One common complaint about CPF is its “untouchability”.
Due to its restrictions and specific uses, the savings put into CPF can often be left untouched until one has turned 55 years old.
On the other hand, there are also a number of Singaporeans who find the restrictions to be beneficial. After all, the purpose of CPF is for retirement and how can one have sufficient savings should they be allowed to spend as and when they like?
Additionally, CPF provides interest rates that are adjusted for inflation and is higher than your typical fixed deposit rates.
Nonetheless, you might prefer to have higher returns by taking investing into your own hands.
In this article we will walk you through how to invest using your CPF money.
CPF Interest Rates
Almost everyone would agree that CPF pays a really reasonable interest rate. These are as follows:
- Ordinary Account (OA) – up to 3.5% per year, minimum 2.5%
- Special Account (SA) – up to 5% per year, minimum 4%
- Medisave Account (MA) – up to 5% per year, minimum 4%
- Retirement Account (RA) – up to 5% per year, minimum 4%
These interest rates include an extra 1% interest paid on the first $60,000 of a member’s combined balances (with up to $20,000 from the OA).
That means if your Ordinary Account has $20,000, and the other accounts have a combined $40,000 total, you earn an additional 1% interest rate.
Below 55 years old:
- Ordinary Account (OA) – 3.5%
- Special Account (SA) – 5%
- Medisave Account (MA) – 5%
- Retirement Account (RA) – 5%
If you are 55 years old and above, your extra interest rate will be 2% on the first $30,000 and 1% per annum on the next $30,000 of your combined balances (capped at $20,000 for OA).
What makes the CPF’s interest rates even more decent is that you don’t have to worry about any downside risks at all.
CPF monies are invested by the CPF Board in Special Singapore Government Securities (SSGS) issued and guaranteed by the Singapore Government.
This backing by the Singaporean Government itself makes the CPF risk-free and very reliable.
CPF Investment Scheme (CPFIS)
Now you have a better idea of the rates entailed once you invest your CPF money – Ordinary Account (OA) and Special Account (SA). To invest your CPF money, you need to make use of the investment scheme under CPF itself.
Members of CPF are given the option to join the CPF Investment Scheme (CPFIS) which allows them to use their CPF balances to invest in a number of financial instruments. These instruments would be further discussed in the following sections.
You will be able to invest up to 35% of your investible savings into these instruments. The investible savings are the amount above $20,000 in your OA and $40,000 in SA. Here’s an example of how to compute the stock and gold limits.
CPF Investment Scheme Eligibility
Aside from being a working Singapore Citizen and/or Permanent Resident, you have to be at least 18 years old to avail the CPFIS. You must not be an undischarged bankrupt.
Instead, you should have enough money in your CPF Accounts.
The minimum amount required in your account would be, as stated above, $20,000 in your OA and/or $40,000 in your Special Account.
It is up to you whether you want to invest via OA, SA or both; you just need to have the required amount in the accounts.
Once you have decided to invest money from your OA, you will need to open a CPFIS Account with an authorised CPF broker.
It does not matter which bank you choose as the fees and charges are similar for all of them.
Also, the banks are only there to administer the funds. You will need to have a brokerage account to actually invest the money. Your brokerage account does not have to be with the same bank as your chosen CPF Investment Account. However, do note that only selected brokerages offer the ability of investing using your CPF.
When investing with your CPF Special Account (SA), CPFIS bank account and brokerage account are not necessary.
How to start investing your CPF monies
Step 1: Take the Self Awareness Questionnaire
From 1 October 2018, you’ll be required to take the Self-Awareness Questionnaire (SAQ) before you can start investing under CPF Investment Scheme (CPFIS). This is to ensure that you are aware of the risks and know what you are getting into.
Step 2: Set up a brokerage account with brokers that offer CPF Investing
Unfortunately, not all brokers allow you to link your brokerage account to your CPFIS account.
Brokers that offer CPF Investing
Here is a list of brokers that offers CPF investing:
- CIMB Securities (CGS iTrade)
- DBS Vickers
- iFast Financial (FSMOne)
- KGI Securities (Singapore)
- Lim & Tan
- Maybank Securities
- OCBC Securities
- Phillip Securities (POEMS)
- UOB Kay Hian
We shared about the best CPFIS stock brokers in detail here
Step 3: Set up your CPFIS account with an agent bank
Besides having a brokerage account, you will also need a CPFIS account with one of the agent banks:
Step 4: Link up your CPFIS account and your brokerage account
Your CPFIS account allows you to tap into your CPF monies while a brokerage allows you to make investment transactions.
You would need to submit your CPFIS account number to your broker so that they can connect your brokerage account to it and have the authorisation to deposit and withdraw funds from your CPF OA.
CPF Returns
Should you decide to invest, any investment gains will be returned back to your CPF accounts. This is to encourage Singaporeans to save for retirement.
On your end, if you want to invest, you should have a long-term time frame as you will only yield the benefits of the gains in 20 to 30 years time (presuming you are a young adult).
