Our CPF Ordinary Account (OA) balances earn a minimum of 2.5% per annum. Unlike what some may think, we can actually “touch” our CPF monies by investing part of our OA balances via the CPF Investment Scheme (CPFIS).
If we invest our OA balances, the aim is to do better than the 2.5% interest floor that CPF pays us. This is quite possible (and we will go into the investments we can make below). However, we need to be willing to take on investment risk – which may lead to losses.
As of 2020, 960,000 CPF members have invested $17 billion of their CPF OA balances, while 283,000 CPF members have invested $5.5 billion of their CPF SA balances. In this article, we will focus on investing our OA balances as it provides 2.5% per annum, compared to our SA balances, which provides a higher return of 4.0% per annum.
What Is CPFIS?
The CPFIS is an investment scheme by CPF. It gives us the option to invest our OA and SA balances to boost our retirement savings. When we invest our OA balances, we need to apply for a CPFIS-OA account with one of the three local banks – DBS, OCBC, UOB – but can invest in a variety of investments managed by other financial institutions. Similarly, when we invest our SA balances, we are utilising the CPFIS-SA scheme, but there is no need to open any specific CPFIS account. Instead, we can buy and sell the products directly with the providers.
Taking on investment risk can mean earning higher returns, but it can also mean losing money on our investments.
To invest our CPF balances, we need to be eligible:
- at least 18 years old
- not an undischarged bankrupt
- have more than $20,000 in our OA
- have more than $40,000 in our SA
- complete Self-Awareness Questionnaire (SAQ) (from 1 October 2018)
For the final two requirements on minimum balances, this is because we can only invest any CPF balances above the first $20,000 in our OA and $40,000 in our SA. This is to enable us to enter CPF LIFE automatically – which requires us to have $60,000 flowing into our Retirement Account (RA) when we turn 55.
Another thing we need to note when investing our CPF balances is that there are costs involved. In 2018, the government had committed to reduce the cost of investing CPF monies. From October 2020, sales charges have been removed and annual wrap fees are capped to 0.4%. This reduces cost for those investing our CPF monies, which should translate into better returns.
Here are 7 types of investments we can make with our CPF OA balances.
#1 Approximately 85 Unit Trusts
We can invest in a broad range of approximately 85 unit trusts with our OA funds. We can invest into majority of the unit trusts individually, while about 10 of them have to be invested into via Investment-Linked Products (ILPs).
The unit trusts that we can invest in with our OA funds are also typically managed by reputable fund managers such as:
- Aberdeen Asset Management
- Eastspring Investments
- Fidelity Investments
- First Sentier Investments
- Franklin Templeton Investments
- FSSA Investment
- Infinity Investment
- Legg Mason Asset Management
- Lion Global Investors
- Manulife Asset Management
- Nikko AM
- PineBridge Investments
- UOB Asset Management
#2 Insurance Products With 10 Insurance Companies
There are approximately 120 funds that we can also invest in via 10 insurance companies’ products. These products include Investment-Linked Products (ILPs), annuities and endowment policies.
The 10 insurance companies include:
- Great Eastern
- NTUC Income
- Tokio Marine
#3 Singapore Government Bonds (SGBs) & Treasury Bills
We can invest our OA funds into Singapore Government Bonds (SGBs) and Treasury Bills as well.
However, this may not be the wisest thing to do as the interest rates on such bonds tend to be significantly lower than what we would receive in our CPF. In terms of riskiness, we’re also not gaining anything as both assets carry virtually the same risk levels.
The one way such investments could become useful is if we ever want to carry out the CPF Shielding hacks, as it carries a very low risk of losing our money and has low charges for investing into it.
#4 5 Exchange Traded Funds (ETFs)
There are currently only 5 ETFs that we can invest into with our CPF OA funds. They are:
- ABF Singapore Bond Index Fund
- Nikko AM SGD Investment Grade Corporate Bond ETF
- Nikko AM Singapore STI ETF
- SPDR Straits Times Index ETF
- SPDR Gold Shares (subject to 10% investible OA savings limit)
#5 Fixed Deposits, Statutory Board Bonds, Bonds Guaranteed By Singapore Government
While these are investments we can make with our OA funds, there are currently no products available. This is very likely because any products made available would be offering significantly lower interest rates that we are already getting on our CPF Ordinary Account, while the risk will be very similar.
#6 Shares, Property Funds & Corporate Bonds
We can only invest up to 35% of our investible OA savings in shares, property funds and corporate bonds.
We can view the entire list of such securities on the SGX page – and the list is quite extensive.
When making such investments, we need to trade via one of the following 10 brokerages.
- CIMB Securities
- DBS Vickers
- iFast Financial
- KGI Securities
- Lim & Tan Securities
- Maybank Kim Eng Securities
- OCBC Securities
- Phillip Securities
- RHB Securities
- UOB Kay Hian
#7 Gold Products (Other Than SPDR Gold ETF)
We can also invest up to 10% of our investible OA savings in gold products. This limit is for all our gold investments, which include any amounts we invest in the SPDR Gold ETF.
If we want to invest in gold products such as gold certificates, gold savings account or physical gold, we can only do so via UOB. As such, we must open our CPFIS-OA account with UOB.
We Can Also Invest Our CPF Monies With Endowus
Another way we can invest our CPF OA monies is via Fund Management Accounts. Endowus is one fintech player that currently enables us to invest in the best-in-class global funds at the lowest possible costs.
Endowus also allows us to invest in a mix of globally diversified equity and fixed incomes funds depending on our risk appetite. These funds include:
- Vanguard-managed Infinity US 500 Stock Index Fund
- Vanguard-managed Infinity Global Stock Index Fund
- First State Dividend Advantage
- Schroder Global Emerging Market Opps Fund
- Legg Mason WA Global Bond Trust
- UOB United SGD
- Eastspring INV UT Singapore Select Bd Fund
Invest Better With Endowus
If you’re interested to start investing with Endowus, you’ll be happy to know that DollarsAndSense readers can have their first $10,000 managed for free for 6 months, which translates to savings of $20 in fees. Sign-up using this link to claim this special offer. Terms & Conditions apply.
Transferring Our OA Balances To Our SA (Or RA) To Earn A Higher Return Instead
If we do not want to take on investment risk, we can transfer our OA balances to our SA to earn 1.5% more per annum. By transferring our OA balances to our SA, we now earn 4.0% per annum instead of 2.5% per annum.
The reason why we earn a higher interest is because this is irreversible. This means we lose the flexibility to use the funds for our housing, children’s education or insurance schemes such as the Dependants’ Protection Scheme (DPS) and Home Protection Scheme (HPS) – which our OA balances can be used for.
This is unlike investing our OA balances. Once we sell our investments made with our OA balances, the funds go back into our OA – and we can use them for our housing or education needs.
Monies Invested Via CPFIS Will Be Considered Part Of Our Estate
Cash and investments held in our CPFIS-OA and CPFIS-SA are not covered under our CPF Nomination. This means that such investments go straight into our estate after we pass on. Therefore, when making our CPF Nomination, we need to note that our investments are not part of it. Similarly, when we make a will, we need to know that our CPF investments will fall under it.