CPF Investment Scheme (CPFIS) – Everything You Need to Know About Investing with CPF

One of the biggest complaints that Singaporeans have about their CPF savings is that we never actually see the money we’ve saved.

Then there’s the other complaint — that the interest rates of the CPF accounts are too low to combat inflation. This is where the CPF Investment Scheme (CPFIS) comes in to save the day.

Wait a minute, don’t I already get interest on my CPF?

Yes, you do. While the returns aren’t insanely high, they’re still a lot better than leaving your cash in a bank account. And the interest is risk-free!

Here are the current interest rates on CPF accounts:

Account type	Annual interest rate	Bonus interest
Ordinary Account (OA)	2.5%	+1% on first $60,000 (capped at $20,000 for OA) +2% on first $30,000 for 55 years old and up (capped at $20,000 for OA)
Special Account (SA)	4%
Medisave Account	4%
Retirement Account	4%

(Since CPFIS directly relates to OA and SA, we’ll talk a little more about these 2 accounts.)

Obviously, the interest rate for SA is a lot more attractive than that of OA. So one way to get better returns from your CPF is simply to move your OA funds to your SA.

The problem is, this is a one-way street — you can’t transfer your SA funds back into your OA where you can spend it on housing or education. It’s just going to get locked up there until retirement. That’s why CPFIS is so attractive. You can get better returns than 2.5% on your OA savings without locking it up.

All that said, it’s wise to bear these interest rates in mind when you think about investing your CPF funds. It’s perfectly possible for investors to get <2.5% returns, in which case you’ll rue the day you signed up for CPFIS.

If you are unaware of the risks and costs of investing your funds, it’s probably wiser to let sleeping dogs lie and leave your money where it is. Or maybe consider moving some excess OA funds (that you definitely won’t need for education/housing) to your SA.

Who is eligible for the CPF Investment Scheme?

If you’re interested in CPFIS, there are a few requirements you need to meet (apart from having a CPF account, duh):

Factor	Minimum requirement
Age	18 years old
Legal status	Not undischarged bankrupt
CPF (OA) balance	$20,000 (for CPFIS-OA)
CPF (SA) balance	$40,000 (for CPFIS-SA)

There are two different requirements for the CPF account balance because there are actually two CPF investment schemes, one for OA and one for SA.

Broadly speaking, using your OA savings to invest under CPFIS-OA will give you more investment product options to choose from, including shares, gold and higher-risk ETFs and unit trusts.

These investments aren’t allowed under CPFIS-SA. (It’s also harder to beat the 4% interest rate on your SA, remember.)

What do you need to know before using your CPFIS?

The most important thing to remember about CPFIS is that any returns you get will go back to your CPF accounts. That means you should ideally be investing with the future in mind.

You don’t want to risk squandering all your available CPF funds on a risky product if you’re still not going to be able to enjoy the fruits of your investments for another 20 to 30 years.

That being said, CPF has already shortlisted investment products that are less volatile, which is good given Singaporeans’ penchant for.. um.. “risk-taking” (we mean gambling).

What can I use my CPF to invest in?

I know what you’re thinking. But no, unfortunately you can’t just withdraw your funds and go berserk with the latest cryptocurrency.

You can only invest in very specific products, the full details of which (down to the specific product names) are helpfully provided on the CPF website — see this complete list of CPFIS investments.

In summary, here’s a table of products ranked from least to most restricted:

Type of investment	CPFIS-OA	CPFIS-SA
Singapore Government Bonds	Yes	Yes
Treasury bills	Yes	Yes
Annuities	Yes	Yes
Endowment policies	Yes	Yes
ETFs	Yes	Yes but not the higher-risk ones
Unit trusts	Yes	Yes but not the higher-risk ones
Investment-linked insurance products	Yes	Yes but not the higher-risk ones
Fund management accounts	Yes	No
Corporate bonds	Up to 35% of investible savings	No
Shares	Up to 35% of investible savings	No
Property funds	Up to 35% of investible savings	No
Gold ETFs	Up to 10% of investible savings	No
Other gold products	Up to 10% of investible savings	No

Note: “Investible savings” refers to your account balance + whatever you’ve withdrawn for housing and education.

