You will be able to explain what can be bought under CPFIS and the amounts that must stay in your accounts.
Jun Hao, Kelvin's colleague from lesson 3.1, has a new idea. His S$20,000 is stuck in his Special Account until 55, so he wants to invest it and "at least make it work harder." A friend told him he can buy almost anything with CPF. Before he does anything, he needs to know what he is actually allowed to buy, and how much of his money is off limits.
The CPF Investment Scheme, or CPFIS, lets you invest part of your OA and SA savings in approved products instead of leaving them to earn CPF interest. It has two parts: CPFIS-OA for Ordinary Account savings and CPFIS-SA for Special Account savings. Each has its own rules on how much you can invest and what you can buy.
You can't invest everything. For each account, the CPF Board sets an amount that must stay in the account, earning CPF interest, before any investing is allowed. Only savings above that amount can go into CPFIS. The amounts are different for the OA and the SA, and they are set out on cpf.gov.sg. When you log in, the CPF website shows how much you could invest under each part.
The amount you can invest is worked out from what the CPF Board calls your investible savings, which counts your current balance plus what you have already taken out to invest. So investing doesn't create new room just because your balance has fallen.
The OA has the wider list. Under current rules it includes unit trusts and exchange-traded funds that are included under CPFIS, Singapore government securities and Treasury bills, fixed deposits, some insurance products such as annuities and investment-linked policies, and shares and corporate bonds listed on SGX. Some product types carry their own caps, for example 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. Funds must 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 it is limited to lower-risk options and a subset of included funds and insurance products. Shares, for example, can't be bought with SA savings. Check the current SA list on the CPF Board website before you plan anything, because the rules for the SA have been tightened before.
That narrowness matters more than it first looks. The products you are allowed to buy with SA money have to beat the SA rate after costs to be worth it, and the next lesson shows how hard that is.
CPFIS investments aren't held in your normal brokerage account. For shares, bonds and some other products bought with OA savings, you open a CPF Investment Account with one of the agent banks the CPF Board lists, and your broker settles trades through it. Funds and insurance products are bought through approved providers and fund platforms, which deal with CPF directly.
Wherever they sit, the investments stay inside the CPF system. When you sell, the money goes back to the account it came from. It never reaches your bank account. Dividends and interest on CPFIS investments are also paid back into CPF. If your investment rises, the gain becomes CPF savings, with all the usual rules on how and when it can be used. If it falls, the loss comes out of savings meant for your home and retirement. Lesson 4.3, Costs, risks and what happens to gains and losses, comes back to what that means.
Jun Hao logged in and checked. His SA balance was below the amount that must stay in the account, so none of it could be invested yet. The S$20,000 he had transferred would stay in the SA earning the guaranteed rate whether he liked it or not. His OA was above the OA threshold, so he could invest part of it, but he was about to need that OA money for a flat.
He realised he had been about to compare investments without knowing what he could buy or how much. He also noticed that the friend who told him he could buy almost anything had been describing a brokerage account. CPF has a much shorter list.
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.
Look up how much of your OA and SA could be invested under current rules and the types of product allowed for each.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).