How to maximize your CPF 2

Once a year, you get a letter from Central Provident Fund (CPF). It shows the amount of money that you have saved with them and the interest they give you. You think to yourself or probably hear this from some of our friendly neighborhood uncles.

“Inside so much money also cannot touch, must as well give me now right?”

“The interest so low. How to combat inflation?”

Unfortunately, we can’t withdraw our CPF until 55 or until retirement age (T&C applies). The CPF is a tool to help people save money for retirement, housing and healthcare. Like all tools, it can be used to aid us or hinder us. Your CPF can make a huge difference to your retirement.  In order to get a million dollars in your CPF, you maximize what to do with your CPF. What if there a way to offer a higher interest on your CPF? I’m talking about CPF investment schemes here.

If you are keen to invest your “untouchable money”, here is how you can do it.

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Who is eligible for CPF Investment Scheme?

  • At least 18 years old
  • Not an undischarged bankrupt
  • Have more than $20,000 in your Ordinary Account (OA)
  • Or have more than$40,000 in your Special Account (SA)
  • Have a CPFIS account with either DBS/OCBC/UOB (For investing using OA)

What to note before committing to CPF Investment Scheme

  • Investment returns are not guaranteed
  • OA gives you a minimum interest of 2.5% per year guaranteed
  • SA gives you a minimum interest of 4% per year guaranteed
  • CPF gives you an additional 1% interest for the first $60,000
  • All investment returns will go back to your CPF account at the end of the day
  • Your risk profile, time horizon for investment and overall financial situation

This means to maximize CPF, it will be good to invest money from OA which gives more than 2.5% interest per year.

What can you invest in?

  • Fixed Deposits
  • Singapore Government Bonds
  • Treasury Bills
  • Statutory Board Bonds
  • Bonds Guaranteed by the Singapore Government
  • Unit Trusts
  • Investment-Linked Insurance Products
  • Annuities
  • Endowment Policies
  • Exchange Traded Funds

There is a detailed list that can be found on the CPF website.

Click here for the source of the information. Information is updated as of 24/04/2017.

What to invest in?

Well, this certainly depends on various factors. It depends on your time horizon, your investment objective and risk appetite. The longer the time horizon the more time you have to ride out market fluctuations. If your risk appetite is low, you probably will be sticking to fixed deposits or bonds which have lower yield in nature as compared to equity funds. If you are using your OA account for your mortgage loan, you might not want to overstretch your OA. Consider your overall financial situation before making a decision otherwise work with someone you trust who is able to do this.

A note of caution

During a networking session, I met a manager who admits that she is totally clueless about her CPF. A trusted friend/insurance adviser advised her on an investments years ago and she told me she made 20 per cent on her $50,000 investment in 4 years. “Until today, I still don’t know what i invest in”. While, there is potential in investment, not everyone will share the same story as her.

Money in CPF is not salient and it will lead to perhaps risk-inducing behaviors as suggested by behavior finance and psychologist. Investing is not gambling. It doesn’t mean the higher risk you take, the better returns you will get. This can be explained using the Sharps’ ratio. If you made a bad investment choice now, you will probably only feel the pain several decades later.

Invest wisely in your Journey With Money. We hope that everyone can retire early and prepare for the next stock market crash. Do also focus on financial planning (singapore) to avoid financial pitfalls along the way.

Feel free to leave comments below or contact me at You can read more information about me at The Financial Planner (Singapore).

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