As Singaporeans embark on part-time or full-time work, you will start contributions to your CPF account. You accumulate savings in these three accounts: your Ordinary Account (OA), MediSave Account (MA), and Special Account (SA). The Retirement Account (RA) will be created for you when you are at age 55.
The OA, which will be the focus of the article, is used for housing, investment, insurance and education. As for the SA, it is for retirement and investments and the MA is for hospitalisation expenses and approved medical insurance.
We will elaborate on the OA, its purpose, its uses, interest rates, and what happens to the monies when you hit 55, and also when you pass on.
Read Also: 8 Types Of Investments You Can Make Using Your CPF OA Monies Via The CPFIS-OA
Contributing To Your OA
Your contribution rates depend on your age and can range from 12.5% to 37% of your monthly wages.
For 55 years old and below and monthly wages under $750, the employer contribution rate is at 17% while the employee contribution is at 20%, adding to a total 37% of wages. The 17% is not a part of your total monthly wages and it is not subject to income tax either.
A CPF account might also be opened when you make a cash top-up for your child, or when a Singapore Citizen newborn qualifies for a MediSave grant.
CPF OA Distributions Change As You Age
If you are a Singapore citizen aged 35 and below, 37% of your total monthly wages (i.e. total CPF contribution) will be allocated to your CPF OA (23%), CPF SA (6%) and MA (8%). The distribution will change as you get older.
| Employee’s Age | Ordinary Account (% of wage) | Special Account (% of wage) | MediSave Account (% of wage) | Contribution rates Total (% of wage) |
| < 35 | 23% | 6% | 8% | 37% |
| > 35 – 45 | 21% | 7% | 9% | |
| > 45 – 50 | 19% | 8% | 10% | |
| > 50 – 55 | 15% | 11.5% | 10.5% | |
| > 55 – 60 | 12% | 3.5% | 26% | |
| > 60 – 65 | 3.5% | 2.5% | 16.5% | |
| > 65 | 1% | 1% | 12.5% |
The article focuses on OA, but you can see that the contribution rate declines when you age, with more monies portioned for SA and MA.
Another interesting point is that you contribute a total of 26%, after 55, with employee and employer contributions at 13% each. Only 12% is kept for your OA.
How Much Interest Can You Earn With CPF OA
Savings in the OA earn the 3-month average of major local banks’ interest rates, subject to the legislated minimum interest of 2.5% per annum. This is reviewed quarterly.
Your CPF OA gives you 2.5% interest per annum, while your CPF MA and SA give you 4% interest per annum. Do note that the interest is credited to your CPF account at the end of the year.
You will get an additional 1% interest per annum for the first $60,000 of your combined CPF balance, with up to $20,000 coming from your CPF OA. This was implemented in 2008. The additional interest allows you to grow your CPF money even more quickly. Do note the cap of $20,000 that can come from our OA balances.
Investing Using OA funds
You have the option of investing in a wide range of investments using your OA to grow your retirement nest egg.
After you set aside $20,000 and a buffer for charges by your Agent Bank (DBS, UOB, or OCBC), the remaining balance of your OA savings can be invested under the CPF Investment Scheme (CPFIS).
To check your CPF OA Investible amount, you can log in to CPF and select investment under the dashboard, it will show you the funds available and the type of investment options.
You can choose from investment products like shares, gold, bonds and unit trusts. You can also use the funds for investment-linked insurance products.
The Agent Bank charges per investment transaction include fees for buying and selling, service charges, and rejected trades (due to insufficient funds).
The investment options for your CPF OA are limited to ensure that Singaporeans do not engage in higher-risk investments that may not adequately compensate them for the risk they are taking.
However, if you do not think the market conditions are favourable or you are not confident of investing on your own, then you should leave your CPF account alone and let it earn the floor interest.
Using Your OA Savings To Buy A Property Or Service A Housing Loan
You can tap on your OA savings to buy a property or service a housing loan.
You can finance all your HDB loan down payment, and pay most of your bank mortgage down payment using CPF. But to buy a flat, you have to make a downpayment of 25% of the purchase value, of which up to 20% may be paid with CPF OA savings, and the remaining 5% in cash.
You will also have to check if the amount of CPF you can use depends on whether the lease can cover you for 95 years.
The government places limits on using CPF savings for housing as a safeguard for you to have enough savings for retirement.