What can you invest in using your CPF? (CPF Investment Financial Instruments)
We have mentioned above that you can invest your money in a variety of financial instruments. These are as follows:
| Investment products included under CPFIS | You can investing using your CPF Savings from OA | You can investing using your CPF Savings from SA |
|---|---|---|
| Unit Trusts (UTs) | Yes | Yes Higher risk UTs are not included |
| Investment-linked insurance products (ILPs) | Yes | Yes Higher risk ILPs are not included |
| Annuities | Yes | Yes |
| Endowment policies | Yes | Yes |
| Singapore Government Bonds (SGBs) | Yes | Yes |
| Treasury Bills (T-bills) | Yes | Yes |
| Exchange Traded Funds (ETFs) | Yes | No products currently available Higher risk ETFs are not included |
| Fund Management Accounts | Yes | No |
| Fixed Deposits (FDs) | Yes | Yes |
| Shares | Yes | No |
| Property Funds | Yes | No |
| Corporate Bonds | Yes | No |
| Gold ETFs | Yes | No |
| Other Gold products (such as Gold certificates, Gold savings accounts, Physical Gold) |
Yes | No |
You can acquire these through the following vendors:
- CPF Fixed Deposit Banks
- Bond Dealers
- Insurance companies
- Investment Administrators
- Fund management companies
It must be noted that availability of your desired financial instruments is dependent on the type of account you are using.
And you will not be able to invest all of your CPF funds. There are certain guidelines you must follow:
You can use up to 35% of your OA investible savings to invest in the following:
- Shares
- Property Funds
- Corporate Bonds
And up to 10% of your OA investible savings to invest in:
- Gold ETFs
- Other Gold products
On the other hand, investments using Special Account are more restricted than OA. You are not allowed to invest in the following:
- High-risk financial instruments like unit trusts and investment-linked insurance products
- Shares
- Gold Products
Above all of these, you must know that the money used from your OA can only be for investments under the CPFIS-OA. The same goes with your SA where investments carried out using it can only be for CPFIS-SA investments. You are not allowed to combine savings from your SA and OA to buy one product.
However, if you are below the Retirement age of 55, you can transfer funds from your OA to your SA to invest using your CPFIS-SA. Do note that this process is irreversible.
You can’t put the money back to your OA after you have transferred, so make sure that you have thoroughly examined your decision before doing anything!
Lastly, you can only transfer money into your SA if you have not reach the Full Retirement Sum in your SA. This amount must also include the monies that you have invested in the CPFIS-SA scheme. The Full Retirement Sum will be $213,000 as of 1 January 2025.
Deciding on a CPF Investment Instrument
When deciding on a CPF Investment instrument/product, we recommend you think of the following:
- Investment timeframe – this includes how long you plan to invest and objective
- Risk appetite – for this, you must be aware of:
- Lower-risk investments – like bonds with steady yields but low returns
- Higher-risk investments – like buying stocks, the water is unpredictable. You could either gain or lose a lot of money over a short span of time
- Financial well-being – this entails you to think through your other retirement savings as well as your other financial commitments
Investing in One Product vs. Diversifying
As the popular saying goes, “the more choices, the more chances of winning”. This is greatly echoed by experts who usually advise investors to diversify. Diversification is to invest your money in different products to spread out your risk.
You might have poorly performing products, but this can be balanced out by other products that might be performing better. This helps balance out your overall portfolio.
One way to diversify is to buy into different asset classes. You must keep some money in lower-risk investments that are safer, while some in higher-risk investments.
You can also invest in different markets by buying into different types of the following:
- Industries
- Companies
- Geographic Regions
- Foreign Countries or Currencies
Keeping Tabs on Your Investments
To keep track of your investments, the best way would be to regularly check the portfolio statement your agent bank or product provider sends to you.
It also helps if these agents or broker are someone you can trust to help you and provide you with advice.
If you are not sure of this, then it is better to start learning. Keep yourself updated with the current trends of the market.
What are the ups and downs that can affect your investments and how volatile are the products?
Withdrawing Investment Profits
Unfortunately, withdrawing the profits made from investments under your CPF account is prohibited. As CPF is meant to built up your retirement nest, your profits will be returned to your CPF Account.
On a positive note, your earned investment/s and dividends profits’ interests will not be taxed. You will receive the full profits eventually when you withdraw your CPF monies.
Why the Financial Industry Encourages You to Invest Your CPF Money
If you are familiar with the world of CPF, then you must have encountered many incentives offered by the Financial Industry to get you to invest your CPF money. This begs the question, “why?”
We have always known that our CPF savings are only accessible to us; and that its interests, profits, and returns are guaranteed by the Singapore Government. This means no other financial entity or individual makes money from your decision.
The reason the financial industry does this is because they make money when you decide to invest your CPF money. This results into a tumbleweed effect once you agree to do so. It goes like this:
- Brokerage firms will generate revenue from the buying and selling of stocks that you made.
- Insurance companies will earn profits from ILPs or investment-linked insurance products or endowment plans that you buy.
- The agents from these insurance companies get their commission from selling you these plans.
- Fund managers will then earn management fees when you buy into their unit trusts.
With everything explained above, it is therefore not difficult to understand why the financial industry is so eager to have you invest your CPF money. They will do literally anything to entice you to invest with them.
Since the funds in CPF rarely gets used unless for specific purposes like retirement, most Singaporeans find investing their money an easy option.
For them, it feels like investing CPF money is easier, compared to using the cold hard cash in their bank accounts.
But the thing is, CPF actually earns a higher return than the money we have deposited in our banks. That is why it is important to take care of your CPF funds.
You should make sure that the investment decisions you made are both wise and logical. After all, your retirement fund is on the line.