Each month, we contribute up to 37% of our salary into our CPF accounts. While we start off with 3 CPF accounts, our Special Account (SA) i
One of the primary purposes of the CPF scheme is to enable Singaporeans’ retirement adequacy. Each month, we contribute up to 37% of our salaries into 3 different CPF accounts – the Ordinary Account (OA), Special Account (SA) and Medisave Account (MA). In particular, our Special Account helps to set aside and grow savings over the long-term, and will eventually be used to pay us a lifelong income via CPF LIFE.
The government does its part to safeguard our retirement adequacy as well. They pay 4% p.a for savings in our Special Account, as as well as 2.5% per annum and 4.0% per annum on our Ordinary Account and MediSave Account savings. To further enhance our retirement savings, CPF gives an additional 1% p.a on the first $60,000 of balances, with a cap of $20,000 for OA.
Since the bulk of our monthly contributions will go towards our Ordinary Account when we initially enter the working world, it will take a while before we can build up enough savings in our Special Account and MediSave Account to enjoy the full extent of the additional 1.0% interest on our CPF savings. Thus, we can consider transferring any funds in excess of the first $20,000 from our OA to SA.
These funds will then earn 5.0% interest returns in our SA, compared to 2.5% of interest returns in our OA.
Obviously, we should understand the implications of this decision – to transfer our OA to SA – as the process is irrevisible. First and foremost, we lose some flexibility in using our OA funds. Currently, we can use OA savings to pay for a down payment on a home, service our home mortgage payments, pay for education loans, and selected insurance payments.
If we do not have any plans to use our OA funds in the long term, we can either invest our OA savings or transfer our OA balances to SA to enjoy higher risk-free interest rates.
According to CPF calculator, a 30-year-old who transfers $10,000 from their OA to SA, can earn more than $2,000 more in 10 years from just the difference in interest rates on the two accounts. This will grow even more over the longer term – earning more than $8,000 more by the time they hit 55.
Now, here is a step-by-step guide on how to transfer our funds from OA to SA in three easy steps.
#1 Enter The CPF Home Portal And Login Via SingPass
The transfer process can be done entirely online, via the CPF website. Before starting, get your SingPass access ready as it requires SingPass login.
On the CPF board portal for transferring OA savings to SA, CPF will once again advise that the process is irreversible (in bold and red fonts in case we were having second thoughts). Click on “Next” button to proceed with the transfer.
We will be re-directed to the request page for OA to SA transfer. A brief note on the process is explained. Tick on the terms and conditions box to start the transfer request. This will lead us to our SingPass login, to verify our identification before we can proceed to Step 2.
#2 Check CPF OA Balance & Key In The Amount You Wish To Transfer To SA
Upon SingPass login and confirming the transfer request, we will be able to access the transfer form.
Here, we will be able to double-check our OA total amount and CPF will automatically advise how much we would be able to transfer to SA. The maximum amount you can transfer from OA to SA is the difference between the current Full Retirement Sum (FRS) of $186,000 and the combined sum of our current SA funds and the net SA withdrawn under the CPF Investment Scheme (CPFIS-SA) for investments that have not been completely disposed of.
From there, key in the amount you are comfortable transferring over to SA. As long as it is within the approved amount, the transfer will be approved.
#3 Confirm The Amount You Wish To Transfer And Process It
Here, we can double-check the amount we are transferring and proceed to submit the transfer request.
Upon confirmation, the funds from OA will be immediately transferred over to SA and it will start accumulating the 4% p.a. interest (or likely 5% p.a.) from the date of transfer.
While contributing 17% of our monthly salary is a substantial amount, we can still make the most of it by figuring out the optimal CPF strategy for ourselves. One way is to transfer funds that we do not intend to use for housing from OA to SA to enjoy a higher risk-free interest rate of 4% p.a (or 5% p.a. if it is part of the first $60,000).
Featured Image Credit: Giovanni Lidya/DollarsAndSense
This article was first published on 7 April 2021 and updated to reflect the latest information.
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