Withdrawal Limit
You can only use your CPF savings up to the Withdrawal Limit, which is the maximum amount of CPF you can use, capped at 120% of the Valuation Limit.
Valuation Limit
The Valuation Limit of the property is the lower of the purchase price or market valuation at the time of purchase. For example, if you purchase your property at $480,000 and the market valuation is at $500,000, the Valuation Limit will be $480,000.
Once you hit the limit, loan repayment must be in cash. CPF savings can only be used for properties built on a freehold or leasehold land with a remaining lease of more than 20 years, provided the remaining lease can cover the youngest buyer until at least 95.
The Valuation Limit does not apply to a new HDB flat financed with an HDB concessionary loan.
Buying A Second Property
You can use the excess of your OA for a second property after setting aside the current Basic Retirement Scheme of $96,000. The total CPF Withdrawal Limit allowed for your second property is capped at 100% of the Valuation Limit.
If you are soon to be 55, you need to apply to reserve monies in your OA if you wish to use that for investment or property, if not savings up to your Full Retirement Sum (FRS) will be transferred to your RA.
There are also many different CPF housing grants that you can use to help you finance your home purchase.
Using Your OA Savings For Insurance
Premiums for the Dependents’ Protection Scheme (DPS) are paid from your CPF OA and/or SA, and there will be no cash outlay unless you have insufficient funds.
DPS is a term life insurance scheme that provides basic financial protection for you and your family in the event of death, terminal illness or total permanent disability. DPS is solely administered by Great Eastern Life.
DPS coverage is automatically extended to you upon your first working contribution if you are a Singapore Citizen (SC) or Permanent Resident (PR) between 21 and 65 years old.
The DPS premiums get more expensive when you are older, you can opt of out the DPS by contacting Great Eastern Life to terminate the cover if you think that you want to conserve more of your CPF savings for retirement.
DPS
| Age (as of payment date) | Yearly premium for $70,000 sum assured |
| 34 years and below | $18 |
| 35 – 39 years | $30 |
| 40 – 44 years | $50 |
| 45 – 49 years | $93 |
| 50 – 54 years | $188 |
| 55 – 59 years | $298 |
| 60 – 64 years | $298 (for sum assured of $55,000) |
Using Your OA Savings For Education
You can use your OA savings up to the available withdrawal limit under the CPF Education Loan Scheme. The scheme allows you to use your OA savings to pay for your own, children’s, spouse’s, siblings’ or relatives’ subsidised tuition fees.
The available withdrawal limit is either 40% of your accumulated PA savings, or your remaining OA balance, whichever is lower.
The amount that can be used is also subject to the tuition fees payable.
The student cannot use his own CPF savings for the repayments to the CPF member’s CPF account.
You may check the amount of CPF savings that can be used for education by logging in to your Education dashboard with your Singpass.
CPF savings can only be used to pay the tuition fees for full-time courses which are subsidised by the Ministry of Education at approved educational institutions.
What Happens When You Turn 55
About six months before your 55th birthday, you will receive a letter from the CPF Board. The letter provides information on the options you have to prepare for retirement.
Your savings from your CPF SA and then OA will be transferred to your RA up to the Full FRS.
Your RA will be created for you. Your savings from your SA and OA, up to the current FRS of $198,800 (as of 2023), will be transferred to your RA to form your retirement sum. You can read more details on the RA here, on details such as the CPF LIFE Scheme.
When Happens To Your CPF When You Die
Your CPF savings will be paid out and distributed, if you made a CPF nomination, it will be distributed to the nominee(s) in the proportion stated.
If you do not have a CPF nomination, the CPF savings will be transferred to the Public Trustee for distribution in accordance with the intestacy or Muslim inheritance laws of Singapore.
The monies in our CPF accounts are not considered part of our estate and hence are not covered by a will. The money will be kept safe by the Public Trustee’s Office before it is distributed based on intestacy laws, but there is a fee payable for it.
Given that the fees can be significant, it is better to nominate beneficiaries. You can easily do the nomination online.
Featured Image Credit: Angela Teng/DollarsAndSense
Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.
Health Insurance
Complete Guide To Buying A CareShield Life Supplement Plan
Branded Content
How To Start Building Multiple Retirement Income Streams
Health Insurance
Complete Guide To Buying A CareShield Life Supplement Plan
