What to do when your CPF SA is closed

By Shawn Lee

If you’ve only got a minute:

• When the CPF Special Account (SA) closes in the second half of January 2025 for those aged 55 and above, your SA savings will be transferred to your Retirement Account (RA) to meet the Full Retirement Sum (FRS). If the FRS is met, the SA balance will be transferred to your Ordinary Account (OA).
• You can transfer OA savings to RA for higher retirement payouts or keep them in OA for 2.5% pa interest and flexibility of withdrawal.
• Consider investing your OA savings via the CPF Investment Scheme if you are willing to take investment risk. Your investment choices will depend on your risk tolerance, financial knowledge, and investment objectives.
• Alternatively, you can withdraw your OA savings for investments and insurance outside of the CPFIS which provides you more options.

In the second half of January 2025, your CPF Special Account (SA) will be closed if you are aged 55 and above. The savings in your SA will be transferred to your Retirement Account (RA) up to the Full Retirement Sum (FRS). These savings will continue to earn the long-term interest rate of at least 4% per annum (pa). You will earn 6% per annum (pa) on the first S$30,000 of your combined CPF balances (capped at S$20,000 from OA), and up to 5% on the next S$30,000 (capped at S$20,000 from OA).

If you have already set aside your FRS, either fully in cash or through a combination of property and cash, any remaining SA savings will be transferred to your Ordinary Account (OA). These savings will be withdrawable and will earn the short-term interest rate of at least 2.5% pa. However, note that any money transferred to your OA from SA will now earn 2.5% pa, instead of the interest of at least 4% pa.

You will be notified when your SA is closed via a hardcopy letter, as well as an email or SMS, where applicable. No immediate action is required on your part.

Before your SA is closed, you can view the estimated amounts that will be transferred from your SA to your RA and/or OA by logging into your CPF Retirement Dashboard.

You may be wondering what to do with your CPF OA funds once the closure happens. Here are some options to consider:

1. Transfer OA Savings to RA for higher monthly CPF LIFE payouts

In 2025, the Enhanced Retirement Sum (ERS) will increase from 3 times to 4 times the Basic Retirement Sum, which amounts to S$426,000.

You can choose to transfer your OA savings to your RA at any time, up to the prevailing ERS, to enjoy higher long-term interest rates and receive larger retirement payouts.

For example, a CPF member turning 55 in 2025 who tops up his RA to the ERS of S$426,000 can expect monthly payouts of S$3,300 under the CPF LIFE Standard Plan from age 65, for as long as he lives. If he opts to delay and start receiving payouts at age 70 instead, the monthly amount could rise to about S$4,000.

Additionally, you can continue to top up your RA to the prevailing ERS each year from age 55 to further increase your monthly payouts. However, do note that top-ups to RA are irreversible. Once transferred, the savings in your RA will only be available for retirement payouts.

*Estimated CPF LIFE monthly payouts calculated with the Standard Plan, using the CPF LIFE Estimator.

2. Keep the money in your OA and enjoy 2.5% interest

By keeping your funds in the OA, you will continue to earn at least 2.5% interest pa, as this is the legislated minimum rate for CPF OA savings. For example, from May to July 2024, the average interest rate was 0.45%, but the CPF OA interest rate stayed at 2.5%.

You can withdraw the funds at any time, just like a bank savings account, provided you have already met at least the FRS in your RA.

Note that the CPF OA interest rate could rise above 2.5% if the 3-month average of major local banks' interest rates exceeds this threshold.

3. Invest OA Funds via the CPF Investment Scheme (CPFIS)

If you have the need and are willing to take on investment risk in suitable products, you can invest your OA funds (above the S$20,000 threshold) under the CPF Investment Scheme (CPFIS) in options like T-bills, fixed deposits, insurance plans, unit trusts, and more. Your investment choices will depend on your risk tolerance, time horizon, financial knowledge, and investment objectives.

Before you begin investing, ensure you understand your financial goals and when you may need the funds. Consider your ability to absorb short-term losses and assess your overall financial situation.

When investments under the CPFIS are liquidated, the proceeds will return to your OA.

4. Withdraw CPF savings for investments and insurance outside of CPFIS

If you wish to access a wider range of investment options, you can withdraw savings from your CPF OA for investments or insurance products that are not available under the CPFIS.

Some CPF members may hesitate to top up their RA to the prevailing ERS (this will be S$426,000 in 2025) and “lock up” their monies. If a CPF member prefers to have more liquidity, he may consider withdrawing the CPF monies to buy a retirement income insurance plan.

Although the effective return of the plan may be lower than that of the CPF LIFE scheme, the advantage is that the policyholder can enjoy some flexibility should he need to surrender the policy to raise funds. Retirement income insurance plans also allow you to choose your payout start date and the payout period so you can structure it according to your needs.

While this gives you more flexibility, bear in mind that once you withdraw your CPF OA savings in cash, there are limited CPF schemes to top up your OA in the future. This means you will miss out on the 2.5% guaranteed interest on those funds.

5. Withdraw CPF savings for immediate needs

If you have upcoming expenses that require immediate cash, you can withdraw the necessary amount from your CPF OA savings, provided it is above the FRS. It is prudent to withdraw only what you immediately need, as you can leave the remaining balance in your OA to continue earning the guaranteed 2.5% pa interest.

Conclusion

When your CPF SA is closed in January 2025, there are various options available to you.

Before making any decisions, it's important to consider your retirement goals, financial situation, and risk tolerance. Taking time to assess your options will help you make informed choices that align with your long-term financial objectives.

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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.