For example, if you’ve withdrawn $30,000 for housing and you now have $70,000 in your OA, your investible savings are $70,000 + $30,000 = $100,000. That means you can invest up to $35,000 (35%) in shares and property funds, and up to $10,000 (10%) in gold.

What are the potential returns of CPFIS investments?

This isn’t an easy question to answer, of course, because of the range of products available. For example, bonds tend to be lower risk, lower returns, while unit trusts are generally higher risk, higher returns.

Ideally, you’d want your investments to at least earn more than the risk-free interest rates of the CPF Ordinary Account (2.5%) and Special Account (4%).

Sounds doable, yes? But it’s not that easy in practice.

Because almost every investment involves some kind of extra cost — ranging from investment brokerage commission fees to hefty unit trust management fees — you need to make sure your returns earn enough to pay for those as well. Otherwise, these costs basically erode your returns.

In fact, these pitfalls (in tandem with some irresponsible financial advisors’ aggressive sales tactics) have left some Singaporeans worse off than if they had never touched the money in the first place!

… But the Gahmen will help us, right?

Of course lah. This is Singapore. The Government has already recognised that, left to our own devices, Singaporeans might fall prey to poor investment decisions under CPFIS.

According to a Q3 2019 report, only 60% of CPFIS-OA investors managed to beat the OA returns of 2.5%. And that’s pre-COVID, mind you. Sheesh.

This is partly because of a conflict of interest between Singaporeans and our financial advisors (FAs). In the past, FAs could earn fat commission fees when they successfully talk you into plunging your CPF savings into a unit trust or investment-linked insurance policy.

Back then, as much as 4% of your investment would’ve gone into FAs’ pockets. You’d have been better off putting your money in your SA, huh?

Since 2018, the gov has been applying “cooling measures” to discourage FAs from irresponsible selling, and to lower the costs of investment for all CPF investors.

From Oct 2020, they can no longer charge sales fees. “Wrap fees” (admin fees, basically) are also now capped at 0.4%. Of course, FAs can get around the lower fees by selling more expensive unit trusts to blur investors. There are many ways for FAs to make money, so let the buyer beware.

Got it! How do I start investing under CPFIS-OA?

Provided you meet the eligibility criteria and understand the potential pitfalls, it’s easy to get started with CPFIS.

We recommend starting with CPFIS-OA as the interest rate of 2.5% is lower and therefore easier to beat through investing than your SA’s 4%. Here are the next steps.

Step 1: Open CPF Investment Account with DBS, OCBC or UOB

Open an account with your favourite local bank. Fees and charges are the same for all three, so it doesn’t matter which. This account is purely to allow your bank to administer the funds. You will still need a brokerage account to actually invest the money.

(FYI, for CPFIS-SA, there’s no need to open an Investment Account. Just approach the investment product providers directly.)

Step 2: Open investment brokerage account

The next step is to open an account with one of the CPFIS eligible investment brokerages. You can compare fees and apply for an account through MoneySmart.

Your brokerage doesn’t necessarily have to be with the same bank as your CPF Investment Account. For example, you can open a CPF Investment Account with DBS, and invest in ETFs with Phillip Securities. Phillip will liaise with DBS to execute the purchase.

Read more: How to Buy Stocks in Singapore: Start Investing in 5 Easy Steps

Alternatively: Go through a (robo) advisor

If you have no wish to get all DIY with your CPF investments, you can invest through an advisor — human or otherwise.

There’s only one robo advisor that does CPFIS, and that’s Endowus. You can sign up for an account through MoneySmart and follow the instructions provided on investing your CPF.

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