How can Singaporeans benefit from the CPF Investment Scheme (CPFIS)?

By Ryan Ong, 23 November 2021 450

For Singaporeans who qualify, the CPF Investment Scheme (CPFIS) allows you to invest part of your CPF funds in approved financial products, to enjoy higher returns that they would otherwise earn if left alone. This can help you to accrue more wealth for your retirement, over the long term.

In this guide, we will explain the pros and cons of investing part of your CPF monies, and how you can go about doing this. 

What is the CPF Investment Scheme?

The CPFIS gives you the option, to invest money from your CPF Ordinary Account (OA) and Special Account (SA). 

On their own, your OA accrues at an interest rate of 2.5% per annum, while your SA grows at 4% per annum1. By investing in different financial products, however, you have the potential to earn higher returns than these. This will help grow your savings for retirement, which means you might be able to withdraw more at your draw-down age of 55 or receive higher pay outs from CPF once you turn 65.
1An additional 1% bonus is applied for the first $60,000 in your combined CPF accounts, and up to $20,000 on your CPF OA. Read more here.

Know who is eligible to invest with the CPF Investment Scheme

Who can invest via CPFIS?

You must be:

  • At least 18 years of age 
  • Have $20,000 or more in your OA
  • Have $40,000 or more in your SA 

In addition, you must not be an undischarged bankrupt. You will also be required to complete a Self-Awareness Questionnaire by CPF, before you can invest via CPFIS.

CPF OA Investments 

From your OA, you can invest the total OA balance minus a $20,000 minimum sum you must maintain. Say, for example, you have $60,000 in your CPF OA. The total amount available to invest is $40,000, since you must always have at least $20,000 left in your OA
If you’re not certain how much you have in investible savings, you can log in to your CPF account to check.

The products you choose to invest in must be approved under the CPFIS (more on this below), and there are restrictions on how much of this total investible amount you can invest in different things. You can invest:

  • up to 100% in approved unit trusts;
  • up to 35% in approved stocks; and
  • up to 10% in gold. 

So if you had $60,000 in your OA, you could invest the full investible $40,000 in unit trusts, or you could put $21,000 (35% of $40,000) into approved stocks and/or $4,000 (10% of $40,000) into gold. 

What sort of investment products are approved under CPF OA?

The complete list can be found on the CPF website. However, the following is a quick summary:

  • Unit Trusts – These are funds that can comprise stocks, bonds, equities, or a mix of different assets. They are managed by full time professionals, so you don’t need to actively control the assets being bought and sold.
  • Investment-Linked Insurance Products (ILPs) – These are insurance policies, in which pay-outs and bonuses are related to the performance of various sub-funds. Some ILPs are more aligned toward investment returns than insurance coverage. 
  • Annuities – These are insurance policies that ensure lifetime incomes, or income over a given time period. 
  • Endowment policies – These are insurance policies that provide a pay-out upon maturity, or upon the death / permanent disability of the insured. Check with your insurer that the policy can be paid for using your CPF monies before making your purchase.
  • Singapore Government Bonds – These are debt instruments, which effectively allow you to lend to the Singapore government. You will then be repaid with interest (the interest rate will change depending on when you bought the bond). 
  • T-Bills - These are discount bonds, sold at less than the face value of the bond. You will receive the full-face value when the bond matures (e.g., if the face value is $10,000 and the maturity period is 10 years, you might purchase the bond at $7,000, but redeem it for $10,000 after 10 years). 
  • Exchange Traded Funds (ETFs) – These funds track the performance of a particular index, such as the Straits Times Index, and provide a return close to that of the underlying index. They tend to have lower management fees than actively managed funds, such as unit trusts. 
  • Shares – Specific stocks and shares in approved companies
  • Property Funds – These are fund such as Real Estate Investment Trusts (REITs), or other collective investments involving property assets
  • Corporate Bonds – These are debt instruments, in which you effectively lend to companies that pay you back with interest
  • Gold ETFs – Similar to ETFs above, except that gold ETFs track gold prices or gold-related stocks 
  • Other gold products – These include gold bullion, and gold savings accounts

Note that the above are umbrella terms, and not specific products (e.g., there are hundreds of different unit trusts and ETFs that may be available). You should speak to a qualified financial professional, on the performance and risks of specific individual assets, rather than judging by the asset type as a whole. For example, just because unit trusts tend to have returns of 5% to 7% per annum, that doesn’t mean it’s true of every unit trust.

