CPF Investment Scheme (CPFIS): Should You Invest Your CPF Money?
Your Central Provident Fund (CPF) monies earn a steady 2.5% p.a. in the Ordinary Account (OA) and 4% p.a. in the Special Account (SA).
For low-risk investors, this is great as it is a risk-free interest that compounds over time.
But what if you want to make your CPF money work harder with higher interest?
Should you invest your CPF funds through the CPF Investment Scheme (CPFIS)?
Here’s all you need to know!
TL;DR: Should I Invest My CPF Monies Through CPF Investment Scheme (CPFIS)?
Basically, the returns for CPFIS-OA depend 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 of more than 2.5% p.a.:
| Financial Year | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| Percentage of CPFIS-OA members with profits more than 2.5% p.a. | 27% | 78% | 74% | 38% | 46% | 75% | 83% |
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.
Jump to:
- Should I Invest My Central Provident Fund (CPF) Monies?
- What is CPF Investment Scheme (CPFIS)?
- What is the Eligibility Requirement For CPFIS?
- What Can I Invest Using the CPFIS?
- How Much of My CPF Can I Invest via CPFIS?
- What Are the Potential Returns for CPFIS Investments?
- What Are the Sales Charges for CPFIS?
- How to Invest My CPF Savings via CPFIS?
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.
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…
Here are the current interest rates for our CPF accounts:
| Account Name | Annual Interest rate |
|---|---|
| Ordinary Account (OA) | 2.5% (up to 3.5%) |
| Special Account (SA) | 4% (up to 5%) |
| Medisave | 4% (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.
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:
- Exchange Traded Funds (ETFs)
- 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.
What is the Eligibility Requirement For CPFIS?
If you’re interested in investing your CPF monies through the CPF Investment Scheme, there are a few requirements you’ll need to fulfill:
| Requirements | Minimum Requirement |
|---|---|
| Age | 18 Years Old |
| Balance in CPF (OA) | $20,000 for CPFIS-OA |
| Balance in CPF (SA) | $40,000 for CPFIS-SA |
| Legal Status | Not discharged bankrupt |
You’ll notice 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 products included under CPFIS | You can invest using your CPF savings from | |
|---|---|---|
| OA | 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 |
| Statutory Board Bonds | No products currently available | |
| Bonds Guaranteed by Singapore Government | No products currently available | |
| Up to 35% of investible savings can be invested in: | ||
| Shares | Yes | No |
| Property Funds | Yes | No |
| Corporate Bonds | Yes | No |
| Up to 10% of investible savings can be invested in: | ||
| Gold ETFs | Yes | No |
| Other Gold products (such as Gold certificates, Gold savings accounts, Physical Gold) | Yes | No |
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. You could even invest in an S&P 500 ETF through platforms such as Endowus.
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 are 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.
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 funds, 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.
This 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.
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-OA | CPF OA | |
|---|---|---|
| Interest Rate/ Return | Depends | 2.5% (3.5% for first $20,000) |
| Risk | Depends on the investments | Risk-free |
| Liquidity | Returns 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 depend.
If you check the members’ investment performance in CPFIS-OA on the CPF website.
Here’s a look at CPFIS-OA members with profits of more than 2.5% p.a.:
| Financial Year | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| Percentage of CPFIS-OA members with profits more than 2.5% p.a. | 27% | 78% | 74% | 38% | 46% | 75% | 83% |
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.
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 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 2020.
CPFIS Sales Charge and Wrap Fees | Maximum Sales Charge | Maximum Wrap Fee (per annum) |
|---|---|---|
| Prior to 1 Oct 2018 | 3% | 1% |
| From 1 Oct 2018 | 1.5% | 0.7% |
| From 1 Oct 2020 (supposed to be 1 Oct 2019) | 0% | 0.4% |
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)?
| Type of CPFIS | Procedure |
|---|---|
| CPFIS-OA | Open a CPF Investment Account with DBS, OCBC, or UOB. |
| CPFIS-SA | No 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.
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.
