What’s The Difference Between Stocks Held In A CDP Account Versus A Custodian Account?

When choosing a brokerage account, I notice there are two different ways stocks can be held – either in a CDP or Custodian account, each with different charges.

What is the difference and is the extra cost of holding stocks in my own CDP account worth it?

DollarsAndSense Answers:

When choosing a brokerage account, you will see that some accounts are designated as custodian accounts, sometimes referred to as pre-funded accounts.

Commissions for these types of accounts are cheaper than “regular” brokerage accounts, because your brokerage firm is helping hold your stocks. For brokerage accounts for CDP-held stocks, your broker is the facilitator of the transaction, and passes on the charges that CDP levies.

Read Also: Singapore Online Stock Brokerage Account Fees Comparison

For  stocks held in your CDP account, you legally own a share of the company and would be invited to attend and vote during AGMs, and receive other forms of shareholder communication.

Companies you invest in will also notify you directly about corporate actions, which include rights issue and dividend re-investment plans. For custodian accounts, your brokerage firm will be the ones notifying you regarding any corporate actions.

When holding investments in your CDP account, you can use brokerage firms interchangeably to execute your trades. You can buy a stock using Brokerage A and then sell using Brokerage B.

If you trade frequently, you can take advantage of the lower fees of custodian accounts. If you plan to hold investments for a long time and prefer a stronger legal basis and exercise your rights as a shareholder, then you wouldn’t mind paying higher charges for your investments to be held in your CDP account.

Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore

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Do I Earn Interest On My CPF Monies Once I Start Receiving CPF LIFE Payouts?

Question:

When I turn 65 and start to draw monthly payouts from CPF LIFE, does my remaining monies in my CPF Retirement Account still generate interest?

DollarsAndSense Answers:

First of all, we need to understand what happens to our monies when we enroll into the CPF LIFE scheme at the age of 65 (assuming we don’t voluntarily defer our payouts).

If you choose the CPF LIFE Standard or Escalating plan, all of the monies in your CPF Retirement Account (RA) is withdrawn and paid as premiums to purchase your CPF LIFE annuity plan. Your RA would now be empty.

It is important to note that even after your CPF LIFE policy has commenced, you are still eligible to earn interest on all your CPF accounts, namely, the Ordinary Account, Special Account, MediSave Account and Retirement Account.

However, the lump sum that you paid to purchase your CPF LIFE annuity plan is now pooled together with other Singaporeans in the CPF Lifelong Income Fund, and any interest on those monies is used for making sustainable payouts for years to come.

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Can I Apply To Buy A HDB Flat If I Worked For Less Than A Year?

I have a partner and we just started work for less than a year. We plan to apply for a HDB BTO and would like to ask when is the earliest possible time we can do so?

DollarsAndSense Answers:

Even though you can ballot with your partner for any of the BTO sales launches, you should only do so after carefully assessing your own financial situation and determining the size and location of flat you can actually afford to pay by the time the BTO is ready.

After you’re successful in balloting for a queue number and invited to select a flat, you’ll need a HDB Loan Eligibility Letter (if you’re taking a HDB loan) or Letter of Offer from the bank (if you’re taking a bank loan), as well as have enough cash and/or CPF to make your downpayment.

Banks have their own income and work history requirements, so do check with them if you qualify. If you’re interested in exploring a bank loan, you can use our landing page  to get a quote on how much you’re likely to receive.

If you’re taking a HDB loan, the HDB Loan Eligibility Letter basically says that you meet the basic requirements for a HDB loan. Given your short work history, you are likely to qualify for only a small loan amount that may not cover the cost of the flat, after deducting grants and your downpayment.

That is fine, since the Loan Eligibility Letter is valid for 6 months from the date of issue anyway, so you will need to apply for another one before your key collection. You just need to ensure that by that time, you qualify for a higher loan amount, or have enough CPF and/or cash to pay for any shortfall.