CPF SA Investments

For CPF SA, you can invest any amount, minus a minimum balance of $40,000. For example, if you have $60,000 in your CPF SA, only $20,000 is available for investing with. 

Besides the higher minimum sum requirement, the list of approved products is slightly different. You can use your CPF SA for the following products (see above for the description):

  • Low to mid-risk Unit Trusts
  • Low to mid-risk ILPs
  • Annuities
  • Endowment policies
  • SGBs
  • T-Bills

Note that many of the product types allowed under CPF OA, such as ETFs, gold, and corporate bonds, are not permitted under CPF SA. 

Do your due diligence and be financially informed before deciding on what products to invest in

How do I get started, or know which products to choose?

Do keep in mind that approval is not endorsement. Just because CPF approves a product, that does not mean they are recommending it. You must exercise due diligence, in reading the financial information and picking the appropriate products.

There’s no universally correct formula on what to buy, as it varies based on your financial goals, risk tolerances, and aspirations. Products that work for one investor may not work for another. As the list is quite overwhelming, it’s advisable to consult a financial advisor for help.  

Investing your CPF money vs keeping it in your OA or SA account

What are the benefits of investing?

Prudent investing can help to grow your retirement fund faster than the usual 2.5%, or 4% interest rate. However, some financial products can provide returns as high as 5% to 7% per annum (however, remember that returns from financial products are not guaranteed).

Here’s how much of a difference it makes:

Say we set aside $1,000 per month, compounding at the OA rate of 2.5% per annum, for 10 years:

Year Deposits Interest Total
0 $0.00 -- $0.00 -- $0.00
1 $12,000.00 $138.46 $12,000.00 $138.46 $12,138.46
2 $12,000.00 $445.42 $24,000.00 $583.88 $24,583.88
3 $12,000.00 $760.15 $36,000.00 $1,344.03 $37,344.03
4 $12,000.00 $1,082.83 $48,000.00 $2,426.86 $50,426.86
5 $12,000.00 $1,413.68 $60,000.00 $3,840.54 $63,840.54
6 $12,000.00 $1,752.89 $72,000.00 $5,593.43 $77,593.43
7 $12,000.00 $2,100.68 $84,000.00 $7,694.10 $91,694.10
8 $12,000.00 $2,457.26 $96,000.00 $10,151.37 $106,151.37
9 $12,000.00 $2,822.86 $108,000.00 $12,974.23 $120,974.23
10 $12,000.00 $3,197.71 $120,000.00 $16,171.94 $136,171.94

*Calculations provide an estimate only. 

This is a total interest of around $16,172 over 10 years. 

Now, let’s look at $1,000 per month, compounding at the SA rate of 4% for 10 years:

Year Deposits Interest Total
0 $0.00 -- $0.00 -- $0.00
1 $12,000.00 $222.46 $12,000.00 $222.46 $12,222.46
2 $12,000.00 $720.42 $24,000.00 $942.89 $24,942.89
3 $12,000.00 $1,238.67 $36,000.00 $2,181.56 $38,181.56
4 $12,000.00 $1,778.04 $48,000.00 $3,959.60 $51,959.60
5 $12,000.00 $2,339.38 $60,000.00 $6,298.98 $66,298.98
6 $12,000.00 $2,923.59 $72,000.00 $9,222.56 $81,222.56
7 $12,000.00 $3,531.60 $84,000.00 $12,754.16 $96,754.16
8 $12,000.00 $4,164.38 $96,000.00 $16,918.54 $112,918.54
9 $12,000.00 $4,822.94 $108,000.00 $21,741.47 $129,741.47
10 $12,000.00 $5,508.33 $120,000.00 $27,249.80 $147,249.80

*Calculations provide an estimate only. 

This time, the returns over 10 years come to around $27,250.

