CPF Investment Scheme (CPFIS): Should You Invest Your CPF Money?
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CPF Investment Scheme (CPFIS): Should You Invest Your CPF Money?

profileMing Feng
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[Update for 1 Oct 2020] What Are the New Sales Charges and Wrap Fees for CPF Investment Scheme (CPFIS)?

Come 1 October 2020, fund sales charge will be slashed to 0%.

And portfolio wrap fees will be reduced to up to 0.4%.

huat ah man with iron holding to his ear SAYS
Source: SAYS

While this is welcomed news for CPFIS investors as this means lower investment costs.

There are concerns in the industry that this might spur Financial Advisors (FAs) to sell higher-cost funds which pay higher trail fees.

FYI: trail fees are a portion of fund annual management fees which are paid to fund distributors

So if you choose to invest your CPF monies via the CPFIS, you’ll want to take note of these changes.

And be wary of the kind of funds which your FAs recommend you.

On top of that, make sure you consider the opportunity cost too.

Since CPF’s interest rate for the Ordinary (2.5%) and Special Account (4%) is hard to beat given today’s low-interest-rate environment


TL;DR: Should I Invest My CPF Monies Through CPF Investment Scheme (CPFIS)?

 

If we’re comparing the returns which CPFIS-OA vs CPF-OA can give:

 CPFIS - OACPF OA
Interest Rate/ ReturnDepends2.5%

(3.5% for first $20,000)
RiskDepends on the investmentsRisk-free
LiquidityReturns will be put back into the CPF account.

Basically, the returns for CPFIS-OA depends on how proficient you are as an investor.

Whereas CPF OA will always give you risk-free interest of 2.5% per annum (p.a.).

Here’s a look at CPFIS-OA members with profits more than 2.5% p.a.:

  • In FY2019: 46%
  • In FY2018: 38%
  • In FY2017: 74%
  • In FY2016: 78%
  • In FY2015: 27%

See how there’s NO fixed pattern of success?

It really depends on how confident you are in being able to beat CPF’s guaranteed 2.5%.

If you’re not, it’s probably a better idea to just leave your money in your CPF to earn that risk-free interest.


Should I Invest My Central Provident Fund (CPF) Monies?

Depending on how you see it…

A lot of Singaporeans believe that their monthly contribution to CPF is money that is as good as gone.

Girl Doesn't Know
Source: Giphy

And that’s because the funds locked away in our CPF accounts aren’t that easily accessible.

Even when we’re given the opportunity to use some of that money.

It comes with a myriad of caveats like us having to meet the Full Retirement Sum before we can even withdraw a single cent.

On top of that, the prevailing CPF interest rates while good, aren’t that great either…

Seedly CPF Interest Rate

Here are the current interest rates for our CPF accounts:

Account NameAnnual Interest rate
Ordinary Account (OA)2.5%

(up to 3.5%)
Special Account (SA)4%

(up to 5%)
Medisave4%

(up to 5%)
Retirement Account (RA)4%

(up to 5%)

Looking to game the system by transferring more money into your Special Account (SA) since it has a higher interest rate?

Think again!

Transferring your OA monies to your SA is irreversible.

can't go back
Source: Giphy

So once you do it, you can’t transfer it back to your OA to fund your HDB BTO purchase or spend it on education.

It’ll just be locked up until you reach retirement.

Side note: if you’re serious about taking advantage of the SA’s higher interest rates, you can top-up your SA with cash AND save on your income tax too!

So that pretty much means that you bobian (Hokkien: no choice) have to leave your monies in your CPF accounts and be happy with that minimum 2.5% to 4.0% p.a. interest.

But what if you’re an investor who can get better returns than the 2.5% on your OA savings?

That’s where the CPF Investment Scheme (CPFIS) comes into play.

What is CPF Investment Scheme (CPFIS)?

The CPFIS allows CPF members to invest their CPF savings in various instruments such as:

  • bonds
  • fixed deposits
  • insurance products
  • shares
  • unit trusts

For a full list of what you can invest your CPF monies in.

CPF has an extensive list along with clear guidelines and criteria for your reference.

Who is Eligible for the CPF Investment Scheme (CPFIS)?

