What to invest in

All CPF members’ money is allocated across three accounts – the Ordinary Account (OA), Special Account (SA), and Medisave Account (MA).

Each acts as a savings account that earns risk-free interest – the SA and MA offer more attractive interest rates of 4 per cent per annum (p.a.)while the OA’s rate is 2.5 per cent p.a.

Tempting as it may be to put all your money in your SA or MA, interest rates do not tell the whole story. Your MA money can be used only to foot medical bills, while savings in your SA are locked up till you hit 55, and cannot be used for housing or education – unlike money in your OA.

It may thus be wiser to invest your OA money under the CPF Investment Scheme (CPFIS) instead of putting it all in your SA. This gives you more flexibility in using that money, such as for housing needs before retirement.

Under CPFIS, a range of products, including Exchange-Traded Funds, T-bills, bonds, insurance products, shares, unit trusts, and fixed deposits, are offered.

But do note that any returns from these investments go back into your OA. This means you should invest with the future in mind, looking for reliable options that are less volatile so that you can enjoy the fruits of your labour later in life. Fixed deposits offer attractive returns with greater certainty - such as Maybank CPF Time Deposit. It launched with a 2.90 per cent p.a. interest rate on a minimum placement of S$20,000, over 12 months. All you would need is a CPF Investment Account with one of the three local banks, to open a Maybank CPF Time Deposit at any Maybank branch.

SA funds can also be used under CPFIS, albeit only in lower-risk products with potentially lower returns. MA funds cannot be used to invest.

 

Factors to consider

To invest your CPF funds, first check if you are eligible to do so. According to the CPF Board, Singaporeans and permanent residents aged at least 18 are eligible for CPFIS.

Potential investors must also have a minimum of $20,000 in their OA before they can invest. If you need funds to pay off a housing or education loan in the near future, investing may not be for you yet.

CPF investments are also long-term, so younger individuals with longer investment horizons may be more suitable candidates than those nearing retirement.

Before taking the plunge, it is important to assess your finances and draw up a plan for the next 10 to 20 years to see if you can invest your CPF money and still stay afloat. You should also evaluate, after thorough research, if other forms of investment can beat the OA’s 2.5 per cent base interest rate, minus brokerage fees and sales charges.

Done wisely, investing your CPF money under CPFIS can significantly bolster your financial security and future. Do your due diligence to find out if it is viable for you.