Let’s say, however, that you put $1,000 a month in an approved financial product, under CPFIS. Financial products do not produce guaranteed returns – but if the product were able to generate returns of 5% per annum, you may see results like the following:

Year Deposits Interest Total
0 $0.00 -- $0.00 -- $0.00
1 $12,000.00 $278.86 $12,000.00 $278.86 $12,278.86
2 $12,000.00 $907.07 $24,000.00 $1,185.92 $25,185.92
3 $12,000.00 $1,567.41 $36,000.00 $2,753.34 $38,753.34
4 $12,000.00 $2,261.55 $48,000.00 $5,014.89 $53,014.89
5 $12,000.00 $2,991.20 $60,000.00 $8,006.08 $68,006.08
6 $12,000.00 $3,758.18 $72,000.00 $11,764.26 $83,764.26
7 $12,000.00 $4,564.39 $84,000.00 $16,328.65 $100,328.65
8 $12,000.00 $5,411.86 $96,000.00 $21,740.51 $117,740.51
9 $12,000.00 $6,302.68 $108,000.00 $28,043.20 $136,043.20
10 $12,000.00 $7,239.08 $120,000.00 $35,282.28 $155,282.28

*Calculations provide an estimate only. 

The total interest could come to around $8,329.50.

As you can see, even a difference of one or two percentage points can result in significant differences. The longer the time till retirement, the bigger the impact of compounding returns (this is one reason it’s advisable to start investing when you’re younger). 

This assumes, however, that the product is able to deliver returns in line with the promised amount. There is always an element of risk in investing.

However, investing your CPF money is not without its downsides

Investment products are not guaranteed to provide their advertised returns. This differs from your CPF interest rates, which remain absolute: your OA will always deliver 2.5% interest, and your SA will always deliver 4% interest. This is regardless of economic conditions. 

With investments, it is possible to incur a capital loss (ie. you get back less money than you initially invested). CPF does not approve very high-risk products for CPFIS (we describe some of these products below). Nonetheless, it’s important to speak with a qualified expert, to ensure you have the risk capacity to invest. 

Besides the risk of capital loss, there is a risk that the products will underperform. For example, if you invest in a product that ultimately provides a return of 1.7% per annum (less than your OA or SA), you would be worse off than if you had just let your CPF money to accrue interest. 

CPF won’t “top up” your funds, if your investment underperforms the prevailing CPF rate, or you incur losses. However, you are not required to top-up the losses in your CPF.

The main risk to not investing is opportunity cost. You may have much less to retire on, if you rely purely on CPF interest rates. In particular, note that Singapore’s inflation rate hovers between 2% to 3% (Source: CNA). Since CPF interest rates, particularly the CPF OA, are quite close to our inflation rate, and since Singapore’s cost of living rises each year; by relying purely on the interest, you may only be maintaining your retirement nest egg, rather than growing it.

Most insurers and financial advisors can help you invest your CPF monies

Getting started with a CPFIS account

How to open a CPF Investment Account 

If you are investing your CPF SA monies, you do not need to open a CPFIS account. Simply approach the product providers, who can help you buy or sell directly – most insurers and financial advisors can also do this for you. 

For CPF OA investments, you will need to pick one of three participating banks as your administrator: DBS, UOB, or OCBC.

All three banks allow you to open a CPFIS account online. If you’re already a client with these banks, the option can likely be found on your internet banking platform already – the app or website will walk you through the process. 

Otherwise, you can interact directly with your financial advisor, who can help you open the account after discussing your options.

In all of the above situations, you will be asked to complete a Self-Awareness Questionnaire, before you’re allowed to proceed with investing. 

Investing even a little of your CPF monies can go a long way

With the rising cost of living in Singapore, it’s a good idea to balance between relying on CPF interest rates, and investing to beat inflation. An added bonus to investing through CPF is that, because the various products have been vetted by CPF board, you know that you’re dealing only with reputable funds and financial products. 

It’s also not difficult to start investing with CPFIS, and it just takes a few minutes. The most important necessity, however, is having a qualified financial advisor to help you work out the right mix of endowment plans, stocks, ETFs, etc. to maximise your odds of a happy retirement. 

Important Notes:
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance adviser.

This advertisement has not been reviewed by the Monetary Authority of Singapore.