If you’re interested in investing your CPF monies through the CPF Investment Scheme, there are a few requirements you’ll need to fulfil:

RequirementsMinimum Requirement
Age18 Years Old
Balance in CPF (OA)$20,000 for CPFIS-OA
Balance in CPF (SA)$40,000 for CPFIS-SA
Legal StatusNot discharged bankrupt

You’ll notice that that there are 2 different requirements for the CPF account balance.

And that’s because they are for 2 different CPF investment schemes: the CPFIS-Ordinary Account (OA) and the CPFIS-Special Account (SA).

More on that in a bit.

What Can I Invest Using the CPF Investment Scheme (CPFIS)?

The CPF Investment Scheme allows you to invest your CPF monies into a variety of products:

Investment ProductsCan you investing using your CPF savings fromRemarks
CPFIS-OACPFIS-SA
Unit Trusts (UTs)YesSomeUTs with higher risk not included in CPFIS-SA
Investment-linked insurance products (ILPs)YesSome(ILPs with higher risk not included in CPFIS-SA)
AnnuitiesYesYes-
Endowment PoliciesYesYes-
Singapore Government Bonds
(SGBs)
YesYes-
Treasure Bills
(T-bills)
YesYes-
Exchanged-Traded Funds
(ETFs)
YesNo-
Fund Management AccountsYesNo-
Fixed Deposits (FDs)No products at the moment-
Statutory Board BondsNo products at the moment-
Bonds Guaranteed by Singapore GovernmentNo products at the moment-
SharesUp to 35% of investible savingsNoShare must be offered by a company incorporated in Singapore, denominated in Singapore dollar and must be listed on the Singapore Exchange (SGX) Main Board.
Property FundUp to 35%
of their investible savings
NoFund must be incorporated in Singapore, denominated in Singapore dollar and must be listed on the Singapore Exchange (SGX).
Corporate BondsUp to 35%
of their investible savings
NoBonds must be offered by a company incorporated in Singapore, denominated in Singapore dollar and must be listed on the Singapore Exchange (SGX) Main board.
Gold ETFsUp to 10%
of their investible savings
NoOnly SPDR Gold Shares
Other Gold products
(Gold certificates, Gold savings
accounts, Physical Gold)
Up to 10%
of their investible savings
NoPlease approach UOB for the list
of gold products offered.

Generally, using your OA savings to invest under CPFIS-OA means that you can choose from more investment products like shares, gold, higher-risk ETFs, and unit trusts.

Whereas using your SA savings to invest under CPFIS-SA means that you can only touch the more secure stuff like Singapore Government bonds, treasury bills, annuities, and endowment policies.

You can still invest in ETFs, unit trusts, and ILPs, through CPFIS-SA.

But you’ll be limited to those which are not higher-risk (read: potentially lower returns).

Are CPFIS Investment Products Really That Good?

There’s a common misconception amongst CPF members that products that are eligible for CPFIS is an indicator that the company or investment product is rock solid.

But this is NOT true at all.

Despite the extensive list of investment products made available to CPF members on CPFIS.

You should always do your own due diligence before investing in anything.

It’s the same with buying a TV or getting a home fibre broadband plan right?

Seedly Best Home Fibre Broadband Plan Comparison

You’re not just gonna buy whatever the saleperson is selling you right?

You’ll definitely do your research first, compare and read reviews, before even putting your money down.

So… How Much of My CPF Can I Invest via CPF Investment Scheme (CPFIS)?

You can’t just throw ALL of your CPF monies into stocks.

In fact, as of 1 April 2008, you cannot invest the first $20,000 in your Ordinary Account.

The maximum that you can invest in eligible stocks, property fund, and corporate bonds is up to 35% of investible savings.

For Gold ETFs and other gold products, only up to 10% of investible savings can be used.

To give you a better idea of what this means…

Let’s assume you have $100,000 in your Ordinary Account (this is your total investible savings).

If you withdrew $40,000 for housing, you’re left with $60,000 in your OA.

For stocks (up to 35% of investible savings), you can invest up to $35,000.

For gold (up to 10% of investible savings), you can invest up to $10,000.

So the maximum amount which you can technically use for CPFIS-OA investments is $45,000.

But you still need to set aside the $20,000 which you can’t touch.

So… $60,000 – $20,000 = $40,000.

Which means if you want to invest the maximum in stocks and the rest in gold.

