Our CPF Ordinary Account (OA) balances earn a minimum of 2.5% per annum. Apart from using our OA balances to pay for our home down payment and monthly home loan, we can also choose to invest via the CPF Investment Scheme (CPFIS).
If we want to invest our OA balances, the aim is to do better than the 2.5% interest floor that CPF already pays us. While this may be possible in a rising interest rate environment, we will be taking on some investment risk.
Today, 977,000 CPF members (or close to one-quarter of all CPF members) have invested via the CPFIS-Ordinary Account. Collectively, they have $17.1 billion of their CPF OA balances in investments. Moreover, there are also over 272,000 CPF members with about $5.7 billion of their CPF SA balances invested via the CPFIS-Special Account.
In this article, we will focus on investing our OA balances as it earns 2.5% per annum, compared to our SA balances, which earn a higher return of 4.0% per annum.
Read Also: 6 Investments In Singapore That Provide Guaranteed Principal And Returns
What Is CPFIS?
The CPFIS is an investment scheme by CPF – and not to be confused with the Supplementary Retirement Scheme (SRS), which is a separate scheme to invest for your retirement. CPFIS gives us the option to invest both our OA and SA balances to boost our retirement nest egg. 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 we 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)
The final two requirements on minimum balances, allowing us to only invest CPF balances above the first $20,000 in our OA and $40,000 in our SA is to enable us to enter CPF LIFE automatically. CPF LIFE is Singapore’s annuity scheme that provides a lifelong monthly payout during our old age, and requires us to have $60,000 flowing into our Retirement Account (RA) when we turn 55.
Moreover, we also earn an additional 1% per annum returns on the first $60,000 of our CPF balances, of which $20,000 can come from our OA. In effect, the restrictions to keep $20,000 and $40,000 in our OA and SA before being allowed to invest also enables us to fully enjoy the additional 1% per annum that CPF pays on top of the floor rates for each account.
Another thing we need to note when investing our CPF balances is that there are costs involved. From October 2020, the CPF Board has mandated the removal of all sales charges, and capped annual wrap fees at 0.4% per annum. This reduces costs for those investing our CPF monies, which should translate into better returns.
Here are 8 types of investments we can make with our CPF OA balances.
Read Also: CPF LIFE VS Retirement Sum Scheme: What’s The Difference?
#1 Approximately 100 Unit Trusts
We can invest in a broad range of nearly 100 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
Read Also: Beginners’ Guide To Start Investing Using The CPF Investment Scheme (CPFIS)
#2 Insurance Products With 10 Insurance Companies
There are approximately 110 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
Read Also: CPFIS: 5 Reasons Why You Should Not Rush To Invest Your CPF Monies
#3 Singapore Government Bonds (SGBs) & Treasury Bills
We can invest our OA funds into Singapore Government Bonds (SGBs) and Treasury Bills as well. These investments have been gaining in popularity since mid-2022, following a steep rise in global interest rates, while the interest rate paid by CPF OA has remained flat at 2.5% per annum. For example, the latest 6-month T-bills have a yield of 3.78%.
In terms of risk, Singapore Government Bonds and T-bills carry virtually the same risk levels. Therefore, more individuals have been investing in them to beat the OA floor rate.
Another way CPF OA 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 in it.
Read Also: Why Every Singaporean Should Apply To Invest Their OA Funds In T-Bill
#4 Exchange Traded Funds (ETFs)
There are currently only 6 ETFs that we can invest in 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
- NikkoAM-StraitsTrading Asia ex Japan REIT ETF
- SPDR Straits Times Index ETF
- SPDR Gold Shares (subject to 10% investible OA savings limit)
These investments have an expense ratio of between 0.24% and 0.6% per annum.
#5 Fixed Deposits
While no one would have thought about putting our OA funds in a fixed deposit in the past, it’s a different story today with rising global interest rates.
OCBC recently introduced their fixed deposit – initially offering 3.4% per annum and up to a high of 3.88% – for those who want to beat the 2.5% floor rate we earn on our Ordinary Account balances. The one thing we should note here is that the first $20,000 of our CPF OA savings earn an additional 1% of interest return. Therefore, we can earn up to 3.5% on our first $20,000 of CPF savings – this may still be superior to what the bank’s fixed deposits in certain periods. Do note that OCBC’s website currently states that it has halted its CPF time deposits and will resume “as soon as we can”.
Read Also: OCBC Is Now Offering 3.4% P.A. For CPFOA Fixed Deposit, But What’s The Catch?
#6 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. Similar to fixed deposits for CPF funds, such investments may not have made financial sense in the past. Today, there may be a reason for the government to offer such products via the CPF Investment Scheme.
#7 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
- UOB Kay Hian
Read Also: Singapore Online Stock Brokerage Account Fees Comparison (2022 Edition)
#8 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 accounts or physical gold, we can only do so via UOB. As such, we must open our CPFIS-OA account with UOB.
Read Also: Complete Guide To Investing In Gold and Silver With UOB And UOB Gold And Silver Savings Account
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. There are six risk profiles, from very conservative to very aggressive that we can be categorised into.
Depending on our risk profile, we will gain investment exposure in a combination of the following funds:
- LionGlobal Infinity U.S. S&P500 Stock Index Fund
- LionGlobal Infinity Global Stock Index Fund (SGD C Class)
- FSSA Dividend Advantage Fund (Dist)
- First State Dividend Advantage
- Schroder Global Emerging Markets Opportunities Fund
- Legg Mason Western Asset Global Bond Trust
- UOB United SGD Fund
- Eastspring Singapore Select Bond Fund
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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 or Retirement Account (RA) to earn 1.5% more per annum. By transferring our OA balances to our SA or RA, we can earn 4.0% per annum instead of 2.5% per annum on our funds.
However, once we do this, we lose the flexibility to bring back these funds into our OA – to use for our housing, children’s education or insurance schemes such as the Dependants’ Protection Scheme (DPS) and Home Protection Scheme (HPS). 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.
Read Also: 5 Practical Ways To Use Money From Your CPF Ordinary Account (CPFOA)
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, an additional consideration is 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.
Read Also: 10 Investments You Can Make With Your Supplementary Retirement Scheme (SRS) Account
This article was first written on 20 September 2021 and has been updated with additional information.
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