You might be interested to know that from the May 2018 BTO sales launch onwards, eligible couples applying for their first flat can defer income assessment for their HDB housing loan until their key collection.

To qualify for this deferred income assessment, couples need to be either 1) full-time students; 2) National Servicement; 3) Completed their studies or National Service in the past 12-months before the flat application.

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Can I Extend My Loan Tenure If I Perform A Refinancing Of My Home Loan?

Question:

If I am servicing a bank loan for my HDB flat, can I extend the loan tenure if I refinance the loan?

DollarsAndSense Answers:

The maximum loan tenure cannot exceed 30 years for HDB flats and 35 years for private properties, but the actual tenure that you’re offered may be shorter depending on your age and the years left on your property.

If the tenure of your original home loan was reduced by your age or lease of your property, then refinancing would not help you extend your tenure.

In addition, banks tend to look at when you purchased your property, and deduct that period from the tenure they are willing to offer you.

The only time when refinancing can help you get a longer tenure is if you took a short tenure loan previously, and would now like to stretch it to the maximum period you’re entitled to.

Read  More: Step-by-Step Guide to Refinancing Your Home Loan

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What Is The Eligibility Criteria For Renting A Flat From HDB?

How do I apply for a HDB rental flat? Is there any income ceiling or minimum age?

DollarsAndSense Answers:

In general there are two schemes that allow you to rent a flat from HDB at subsidised rates: Public Rental Scheme and Parenthood Provisional Housing Scheme.

The Public Rental Scheme is heavily subsided and caters to Singaporean households with no other housing options. Since the supply of rental flats is limited, applicants must meet the eligibility criteria set by HDB:

Parenthood Provisional Housing Scheme on the other hand, is meant to provide temporary housing for families as they await completion of their HDB flats. You can read in detail about the eligibility criteria on the HDB website.

If you do not qualify for either of these schemes, the alternative would be to rent from the open market.

Read Also: Frustrated With Waiting For Your BTO To Be Ready? Here’s How Provisional Housing Scheme Can Help You

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Can Singapore Permanent Residents Apply For A HDB BTO Flat?

DollarsAndSense Answers:

For all HDB BTO flats, the main applicant must be a Singapore Citizen.

If the co-owner is a Singapore Permanent Resident (PR), then they will be able to apply for BTO flats of all sizes under one of the schemes they qualify under – such as the Public Scheme, Fiance/Fiancee Scheme.

If the co-owner is not a Citizen nor a Singapore PR, then they can still apply for a 2-room BTO flat in a non-mature estate. However, the non-Citizen must be holding a valid Visit pass or Work pass at the time of application.

For more information about the other eligibility criteria (such as income ceiling, age and property ownership), you can refer to this article on DollarsAndSense.

Read More: [BTO Guide] Eligibility Criteria For Buying A HDB In Singapore

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What Is The Difference Between ETFs And Low-Cost Index Funds?

DollarsAndSense Answers:

Both exchange traded funds (ETFs) and index funds are investments that track an underlying index. This has become an increasingly popular way to invest as they:

# 1 Allow investors to take a passive investment approach;

# 2 Are low-cost compared to active fund management;

# 3 Offer investors a diversified investment, with a single investment of as low as $1,000 or even $100;

# 4 Enable investors to receive close to market returns (while also mitigating any manager risk – the risk of an investment manager making wrong investment decisions)

Read Also: Step-By-Step Guide To ETF Investing In Singapore

So, now that we’ve established how they are similar, let’s try to resolve our user’s question.

The biggest difference between ETFs and index funds is that ETFs are listed on stock exchanges, while index funds are not. This means you can buy or sell ETFs like any other listed stocks via a brokerage account, while you can only buy or sell index funds, similar to unit trusts or mutual funds, at the end of the trading day at its Net Asset Value (NAV).

Read Also: The Pros And Cons Of Building An ETF-Only Portfolio

Being listed and unlisted securities respectively, there are different transaction costs associated with investing in ETFs and index funds. There is a minimum brokerage fee of close to $30 when we invest in ETFs. The cost of investing in index funds can vary from 0% to about 5%.

