What is CPF Investment and How to Maximize Its Value

For qualified Singaporeans, the CPF Investment Scheme (CPFIS) is a way to invest part of their CPF funds in approved financial products, which tend to result in higher returns than what their money would earn if left alone. Doing so helps in gaining more wealth for retirement over the long term.

Let’s check the pros and cons of CPF investment and how you can go about doing this. 

CPF Investment Scheme Summary

The CPFS allows you to invest money from your CPF Ordinary Account (OA) and Special Account (SA). Your OA on its own accrues at an interest rate of 2.5% per annum, while the SA grows at 4% per annum. Investment in other financial products has the added potential to get higher returns. This helps grow savings for retirement, which you might be able to withdraw more at your draw-down age of 55 or obtain higher payouts from CPF after you turn 65.

Who can start with CPF investment?

To be eligible, an individual must be:

• At least 18 years of age 
• Have at least $20,000 in your OA
• Have at least $40,000 in your SA 
• Moreover, you must not be bankrupt. 
• Complete a Self-Awareness Questionnaire by CPF

What investment products are approved under CPF?

A full list can be found on the CPF website or discussed with a bank offering assistance for CPF investment. However, the following is a quick summary:

Unit Trusts – funds that include stocks, bonds, equities, or various assets. Mostly managed by full-time professionals, so there’s no need to control what’s being bought and sold actively.

Investment-Linked Insurance Products (ILPs) – Insurance policies wherein payouts and bonuses are linked to the performance of different sub-funds. Many ILPs are aligned toward investment returns instead of insurance coverage. 

Singapore Government Bonds – Debt instruments allow you to lend to the Singapore government, which is repaid with interest.

Annuities – Insurance policies guarantee lifetime incomes or income over a period. 

Endowment policies – Insurance policies that give payout upon maturity or the death / permanent disability of the insured.

T-Bills – Discount bonds sold at less than the face value of the bond. You will then receive the full value when the bond matures.

Exchange-Traded Funds (ETFs) – Funds that track the performance of a particular index like the Straits Times Index and offer a return close to that of the index. They usually have lower management fees than actively managed funds, such as unit trusts. 

Shares – Stocks and shares in approved companies

Property Funds – Funds such as Real Estate Investment Trusts (REITs) or other collective investments involving property assets

Corporate Bonds – Debt instruments wherein you effectively lend to companies that pay you back with interest

Gold ETFs – Gold ETFs track gold prices or gold-related stocks 

Other gold products – Comprised of gold bullion and gold savings accounts

The above are general terms and not specific products. Consult with a qualified financial professional on the performance and risks of specific individual assets, rather than simply judging by the asset type.

As the cost of living in Singapore rises, it’s wise to balance CPF interest rates and invest to beat inflation. The CPF Board has vetted CPF products, so you know that you only deal with reputable funds and financial products. 

To get started in CPF investment, head over to a top bank’s website. Note that dealing with a qualified financial advisor can help you decide on the right mix of investment options to maximize your odds of earning and happy retirement.