Do more with your CPF
If you’ve only got a minute:
- There are options for you to achieve potentially higher returns on your CPF OA and SA balances to grow your nest egg.
- CPF Investment Scheme (CPFIS) allows you to invest your CPF OA and SA savings.
- DBS recently introduced more CPFIS-approved unit trusts that offer exposure to a wider variety of asset classes and geographies.
Your savings in the Central Provident Fund (CPF) form a crucial part of your retirement plan. If you are employed and aged 55 and below, you could be contributing 20% of your salary while your employer contributes an additional 17% of your pay to your CPF every month. These mandatory CPF contributions add up to a whopping 37% of your pay cheque.
Do you know that as at end 2020, the total sum of CPF members’ balances reached a record S$462.1 billion (CPF Annual Report 2020)? This means each CPF member had an average total balance of S$112,707 across their CPF accounts. With such high CPF savings, it is important that you make the best use of your CPF to generate a reliable lifelong income stream to help fund your retirement lifestyle.
Growing your CPF
The monies in your CPF Ordinary Account (OA) grow at the legislated minimum interest of 2.5% p.a and monies in your CPF Special Account (SA) enjoy a floor rate of 4% p.a. These interest rates are reviewed quarterly. In fact, you can earn additional interest on the first $60,000 of combined CPF balances.
One option to achieving higher returns on your OA is to transfer your OA savings to your SA as it earns a higher interest rate. However, do consider your financial commitments including any purchase of property or servicing of housing loans that could be funded from your OA before making this transfer. OA transfers to SA are not reversible and monies in SA cannot be used for housing and education needs unlike OA savings.
For CPF members aged below 55, you can estimate your CPF LIFE monthly payouts with “Your CPF” in digibank.
Investing with CPF
To enable CPF members to accumulate their retirement savings via investing, the CPF Investment Scheme (CPFIS) allows you to invest your OA and SA balances. You can invest your OA savings that is in excess of S$20,000 and SA monies that is in excess of S$40,000.
With the OA interest rate at 2.5% p.a, you can consider investing your OA balance to potentially earn more than this base rate. For example, by investing a one-time amount of S$50,000, the difference between getting a return of 6.0% p.a compared to 2.5% p.a would be an additional S$182,296 more for your retirement nest egg in 30 years. A larger nest egg will definitely offer more options for your retirement lifestyle. So do consider making full use of the magic of compounding by investing your CPF OA savings.
The main objective of CPF is to save up for your golden years. As the monthly lifetime payouts from the national annuity scheme CPF LIFE start from age 65, it means that you have a long-time horizon before you draw down from your CPF. If you do not have any short-term needs for your OA, by investing over the long-term and potentially enjoying a higher rate of return, you can better mitigate against longevity, inflation and healthcare risks in retirement.
There is a growing suite of products that you can invest with your OA such as unit trusts, annuities, endowment policies, exchange traded funds, shares and gold ETFs. Unit trusts allow you to invest in a basket of stocks which can diversify your investments. This helps to ride out market volatility while potentially achieving higher returns than the OA base rate.
Investing with DBS
With DBS, you can invest in unit trusts using your CPF with ease. The bank offers a wide range of unit trusts eligible for CPFIS that have been subjected to due diligence by the CPF Board’s appointed consultant, Morningstar.
There are currently a total of 58 CPFIS-approved funds you can have access to via DBS. The availability of a wide variety of asset classes, geographies, including narrowly focused region and sector funds provide the flexibility to construct an investment portfolio according to your preferred asset allocation and make your CPF savings work harder for you.
For CPFIS-approved funds on DBS, over a 5-year period (as at 13 Feb 2023), the best performing funds were invested in Global Equities, US Equities, China Equities and Asia Pacific ex-Japan Equities
Top 10 CPFIS-approved funds available at DBS Bank (as at 13 Feb 2023),
5Yr Annualised Returns
|Nikko AM Shenton Global Opportunities Fd - SGD - Acc||8.73|
|PineBridge US Large Cap Research Enhanced Fund - A5CP - SGD - Acc||8.69|
|Franklin US Opportunities Fund - SGD - Acc||7.46|
|Fidelity America Fund - SGD - Acc||6.53|
|Allianz GIPF -Aillianz Global High - SGD - SAdis - Cash||5.98|
|Fidelity Greater China Fund - SR - SGD - Acc||5.89|
|Fidelity America Fund - SGD - Hedged - Acc||5.77|
|Nikko AM Japan Dividend Equity Fund - SGD - Hedged - Mdis - Cash||5.59|
|Schroder ISF Greater China - F - SGD - Acc||4.39|
For the full list of CPF Funds available via DBS, click here.
Getting Started with DBS
1. Open a CPF Investment Account (CPFIA)
To invest your OA savings, you can easily do so online. Apply for your CPFIA with the new DBS digibot
2. Invest at your convenience online with digibank or link your CPFIA to your DBS Vickers Account
a. For digibank users, go to “Invest” to get started: [Login]
b. Alternatively, if you have a DBS Vickers Account, choose CPF as your settlement mode: [Login]
Happy growing your CPF!
Ready to start?
Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.
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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.
All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.
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