ETFs are also generally stored in your Central Depository (CDP) account. Index funds aren’t listed, and there are generally platform fees for a custodian account to consider.

How Can Investors In Singapore Buy The S&P500 Index Fund/ETF?

The S&P500 is a benchmark index for the strongest 500 companies listed on the New York Stock Exchange (NYSE) or the NASDAQ.

For investors in Singapore, the easiest way to gain exposure to the S&P500 is to buy the SPDR S&P500 ETF Trust (SGX:S27), listed on the Singapore Exchange (SGX) since 1993. We can buy and sell this similar to how we buy and sell other locally listed stocks.

Read Also: How Singaporeans Can Start Investing In Overseas Stocks, By Looking At The World Around Us

Of course, index funds offer investors another way to gain exposure to the S&P500 index. Platforms such as iFast’s FSMOne and Aviva’s Navigator offer several index funds that either track the S&P500 benchmark in full or use it as part of its benchmark.

This includes Infinity US 500 Stock Index SGD (tracking the S&P500 index) or the Neuberger Berman US Equity Index PutWrite Fund USD A Accumulating Class (with 85% of its benchmark tracking the S&P500 index).

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How Will I Receive My 2.7% Per Annum Interest From My Temasek T2023-S$ Bonds?

Thank you for the recent article on the Temasek T2023-S$ bonds. I’m glad I received my allotted lots.

I would like to ask, how will I be receiving the coupon payments, and upon the maturity of the bond, will the monetary value of the bond be automatically credited to me, or do I need my broker to help me redeem the bond?

DollarsAndSense Answers:

First of all, congratulations on your allotment!

As you know, the Temasek T2023-S$ bonds are held in your CDP account and can be traded on SGX.

As with other stocks and bonds held in your CDP, dividends and coupon payments will be credited to you by CDP, in the form of  a cheque or bank transfer, which you specified when registering for your CDP account.

Upon maturity, your investment will likewise be credited to you, without any intervention from your broker. Your brokerage will only be involved if you wish to sell your bond before maturity.

Read Also: Step-By-Step Guide To Opening A CDP Account In Singapore

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When Enjoying 50% Off Discounts At Restaurants, Is It Right For Service Charge Or GST To Be Applied To The Price Before Discount?

DollarsAndSense Answers:

In most cases, the service charge (10%) is levied on the full price of your food order, before any discounts are applied to the original price of your food items.

GST is then applied to the net price, after discounts,

To illustrate, here is the math:

Net Price = MENU PRICE + 10% of MENU PRICE – Discount Off MENU PRICE

What You Pay = Net Price + 7% GST of Net Price

Restaurants applying the service charge to the full menu price is fair, since discounts are for the food items, and not service.

However, by law, GST should only be applied to the value of goods and services you’re actually paying, after discounts.

Read Also: Dining Promotions: 1-for-1 or 50% Off – Which Is Better?

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Does The Retirement And Re-Employment Age Apply To Singaporeans Who Returned From Overseas?

DollarsAndSense Answers:

Short answer: It depends.

Protection For Retirement Age

Based on the MOM website, the retirement age only applies if you join your employer before the age of 55.

Source: MOM

That means overseas Singaporeans who return home and join a company before the age of 55 will enjoy the retirement age protection.

Protection For Re-Employment

Aside from being medically fit and having satisfactory work performance, an individual will be eligible for re-employment after turning 62 if they have worked with their current employer for more than 3 years.

Source: MOM

This does not mean your existing employer cannot offer you a re-employment contract if you do not meet the eligibility criteria. They can if they want to, but remember, they are not obliged to do so.

Applies Equally To All Singaporeans & Permanent Residents (PRs)

For all Singaporeans and PRs, both the retirement and re-employment age will apply to you as long as you qualify for them based on the criteria stated above. Whether or not your work experience was from overseas does not matter in this case.

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