CPF Investment Scheme (CPFIS): Guide to investing with your CPF
PHOTO: The Straits Times
Yes, using your CPF savings to invest is actually possible! Many have the concept that their CPF savings are locked in and untouchable until retirement, but that is not entirely true.
Under CPFIS, you have some access to your CPF savings for investment purposes with a few caveats.
Whether you’re finding ways to build your retirement nest egg, make your CPF savings work harder or want to diversify your investment portfolio, here’s everything you need to know about CPFIS and how to get started.
What is CPFIS?
An investment scheme by CPF, it allows you to use a portion of your Ordinary Account (CPF-OA) and Special Account (CPF-SA) for investment purposes.
What is the eligibility criteria for CPFIS?
To start investing under CPFIS, you have to meet these criteria:
- At least 18 years old
- Not an undischarged bankrupt
- Have more than $20,000 in your CPF-OA
- Have more than $40,000 in your CPF-SA
- Complete the mandatory Self-Awareness Questionnaire
Why is there a minimum sum you need to maintain in your CPF-OA and CPF-SA? Well, this is to ensure that in the event your investments do not perform well (e.g. during a recession or market slump), you still have a cash cushion in your CPF.
How much can you invest?
For CPFIS-OA, you can invest up to 35per cent of your investible savings in stocks or funds, and 10per cent of your investible savings in gold or gold-related investments.
Investible savings refer to the amount you have in your CPF-OA, plus the amount you’ve previously withdrawn for housing and education.
| Factor | Amount |
| Current amount you have in your CPF-OA | $50,000 |
| Housing | $20,000 |
| Education | $10,000 |
| Investible savings | $100,000 |
| Total investible savings for shares and funds (35 per cent) | $35,000 |
| Total investible savings for gold and gold-related investments (10 per cent) | $10,000 |
CPFIS-SA, on the other hand, doesn’t require as many calculations, and you may invest any amount beyond the minimum balance of $40,000.
What types of investments can you purchase under CPFIS?
You can only purchase investment products that have been screened by the CPF and depending on which CPF savings account you are intending to use, investment products will differ.
The general rule of thumb is that savings from your CPF-SA cannot be used to purchase investment products that are labelled as high risk.
You can refer to Investment Management Association of Singapore‘s report for more detailed risk profile information.
Savings from your CPF-OA, on the other hand, can be used to purchase investment products regardless of risk profile. Below is a list of investment products that you can purchase under CPFIS.
You can use your CPF-OA savings to purchase:
- Unit Trusts
- Investment-linked Insurance Products
- Annuities
- Endowment policies
- Singapore Government Bonds
- Treasury Bills
- Exchange Traded Funds (ETFs)
- Fund Management Accounts
- Shares (up to 35 per cent of investible savings)
- Property Funds (up to 35 per cent of investible savings)
- Corporate Bonds (up to 35 per cent of investible savings)
- Gold ETFs (up to 10 per cent of investible savings)
- Other gold products (up to 10 per cent of investible savings)
You can use your CPF-SA savings to purchase:
- Unit Trusts (less high risk products)
- Investment-linked Insurance Products (less high risk products)
- Annuities
- Endowment policies
- Singapore Government Bonds
- Treasury Bills
There are hundreds of investment products that you can purchase under CPFIS, head over here for the detailed list.
How do you start investing with CPFIS?
Depending on which account you are using for investments, getting started will differ slightly.
Investing with CPF-OA
- Ensure that you meet all the eligibility criteria mentioned above.
- Open a CPF investment bank account with DBS/POSB, OCBC or UOB (fees and charges are similar, pick one that is convenient for you).
- This step differs depending on who is managing your CPFIS.
- Independent investing: If you’re financially savvy enough and want to manage your own investments, then you’ll need to set up a brokerage account before you can actually start investing.
- Engage a broker or financial adviser: If you’ve made the choice to engage a financial professional to manage your CPFIS on your behalf, then all you have to do is pick your investment, sign the paperwork and wait for a week or so before your investments are accepted.
Investing with CPF-SA
Follow steps 1 and 3 from CPF-OA above.
Are there any risks involved?
Many think that since you are only allowed to purchase investments that have been screened, you will not make any losses — this is inaccurate.
These are actual investments that have fluctuating values depending on the economy, and they are not guaranteed by the CPF.
An investment loss here may seem small since it was bought using your CPF savings that you do not have access to until retirement. However, its real consequence will be felt when you decide to purchase a HDB flat and need to tap on your CPF-OA for downpayment and monthly instalments.
Conclusion
CPFIS is a great way to diversify your financial portfolio without having to pay any cash upfront. Having said that, there are also risks involved and perhaps even more now that we are facing an impending recession.
A recent study has shown that during the first quarter of 2020, investment products listed under the CPFIS dipped 12.96 per cent on average due to the pandemic.
Whereas savings put in CPF-OA and CPF-SA generate returns of 2.5 per cent p.a and 4 per cent p.a. respectively. These interest rates are risk-free, guaranteed by the CPF and higher than any offered by banks.
So unless you are absolutely confident in your abilities or in your broker to invest, it might be safer to leave your CPF savings where they are for now.