Should You Invest Your CPF Money? Here's A Guide On CPF Investment Scheme (CPFIS)
 
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Should You Invest Your CPF Money? Here's A Guide On CPF Investment Scheme (CPFIS)

Ming Feng
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Your Central Provident Fund (CPF) Contributions

Depending on how one sees it, most Singaporeans have accustomed to the mindset that their CPF contribution is as good as money gone.

CPF Money gone
Source: giphy

This is simply because the fund locked in their CPF account is illiquid and not accessible.

This 20% CPF contribution discounted from your monthly take-home salary goes into 3 different accounts:

  • Ordinary Account (OA)
  • Special Account (SA)
  • Medisave (MA)

Funds in your CPF Ordinary Account (OA) generates a regular interest rate of 3.5% (including 1% per annum extra interest on the first $60,000). While this interest rate is enough to beat inflation, we know investors out there with a good track record of beating inflation should they invest on their own.

Interest Rate On Your CPF

For more insights on the returns on the funds in your CPF, here are the current interest rates on your 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%)
  • There is an extra 1% interest on the first $60,000 of combined balances in CPF. Of this $60,000, $20,000 comes from the Ordinary Account (OA).
  • Singaporeans who are aged 55 and above will also earn an additional 1% interest rate on the first $30,000 of combined balances. Of this $60,000, $20,000 comes from the Ordinary Account (OA).

If you are looking to game the system by transferring more money into the Special Account (SA) for more interest rate, do think twice.

can't go back
Source: giphy

Transferring money from your Ordinary Account (OA) into your Special Account (SA) is irreversible.

Once you do that, you cannot transfer back.


TL;DR – If You Invest Your CPF Monies

The annual interest rate the Ordinary Account is up to 3.5%.

For those who were brave enough to invest using their CPF money, there are only a few stocks that would have done them justice in terms of returns.

Some of the 3 blue-chip stocks that yield more than the CPF OA are CapitaLand, DBS and SGX. Do note that past performance is not a good indication of future results.

CPF Investment scheme (CPFIS)

Should we even look to take the risk (leap of faith) for extra returns with CPFIS-OA?

 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.

In fact,

  • In FY2018, 38% of CPFIS-OA investors made more than 2.5% returns per annum.
  • In FY2017, 74% of CPFIS-OA investors made more than 2.5% returns per annum.
  • In FY2016, 78% of CPFIS-OA investors made more than 2.5% returns per annum.
  • In FY2015, 27% of CPFIS-OA investors made more than 2.5% returns per annum.

How confident are you to beat that 2.5% returns per annum?

From the above, we can see that CPFIS investors are subjected to risk, and the decision on whether an investor should invest his CPF money depends on:

  • His appetite for risk
  • How knowledgable is the investor?
  • Market condition
  • Investment products purchased
  • Investment duration of the investor

For investors who are confident of beating the interest rate of 2.5% -3.5%, we introduce you to the CPF Investment Scheme (CPFIS).

CPF Investment Scheme (CPFIS)

The CPF Investment Scheme (CPFIS) allows Singaporeans the option to invest their CPF monies into:

  • Insurance products
  • Unit trusts
  • Fixed deposits
  • Bonds
  • Stocks

Who Is Eligible For CPF Investment Scheme (CPFIS)?

To qualify for CPFIS, here are the requirements 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

The requirements for investing in CPF (OA) account and CPF (SA) account is different.

Sales Charge For CPF Investment Scheme (CPFIS)

The maximum sales commission from someone who invested under CPFIS was 3% in the past. It resulted in a certain degree of conflict of interest between Financial Advisors (FAs) and Singaporeans.

As of 1 October 2019, the change in maximum sales commission and maximum wrap fees were implemented, making it more favourable for Singaporeans.

Here are the relevant sales charges for Singaporeans looking to invest their CPF money:

  • The Sales Charge for new CPFIS purchases is 0%
  • The Wrap fee for existing and new accounts is 0.4%

This removes any possible conflict of interest for Financial Advisors (FAs).

What Can I Invest In, Using CPFIS-OA And CPFIS-SA?

To have a better understanding of what you can invest in, using the CPFIS-OA and CPFIS-SA, we compiled a list of products to help you make smarter personal finance decision.

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.

If you are looking to invest using your CPFIS-OA with OA savings, you have more investment products to choose from.

Investment products available for CPFIS-SA is limited, with Unit Trusts (UTs) and Investment-linked Insurance Products (ILPs) with higher risk excluded. Exchange-Traded Funds (ETFs) and Fund Management Accounts are not available for CPFIS-SA too.

Misconception

A common misconception is that products that are eligible for CPFIS indicate that the company or investment product is rock solid. This is not true at all.

Investors should always do their own due diligence before jumping into any of those products. Should you find yourself not having the necessary skillsets to evaluate a stock, it is better to leave the savings in CPF OA to grow.

How Much Can I Invest?

On top of that, do take note that the maximum 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. For gold products, the investment account must be opened with UOB.

Investible savings refer to the total sum of balance in the CPF Ordinary Account, amount withdrawn for investment and amount withdrawn for education.

How To Invest My CPF Savings Under CPFIS?

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)

Bring along your CPF statement!

For CPFIS-SA, there is no need to open a CPF Investment Account. Simply head over to the product providers and buy or sell your investments directly.


 

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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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