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How to Make the Most of Your CPF

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The Motley Fool Singapore

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The Singapore government encourages citizens to save. In pretty much the same way they “encourage” you not to litter, and policemen “encourage” crack dealers to surrender. It’s mandatory, is what we’re saying. Hence, the much grumbled about Central Provident Fund (CPF). In this article, the crew at MotleyFool explains how it’s more flexible than we think:

CPF: What (Else) Is It Good For?

Your Central Provident Fund (CPF) can make a huge difference to your retirement. As it stands, most people in Singapore use the money in their CPF accounts to pay for their HDB flats or other properties. There’s nothing wrong with that. However, you can do other things with the money in your CPF. You could invest the money in shares, bonds and collective investments such as unit trusts. You can find a list of allowable investments here.

 

Restrictions and Conditions

There are two CPF investment schemes that you can use. You can invest the money in your Ordinary Account (OA) and Special Account (SA) under the CPFIS-OA and CPFIS-SA schemes. However, there are few hoops you need to jump through before you can start. Firstly, you have to be at least 18 years old.

Secondly, your OA and SA must contain at least $20,000 and $40,000 respectively. You can check this link for the differences between the two investment schemes.

Finally, if you are using your OA, you have to open a CPF Investment Account at one of the three CPFIS agent banks in Singapore. They are DBSOCBC, and UOB. But you won’t need to if you use the funds in your Special Account.

It’s worth noting that any gains you make in your CPFIS are not subjected to capital gains taxes. However, dividends are taxed at your individual tax-rate. Do also note that special charges apply when you invest under the CPFIS-OA and CPFIS-SA schemes. The amount and type of charges depend on the type of investment you make. You can find more here.

Withdrawals are subject to the same withdrawal rules from your CPF accounts. In other words, you can only take the money out after you are 55 years old. However, you can buy and sell your investments as often as you like provided you have held them for at least one day.

But just because you can trade as often as you like doesn’t mean you should. The Motley Fool believes that buying and holding shares with good long-term prospects are the best way to build wealth over the long haul.

So, if you don’t plan on retiring in the immediate future, it may be a good idea to think about putting your available cash to better use. Here at The Motley Fool we believe that the best place for money that you don’t need for the next five to seven years is in shares.

Motley Fool’s purpose is to help the world invest, better. Click here now for your FREEsubscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David KuoTake Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead. 

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. 

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Sam Calma

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The Motley Fool Singapore

The Motley Fool (www.fool.sg) offers stock market and investing advice, showing people how to take control of their money and make better financial decisions. We also host a range of educational content, written for everyday people. We feel that the best person to make your financial decisions is you, and we want to help you take control of your own money.