Our Special Account is one of four CPF accounts we will have. From the moment we are born, we start of with three CPF accounts – Ordinary Account (OA), Special Account (SA) and MediSave Account (MA). When we turn 55, our Retirement Account (RA), a fourth CPF account, will be opened for us.
Each of our CPF accounts is meant for different purposes, and in this article, we look at the role that our Special Account plays.
#1 The CPF Special Account Was Introduced In July 1977
One fun fact is that while the CPF system was started 1955, people only had an Ordinary Account. The Special Account was introduced in July 1977. It would be cruel to end off this fun fact segment without mentioning that the MediSave Account was introduced in April 1984 and the Retirement Account came into effect in January 1987.
One unimportant fun fact is that this makes the Retirement Account only as old as the writer of this article. Which isn’t that old…right?
#2 We Contribute Between 1.0% and 11.5% Into Our Special Account Throughout Our Career
Most of us grow our Special Account through monthly contributions from our salaries. Depending on our age, we contribute up to 20% of our salary to our CPF accounts, while our employers contribute another up to 17%. This combined amount is segmented into our OA, SA and MA (but not our RA).
For a small group of people earning below $750 a month, the employee contribution portion is removed. Employers have to make CPF contributions for anyone earning more than $50 a month – which means temp-staff, part-timers and other types of ad-hoc workers will also receive some CPF contributions.
|Age Band (Years)||Allocation Rates (for monthly wages ≥ $750)|
|Ordinary Account (% Of Wage)||Special Account (% Of Wage)||Medisave Account (% Of Wage)||Total (% of Wage)|
|35 and below||23||6||8||37|
|Above 35 to 45||21||7||9||37|
|Above 45 to 50||19||8||10||37|
|Above 50 to 55||15||11.5||10.5||37|
|Above 55 to 60||12||3.5||10.5||26|
|Above 60 to 65||3.5||2.5||10.5||16.5|
As we can see in the table, contributions to our Special Account start off as the smallest component, at 6%, at the beginning of our career. It gradually grows to become the biggest component just before we hit 55 – at 11.5%. Once we turn 55, it again falls to the smallest component, as we would already have set aside our Full Retirement Sum (FRS) by 55.
Of course, we can also see that we start off contributing 37% into our CPF accounts up to the point we turn 55. Our CPF contributions then tail off until we only contribute up to 12.5% by the time we are above 65.
From 1 January 2022, the government has already announced that contributions rate for older workers will increase.
|Age Band (Years)||Contributions Today (% of Wage)||Contributions in 2022 (% of Wage)||Contributions (Long-Term Govt Target)|
|55 and below||37 (no change)|
|Above 55 to 60||26||28 (1% from employer and 1% from employee)||37|
|Above 60 to 65||16.5||18.5 (1% from employer and 1% from employee)||26|
|Above 65 to 70||12.5||14 (0.5% from employer and 1% from employee)||16.5|
|Above 70||12.5 (no change)|
The higher contribution rates will be fully allocated to our Special Account.
#3 The 4.0% Interest Rate We Receive On Our Special Account Is Not A Fixed Number
Apart from managing this scheme, the government also does its part to grow our Special Account balances by providing a floor interest rate of 4.0% per annum. Note that this is a floor rate, set by the government in 1999, and it can actually be higher. However, given the low interest rate environment today, it looks likely that the floor rate will continue to be the prevailing rate for foreseeable future.
The actual computation of the Special Account rate today is “12-month average yield of 10-year Singapore Government Securities plus 1%”. Using this calculation, the interest rate on our Special Account would be 2.04%. Thus, we will receive the floor rate of 4.0%.
Lastly, the 4.0% floor rate is a commitment by the government to grow our retirement funds. It is not set in legislation. The floor interest rate, on any CPF accounts, that is set in the CPF Act is 2.5%.
#4 Extra 1.0% Interest Payments Goes Into Our Special Account (Until Our Retirement Account Is Opened)
To build our retirement adequacy, the government also committed to paying an extra interest of 1.0% on the first $60,000 of our combined CPF account savings (capped at up to $20,000 from our OA). Extra interest received on monies in our Ordinary Account and Special Account will both flow into our Special Account or Retirement Account (if we are over 55).
After we turn 55, we also get an additional extra interest of 1.0% on the first $30,000 of our combined CPF account savings (capped at up to $20,000 from our OA). As we would already have our Retirement Account by this point, Additional extra interest earned on our RA, SA or OA will flow into our RA.
