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

As someone who regularly invests, I’m not exactly a fan of CPF. My money ends up sitting in my Ordinary Account (OA), earning a measly 2.5% p.a. or up to 4.0% p.a. in the other accounts.

If I put all my CPF savings in a high-interest fixed deposit that offers 3.8% p.a., I would already beat that combined interest rate. And I haven’t even talked about the gains I could get from ETFs (exchange-traded funds) yet.

But I do see the merit of CPF—it’s good for people who are uninterested in investing or who live pay-cheque-to-pay-cheque. At least they’ll have a guaranteed source of income waiting for them when they retire.

For the rest of us looking to maximise our savings, we can look to the CPF Investment Scheme (CPFIS).

What am I currently earning on my CPF savings?

Before we think about investing our CPF savings, we need to see what we’re currently earning (since we need to beat this rate).

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 and +1% on next S$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.

But here’s the part you need to bear in mind: interest from CPF is guaranteed. Interest from CPFIS is not. If you don’t invest wisely or are unlucky, you could end up with <2.5% in returns.

If you have no knowledge of investing, it’s probably wiser to leave your money where it is while you learn how to invest. 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)
CPFIS Self-Awareness Questionnaire (SAQ)	You must have completed the questionnaire

The CPF account balance has two different requirements because there are 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, including shares, gold, higher-risk ETFs, and unit trusts.

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

What do you need to know before using your CPFIS?

One important thing to remember about CPFIS is that any returns you get will go back to your CPF accounts. That means you should invest with the future in mind. This money is for your retirement, not for you to enjoy during your working years.

To ensure that you don’t invest in volatile or high-risk options, CPF has shortlisted some investment products for you. After all, they don’t want you to gamble for CPF savings away.

What can I use my CPF to invest in?

As mentioned, CPF will not allow you to go berserk with your investing—you can’t go pumping all your cash into the latest cryptocurrency.

You can only invest in very specific products. The full details (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 and currently no products are approved
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 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.

Whatever you invest in, you need to earn more than the risk-free interest rates of the CPF Ordinary Account (2.5%) and Special Account (4%), or it will be pointless.

It’s definitely doable but not that easy in practice.

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 will erode your returns.

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. 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.

Since 2018, the government has been applying “cooling measures” to discourage FAs from irresponsible selling and to lower investment costs 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 clueless 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 a 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 an 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 are only 2 robo advisors that offer CPFIS, and that’s Endowus and MoneyOwl.

Found this article useful? Share it with anyone who wants to invest their CPF.