You can only funnel $35,000 to stocks and $5,000 to gold.

What Are the Potential Returns for CPFIS Investments?

Even if you’re a really good investor.

The guaranteed 2.5% and 4% interest earned on the CPF Ordinary Account and Special Account, respectively.

Is pretty hard to beat give this low-interest-rate environment we’re currently in.

Where are you going to find a financial instrument that can give you such risk-free interest rates?

If we’re comparing the returns which CPFIS-OA vs CPF-OA can give:

 CPFIS - OACPF OA
Interest Rate/ ReturnDepends2.5%

(3.5% for first $20,000)
RiskDepends on the investmentsRisk-free
LiquidityReturns will be put back into the CPF account.

I know.

Not very helpful.

But let me explain why I say that the returns on CPFIS-OA, depends.

If you check the members’ investment performance in CPFIS-OA on the CPF website.

Here’s a look at CPFIS-OA members with profits more than 2.5% p.a.:

  • In FY2019: 46%
  • In FY2018: 38%
  • In FY2017: 74%
  • In FY2016: 78%
  • In FY2015: 27%

See why I say that it depends?

Of course, you’ll need to factor in your time horizon and how your returns might average out.

But overall, it really boils down to how confident you are in being able to beat CPF’s 2.5% p.a.

Oh and additionally, you’ll also have to factor in extra costs like brokerage fees and sales charges incurred when you make a trade.

So that means that you need to make sufficient returns in order to cover these costs as well.

Otherwise, they’ll just eat into your returns and you might make lesser than CPF’s guaranteed 2.5% interest at the end of the day.

[Update for 1 Oct 2020] What Are the Sales Charges for CPF Investment Scheme (CPFIS)?

When it comes to investments, CPF, and money.

It often gets messy when financial advisors (FAs) get involved due to a potential for conflict of interest.

Previously, FAs can earn up to 3% in sales charges (aka commission fees) when you invest your CPF savings in a financial product that is recommended by them.

They’ll also be able to charge a “wrap fee” (aka admin fee) of up to 1% on your entire investment.

If you’re suay (Hokkien: unlucky) and meet an unscrupulous FA who doesn’t care about your financial health but only wants that sweet commission.

They might try all means to get you to buy whatever investment product they can push on you, because they only care about the sales charge and wrap fee.

CPF and the Ministry of Manpower recognised this problem and announced the removal of the sales charge and a reduction of wrap fees for CPFIS starting from 1 October 2018.

CPFIS Sales Charge and Wrap Fees

Maximum Sales ChargeMaximum Wrap Fee
(per annum)
Prior to 1 Oct 20183%1%
From 1 Oct 20181.5%0.7%
From 1 Oct 2020
(supposed to be 1 Oct 2019)
0%0.4%

The earlier announcement called for the sales charge to be removed entirely and the wrap fees cap to be lowered further by 1 October 2019.

But in response to industry feedback that FAs need more time to adjust to the revised CPFIS fee structure.

The sales charge removal and lowering of the wrap fees cap has been postponed till 1 October 2020 instead.

So take note if your financial advisor says otherwise…

More importantly, doing so reduces the cost of investing and is definitely beneficial for you if you’re considering the CPFIS to grow your CPF monies.

How to Invest My CPF Savings via CPF Investment Scheme (CPFIS)?

How to invest with your cpf

Type of CPFISProcedure
CPFIS-OAOpen a CPF Investment Account with DBS, OCBC, or UOB.
CPFIS-SANo need to open a CPF Investment Account.

For CPFIS-OA, simply open a CPF Investment Account with either of these banks:

  • DBS Bank Ltd (DBS)
  • Overseas-Chinese Banking Corporation Ltd (OCBC)
  • United Overseas Bank Ltd (UOB)

In case you’re wondering, it doesn’t matter which bank you go with.

All the fees and charges are the same for all 3 banks.

Oh, remember to bring along your CPF statement for a smoother account opening!

For CPFIS-SA, there is no need to open a CPF Investment Account.

Just approach the investment product provider directly to buy or sell your investments direct.

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About Ming Feng
A stint in Bloomberg gifted me with a beer belly, which only grew larger when I moved on to become a Professional Trader. Now I turn caffeine into digestible finance-related content.
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