#5 If You Hit Your Basic Healthcare Sum (BHS), Your MediSave Contributions Go Into Your Special Account (Only Up To The FRS)
The Basic Healthcare Sum (BHS) is a cap on the amount that we can save in our MediSave Account (MA). The current cap is $63,000.
If we have reached this figure before we turn 55, there will be excess amounts from our salary contributions that cannot go into our MA anymore. These excesses will flow into our Special Account. However, if we have already hit the FRS, it will then flow into our Orindary Account. The current FRS is $186,000. The FRS also represents the maximum amount of money we can contribute to our Special Account.
If we are over 55, any excess amount will flow into our Retirement Account. However, if we have already hit our Basic Retirement Sum (BRS) or Full Retirement Sum (FRS), the excess amounts will instead flow into our Ordinary Account – bypassing our Special Account.
#6 We Can Save On Taxes (And Build Better Retirement Safety Net) By Making Topping Up Our Special Account Via The RSTU
There are generally two ways to top up our CPF – via the Voluntary Contribution (VC) or the Retirement Sum Topping Up (RSTU) schemes. However, we can only make top-ups up to the Full Retirement Sum into our Special Account and Enhanced Retirement Sum into our Retirement Account (after we turn 55).
If we are choosing to make top-ups via the VC scheme, we can opt to make cash contributions to all three of our CPF accounts – OA, SA and MA – or just to our MA. When doing so, we are limited by the CPF Annual Limit, which is $37,740. In addition, we only receive tax relief for making VC top-ups to our MA, but not if we are making Voluntary Contributions to all three CPF accounts.
When we make RSTU top-ups, we receive a dollar-for-dollar tax relief of up to $7,000 for contributions into our own SA and $7,000 for contributions into our loved ones’ SA. We can make RSTU contributions for any amounts up to the Full Retirement Sum (FRS) for those under 55 and up to the Enhanced Retirement Sum (ERS) for those 55 and above. RSTU contributions go into our Special Account if we are below 55 and into our Retirement Account for those 55 and above.
Apart from making cash top-ups via the RSTU scheme, we can also choose to transfer our OA funds into our SA to earn a higher interest rate.
#7 We Can Invest Our Special Account Balances
Another way we can build our Special Account savings is by investing our SA balances through the CPF Investment Scheme (CPFIS). We can invest both our OA and SA balances if we choose to. Doing so, we are effectively trying to beat the floor interest rate of 4.0% paid on our SA balances (and 2.5% paid on our OA balances). Of course, we can also choose to transfer our OA balances to our SA to earn 1.5% more per annum.
However, we can only invest anything above $40,000 in our Special Account (and anything above $20,000 in our Ordinary Account). We also need to take a Self-Awareness Questionnaire before we can invest our CPF monies.
The investments we can invest in for our Ordinary Account and Special Account is not the same. The list of available investments for our Special Account is more limited. Just as an example, you cannot utilise your Special Account funds to invest in shares or gold but you can do so with your Ordinary Account funds. With your Special Account funds, you can generally invest in unit trusts, investment-linked plans (ILP), Annuities, endowment plans and others.
To safeguard people who are investing our CPF funds, the government has mandated a removal of sales charges for new purchases and a reduction of wrap fees for both new and existing investments. For the full list of products you can invest in, you can head to the CPF website.
#8 There Is A Maximum Cap We Can Top-Up To Our Special Account (And It Is Earmarked For Our Retirement Account)
In general, we can only top-up our Special Account up to the Full Retirement Sum (FRS). As mentioned, the current FRS is $186,000. However, even after hitting our FRS, we can continue to see our Special Account grow from our salary contributions.
When we turn 55, up to the Full Retirement Sum (FRS) will automatically flow into our Retirement Account. Funds in our Special Account will be the first that is drained out. This is because our Special Account has always been meant for our long-term retirement needs. If we have insufficient SA balances, then funds from our Ordinary Account will be drained next.
This priority (without choice) has also led to the rising popularity of CPF shielding hacks to limit the amount drained into our Retirement Account by temporarily investing or SA and OA.
We can also choose to contribute up to the Enhanced Retirement Sum (ERS) to our Retirement Account. The ERS is currently $279,000, or 1.5x the FRS.
#9 If You Continue To Work After 55, You Can Continue To Grow Your Special Account
Even though our Retirement Account is created after 55, it does not attract any contributions from our salary contributions. If we continue to work after 55, our CPF contributions will continue to flow into our OA, SA and MA.
Any balances in our SA is not automatically rolled-over into our Retirement Account – which will be contributed to the CPF LIFE scheme.
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