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Investing with CPF in Singapore | Money Money Home

14 Dec 2021

Investing with CPF in Singapore | Money Money Home

Hands up if you're Singaporean!

We pride ourselves as a "fine country." Our national hobby is to queue, but more prominently, our country is one of the most socially organised in Southeast Asia if not wider.

However, some would argue that even with our excellent infrastructure, good education system, and low crime rate, we are also said to be a nation that has many rules in place and is "too structured" in many ways. Two of the more notable ones are the hotly debated Central Provident Fund (CPF) and the idea of investing with CPF.

What is CPF?

CPF is Singapore's social security system that was introduced in 1955. 

In general, most Singaporeans and Permanent Residents in the workforce are required to contribute 20% of their total salary to CPF every month, whereas their company is required to contribute another 17% on their behalf. This amount will then be divided across the 3 types of accounts within their CPF:

The percentage of your contribution is increased gradually the longer you are in the workforce. Depending on the economic situation and inflation rates, this percentage may also be adjusted accordingly.

The mechanics of CPF can be confusing as heck if you don't understand them or what they're for. However, when you do, you'll realize it is one of the more useful tools to grow your wealth in Singapore. Investing with CPF can generate returns some banks can't.

However, in the last few years, it's been the subject of many controversies.

Why don't some people like CPF?

Some Singaporeans dislike CPF due to how inaccessible it is. And they don't like the fact that they have to give the government a part of their salary every month. They would rather manage the money themselves and they feel as if they're forced to give up a part of their salary.

That is, however, a misconception.

Because many people don't understand how it works and how much they can earn from this scheme compared to other investment instruments, they also don't realise that it is actually one of the safest places to park your money right now.

Investing with CPF – the three types of accounts

Ordinary (OA), Special (SA), and Medisave -- These are your 3 CPF accounts, each with its own purpose.

On its own, each type of account offers great interest rates compared to banks and pose virtually no investment risk. However, you can also decide to invest your funds in other investment instruments, if you're certain you can top the returns from CPF.

Ordinary Account (OA)

When you're ready to start investing with your CPF, you'll probably want to invest using OA first.

This gives you access to a large number of investment options, from stocks, real estate funds, bonds and gold.

But beware, there's a limit as to how much you can invest in some of these asset classes. For example, you're allowed to use 35% of your funds to invest in stocks, but only 10% if you wish to invest in gold.

This account is useful for building up a portfolio. On its own, you get 2.5% annual returns for all the money you have in this account. Therefore, if a product gives you more than 2.5% returns per annum, then it's worth investing using funds from here.

This is also the account that you'll use to pay for your housing in Singapore, also known as HDB, as well as your education loans.

Before using it invest, make sure that your OA has a minimum of S$20,000.

Special Account (SA)

On its own, SA gives an annual return rate of 4%.

In fact, with this being much higher compared to the OA's 2.5%, some experts are now advising Singaporeans to move some of their funds from their OA to their SA to take advantage of the higher return rate instead.

It's important to do this with caution though. Once moved to your SA, you cannot move your funds back to OA after you've garnered the 4% interest. This will possibly increase the difficulty for you to get housing or you may need to struggle with your education loans if you don't have enough in your OA to sustain this.

In terms of investment, the number of investible products is limited compared to OA. You will not be able to invest in stocks or property funds here. Still, don't rule out this option, because there is still a respectable range of products you can invest in such as Singapore Government Bonds and investment-linked insurance.

Undeniably, stakes are higher for this. However, if you're confident that your investment can bring you more than 4% annual returns, you can safely invest using funds from this account.

Before using it to invest, make sure that your SA has a minimum of S$40,000.


As the name would suggest, MediSave is meant to help you or your dependent in terms of healthcare. So the next time you visit a clinic or the hospital for treatment, you will be able to shave some, if not all, off the cost of your total medical bill, depending on the amount and institution.

You're unfortunately not able to use funds from the MediSave account to invest in wealth-accumulating financial instruments.

You can, however, use your MediSave to pay for MediShield Life, a health insurance administered by CPF itself which gives you wider coverage for your medical bills.

Final thoughts

When you turn 55, funds in your OA and SA will be converted into your Retirement Account (RA).

This means, whatever you do today with your CPF, be it investing it, using it or leaving it to compound, will directly impact your later days.

Applied with the right knowledge, you may become a millionaire before you even retire. Applied with the wrong knowledge, you may struggle and be forced to go back to work in your retirement days.

Growing your wealth and investing with your CPF right now may seem like a very viable option. After all, the options available are specifically selected by the government, hence, deemed legal and safe. However, it is also crucial to bear in mind that nothing is zero-risk in this world. Investments can still go wrong; mistakes can be made.

Therefore, before investing with your CPF, make sure you do your due diligence and learn as much as you can about the product you're about to invest in. What is the return like? Does it top CPF's returns? What are the risks?

From there, it will be easier to gain clarity on what you're taking on.

Catch the shenanigans among Zhen Xianren, Jia Daren, and their nephew in the new episode of Money Money Home as the nephew shares his "legit" financial plans with them and receives claps from Xianren.

Money Money Home is an edutainment series that takes reference from Malaysia’s TV programme of the same title.

Money Money Home | VI

Savings doesn't make you rich but not having any savings will definitely make you poor.

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This article and its contents are provided for information purposes only and do not constitute a recommendation to purchase or sell securities of any of the companies or investments herein described. It is not intended to amount to financial advice on which you should rely.

No representations, warranties, or guarantees, whether expressed or implied, made to the contents in the article is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

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