You will be able to explain what you can buy under CPFIS and how much must stay in your accounts.
You can invest only the part of your OA and SA savings above an amount the CPF Board sets for each account. You can only buy products on the approved list for that account. Check both before you compare any investments.
The CPF Investment Scheme (CPFIS) lets you invest part of your OA and SA savings in approved products. If you don't use it, the money stays in CPF and earns CPF interest. CPFIS has two parts: CPFIS-OA for Ordinary Account savings and CPFIS-SA for Special Account savings. Each part has its own rules on how much you can invest and what you can buy.
Jun Hao, Kelvin's colleague from Lesson 3.1, has S$20,000 in his Special Account (an invented example). He transferred it there and can't touch it until 55. He wants to invest it to "at least make it work harder." A friend told him he can buy almost anything with CPF. Before he acts, he needs to know what he is allowed to buy and how much of his money is off limits. So he logs in to the CPF website and checks.
You can't invest all of your savings. For each account, the CPF Board sets an amount that must stay in the account and keep earning CPF interest. You can't invest anything from that account until your balance is above that amount, and only the savings above it can go into CPFIS. The amount is different for the OA and the SA. Both amounts are published on cpf.gov.sg. When you log in, the CPF website shows how much you could invest under each part.
The CPF Board works out how much you can invest from your investible savings. These are your current balance plus what you have already taken out to invest. If your balance drops after you invest, you don't get new room to invest more.
Jun Hao's SA balance is below the amount that must stay in the SA, so none of his SA can be invested yet. The S$20,000 he transferred stays in the SA earning the guaranteed rate, whether he likes it or not. His OA is above the OA threshold, so he could invest part of it. But he will soon need that OA money for a flat.
The OA has the wider product list. Under current rules it includes:
unit trusts and ETFs that are included under CPFIS Singapore government securities and Treasury bills fixed deposits some insurance products, such as annuities and investment-linked policies shares and corporate bonds listed on SGX
Some OA product types have their own caps. For example, there is a limit on how much of your investible savings can go into shares. The CPF Board publishes the list of included products and the caps.
Not every fund on the market is included. A fund has to meet criteria on costs and performance to be included under CPFIS, and the list is reviewed. A fund you see advertised may not be on it.
The SA list is narrower, because SA money is meant for retirement and earns a higher guaranteed rate. Under current rules, the SA list is limited to lower-risk options plus some of the included funds and insurance products. You can't buy shares with SA savings. SA rules have been tightened before, so check the current SA list on the CPF Board website before you plan anything. A product bought with SA money is only worth buying if it beats the SA rate after costs. The next lesson shows how hard that is.
Jun Hao realises he was about to compare investments without knowing what he could buy or how much. He also notices that his friend was describing a brokerage account. A brokerage account lets you buy almost anything. CPFIS has a much shorter list.
CPFIS investments are not held in your normal brokerage account. To buy shares, bonds and some other products with OA savings, you open a CPF Investment Account with one of the agent banks listed by the CPF Board. Your broker settles trades through that account. Funds and insurance products are bought through approved providers and fund platforms, which deal with CPF directly.
Wherever they are held, CPFIS investments stay inside the CPF system. When you sell, the money goes back to the account it came from and never reaches your bank account. Dividends and interest from CPFIS investments are also paid back into CPF. A gain becomes CPF savings and follows all the usual CPF rules on how and when it can be used. A loss comes out of savings meant for your home and retirement. Lesson 4.3, "Costs, risks and what happens to gains and losses", explains this in more detail.
Do the checks in this order. Log in to cpf.gov.sg and see how much of your OA and SA you could invest under CPFIS. For each account, this depends on whether your balance is above the amount that must stay in it. Next, look up the current list of product types allowed for the OA and for the SA. Then note any caps that apply, such as the limit on shares. Compare actual investments only after you have done all three.
Your activity: log in to cpf.gov.sg and find how much of your OA and SA you could invest under CPFIS today. Then look up the current list of product types allowed for each account, and note any caps that apply.
Find out how much of your OA and SA you could invest under the current rules, and which types of product each account allows.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).