CPF Investment Scheme allows us to invest our CPF savings in something that can potentially pay us more than CPF's 'high' interest rates. But should we do it? Is it worth it? How does it work? What happens to these investments if I die?
We will investigate these concerns in Part 5 of this CPF x Inheritance series.
Related:
What is CPF Investment Scheme (CPFIS)?
Before you turn 55 years old, your CPF should have Ordinary Account (OA), MediSave Account (MA), Special Account (SA). After you turn 55, a Retirement Account (RA) will be set up for you and later on, you will also get involved with CPF LIFE.
CPF Investment Scheme allows you to invest using your OA and SA savings. You can use your CPF savings to invest in products such as insurance, unit trusts, fixed deposits, bonds and shares through two investment schemes:
CPF Investment Scheme-Ordinary Account (CPFIS-OA)
CPF Investment Scheme-Special Account (CPFIS-SA)
You are eligible to invest under CPFIS if you:
are at least 18 years old;
are not an undischarged bankrupt;
have more than $20,000 in your OA; and/or
have more than $40,000 in your SA; and
have completed the CPFIS Self-Awareness Questionnaire (SAQ)
Should you invest your CPF savings?
CPF saving rates are very attractive compared to fixed deposit rates but if you are young, this should be the case as you are locking up your funds for a longer period of time and should be compensated for this illiquidity.
Whether you should forgo that attractive interest rate and direct your CPF OA and SA funds to somewhere else depends on whether you can find an investment that pays more than CPF saving rates and whether that investment suits your risk profile.
What are the interest rates on CPF accounts?
While we can't advise you on what to invest in, we have included an overview of CPF saving rates below for your comparison convenience.
Ordinary Account - At least 2.5% p.a.
Special Account - At least 4% p.a.
Medisave Account - At least 4% p.a.
Retirement Account - At least 4% p.a.
CPF LIFE - Same as RA
Note that these rates may change. Check here for the latest rates and here for how the rates are determined.
What can you invest your CPFIS-OA and CPFIS-SA in?
Check here for the list of CPF-approved investments.
Note: If all these comparisons seem complicated, you can consider outsourcing the work to someone else. You can find and compare a list of financial consultants here or speak to us here for recommendation on a financial consultant that suits your needs and style.
How to invest your CPF savings?
You will first need to take a Self-Awareness Questionnaire (SAQ), which assesses basic financial knowledge and suitability, before you can start investing under CPFIS. There are different rules and requirements for investing via your OA compared with investing through your SA. We will illustrate them in turn.
For CPFIS-OA
You have to set aside $20,000 in your Ordinary Account (OA) before you can invest
You can only invest up to 35% and 10% of your investible savings in stocks and gold (referred to as stock and gold limits)
Investible savings = Sum of your OA balance and the amount of CPF you have withdrawn for investment and education.
You need to open a CPF Investment Account with one of the following CPFIS agent banks with your CPF statement before you can buy/sell your investments:
● DBS Bank Ltd (DBS)
● Overseas-Chinese Banking Corporation Ltd (OCBC)
● United Overseas Bank Ltd (UOB)
Note: You can only maintain one CPF Investment Account at any one time.
For CPFIS-SA
Have to set aside S$40,000 before you can invest
You don’t need to open a CPF Investment Account to invest your SA savings. You can directly buy/sell your investments with the service and product providers. See the list of providers here.
You will need to bring along your identity card and a copy of your CPF statement for the product provider to verify your CPF account number. The product provider will also require you to declare your SAQ status and/or ask to view a copy of your SAQ status. After which, CPF Board will liaise with the various product providers to settle your purchase and sale of investment, and keep track of your investment holdings and transactions.
Note: These procedures may change. Check here for the latest instructions on how to invest via the CPFIS.
Where does the money go when you sell your investments in CPFIS?
For CPFIS-OA, the sale proceeds will be credited into your CPF Investment Account. The money will remain there unless you instruct your agent bank to transfer the amount into your OA.
Your agent bank will also automatically transfer the cash balance held in your CPF Investment Account to your OA if your Investment Account has been inactive/there's no investment transactions for two consecutive months.
For CPFIS-SA, sales proceeds will be credited into your SA.
Are my profits from CPF Investment Scheme taxable?
No, the profits, interest earned from investments and dividends are not taxable under the CPF Investment Scheme.
Can I withdraw my CPFIS investments?
Yes, but only upon reaching 55 years old and you have set aside the Full Retirement Sum (which is 2 times of Basic Retirement Sum) in your Retirement Account.
The Full Retirement Sum can be set aside fully with
(1) cash, or
(2) if you have a property, cash to at least the Basic Retirement Sum. You can check the Basic Retirement Sum that's applicable to you here.
You do not have to sell your investments. Once your application has been approved, the CPFIS investments will be transferred to you. Your CPF Investment Account will be closed once you apply to withdraw your investments.
What happens to my CPFIS investments after I die?
The investments will form part of the estate and be distributed based on will or if you don't have a will, based on intestacy law. The administrators or executors of the estate can claim investments and cash balances from the product provider or agent bank.
Note: Because your CPFIS forms part of your estate, your funds in CPFIS are not protected from creditor claims on any outstanding debts. This is in contrast with CPF OA and SA which fall under CPF nomination and thus, are protected from creditor claims.
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FAQ
Are profits from CPF Investment Scheme taxable?
No, the profits, interest earned and dividends earned are not taxable under the CPF Investment Scheme.
What happens to my CPFIS investments after I die?
The investments will form part of your estate and be distributed based on will or if you don't have a will, based on intestacy law. The administrators or executors of the estate can claim investments and cash balances from the product provider or agent bank.
Does CPF nomination cover my cash and investments under the CPF Investment Scheme?
No, cash and investments under CPF Investment Scheme are not covered by CPF nomination.
Disclaimer: Nothing in this article or site should be construed as providing legal advice or advice of any sort. The information provided are general in nature and may become inaccurate over time. Please consult a professional for advice.
For any issues or queries, please contact j@immortalize.io