July 21, 2018 thefinlens

The Beginner’s Guide to CPF Investment Scheme

cpf investmentMany of us may know that our CPF can be used for purchasing a house, paying for healthcare or funding our retirement plan. However, if you are not already aware, your CPF can also be used for investments. Purpose? To have higher returns compared to leaving your savings untouched by taking investments into your own hands. This is known as the CPF Investment Scheme (CPFIS).

Important Points For You to Take Note Before Investing

CPFIS gives you the option to invest your savings from your Ordinary Account (OA) and Special Account (SA) in a wide range of investments to enhance your retirement savings. As investments have a certain level of risk, you do have to fulfill certain criteria before you are allowed to invest under CPFIS:

  • At least 18 years old;
  • Not an undischarged bankrupt;
  • More than $20,000 in your OA; and/or
  • More than $40,000 in your SA

Be aware that there are two CPF investment schemes, one for OA and one for SA

Frankly speaking, investing under CPFIS-OA will give you more investment product options to choose from, including shares, gold and higher-risk ETFs and unit trusts. These investments are not available under CPFIS-SA.

Another important point to know is that any returns you get will go back to your CPF accounts. So when you are investing, keep in mind that you should be investing with the future in mind as you do not want to risk losing your CPF funds on a risky investment. With that said, you don’t have to worry much because CPF has already shortlisted financial products that are less volatile.

How Much Can I Invest?

If you are still motivated to invest your CPF savings after reading all of the above, then now you must know how much you can actually invest. So let’s start.

Firstly, you can only invest the excess of your CPF savings under CPFIS after you have set aside $20,000 in your OA or if you want to invest the savings in your SA, after you have set aside $40,000 in your SA. On top of that, you can only invest up to 35% of your savings and up to 10% of your investable savings* in stock and gold respectively, also known as the stock and gold limit.

To find out the amount of OA and SA savings you can use for investment, you can:

  1. Login to CPF website using your SingPass to access my cpf Online Services – My Statement; or
  2. Access CPF Tools on your iPhone using your SingPass; or
  3. Visit any CPF Service Centres with your identity card.

What Can I Invest In?

Unlike withdrawing your own savings from the bank and being able to invest in any possible investment options there are in the world, unfortunately you are not allowed to withdraw your CPF savings and invest in anything you want.

There are very specific products that you can invest in and below is a summary of the products ranked from the lowest to the highest risk that you can or cannot invest in:

Type of Investment

CPFIS-OACPFIS-SA

Singapore Government Bonds

Yes

Yes

Treasury Bills

Yes

Yes

Annuities

Yes

Yes

Endowment Policies

Yes

Yes

Exchange-Traded Funds (ETFs)

Yes

Yes but not the higher-risk ones

Unit Trusts

Yes

Yes but not the higher-risk ones

Investment-linked Insurance Products

Yes

Yes but not the higher-risk ones

Fund Management Accounts

Yes

No

Shares

Up to 35% of investible savings

No

Property funds

Up to 35% of investible savings

No

Gold ETFs

Up to 10% of investible savings

No

Other Gold Products

Up to 10% of investible savings

No

If you would like a more detailed list, you can refer to this complete list of CPFIS investments.

Note: Investible savings” refers to your account balance + whatever you’ve withdrawn for housing and education.

For example, if you’ve withdrawn $40,000 for housing and you now have $60,000 in your OA, your investible savings are $60,000 + $40,000 = $100,000. That means you can invest up to $35,000 (35%) in shares and property funds, and up to $10,000 (10%) in gold.

How Do I Decide On What To Invest In?

Choosing your investment options depend a lot on what you know about financial products, your objectives are and what your risk appetite is. What does STI ETF mean? What is an endowment plan? Are you looking for short term or long term gains? Are you willing to risk losing the money you will be investing? Even if you are willing to risk losing the money, is it worth it? Do you have any other savings besides your CPF accounts? What are your current financial commitments? How long do you see yourself in your current job? It is important that you consider many possible factors before committing to invest.

Deciding on what to invest in is also a time-consuming and tiresome process. These are the reasons why we are here to help. Other than helping you to understand your situation financially, we would like to expedite and ease the process when you start investing by offering you the right information on how you should go about looking at your investments options, what you should be focused on and when to invest to maximise your returns and at the same time protecting your assets.

If you do require any assistance regarding this, please feel free to contact us. We will be glad to help.

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