In Singapore, the Central Provident Fund (CPF) works as the country’s pension scheme to enable working Singaporeans and Permanent Residents (members) to save for retirement.
Besides letting employees save-as-they-earn, the scheme also addresses healthcare, home ownership, family protection, and asset enhancement, and comes with guaranteed annual returns.
To help grow the retirement nest egg, the Singapore government has implemented various CPF Investment Schemes to allow members to invest their CPF savings.
There are two CPF investment schemes that you can use. You can invest the money in your Ordinary Account (OA) and Special Account (SA) in shares, bonds and collective investments such as unit trusts under the CPFIS-OA and CPFIS-SA schemes. You can find a list of allowable investments here.
Minimum CPF interest rates
While the CPFIS is supposed to give financially-savvy Singaporeans a chance to beat their CPF returns, it is worth noting that all investments carry some degree of risk and returns are not guaranteed. Even with “safe” investment types, you could still run the risk of losing money. In 2015, 40% of Singaporeans who invested their CPF money reportedly made losses.
Members who are looking for a risk-free and guaranteed source of returns can consider moving their OA savings to SA, which currently earns up to 5% per annum. This figure is adjusted quarterly.
However, you will need to be under 55 years old to do that and should only do so if you do not intend to use your OA for housing. The transfer from OA to SA is irreversible once it is implemented, so think wisely!
CPFIS pros and cons
Any gains you make in your CPFIS are not subjected to capital gains taxes. However, dividends are taxed at your individual tax-rate.
Do note that transaction charges and management fees may apply when you invest under the CPFIS-OA and CPFIS-SA schemes. The amount and type of charges will depend on the type of investment you make.
You can buy and sell your investments as often as you like provided that you have held them for at least one day. However, withdrawals are subject to the same withdrawal rules from your CPF accounts – you can only take the money out after you are 55 years of age.
CPFIS eligibility and requirements
Keen to get started? You will need to meet these requirements first before you invest your CPF savings:
Firstly, you need to be at least 18 years old. Secondly, your OA and SA must contain at least $20,000 and $40,000 respectively before you start investing.
If you are using your OA, you will have to open a CPF Investment Account at one of the three CPFIS agent banks in Singapore. They are DBS, OCBC and UOB. You will not be required to do this if you are using the funds in your SA.
So, if retirement is not on the cards in the immediate future, it may be a good idea to start thinking about where to put your available cash to better use.