Why women should look closer at CPF investing

Gender gap in retirement savings

Across older age groups, women tend to have far lower Central Provident Fund (CPF) account balances than men.

This is why there is room for women to consider investing their CPF Ordinary Account OA savings, by taking on some risk and aim for returns greater than the OA interest rate of 2.5% per annum (p.a.). 

Starting on this path can help to ensure that women have sufficient savings over their longer lifespans, as well as make up for the gap in the retirement funds’ runway as compared with men.

First, let's take a look at the numbers. Starting from around the ages of 35 to 45, women generally have lower CPF balances than men do, according to the CPF Board’s latest annual report. This is despite the fact that there were more women than men in most of the age groups above 35 years old.

The trend of smaller CPF balances for women continues in all the older age groups, stretching past 80 years old.

CPF balances are made up of a combination of wage contributions and top-ups. The figures include self-employed persons.

Older women have less CPF savings than older men

In many countries, the gap between retirement savings for men and women arises partly from different levels of earnings between the genders, US-based actuarial and consulting firm, Milliman, wrote in a research report last year.

Such a disparity may reflect different job types, varying contract structures – especially part-time versus full-time work – and possible lingering pay inequities. 

Retirement savings are also affected by gaps in contributory service, which tend to impact women disproportionately, particularly those who take a career break to raise a family, Milliman added.

In Singapore, the CPF savings gap between the genders still exists, although Milliman’s analysis found that it has been gradually narrowing since 2009.

Going by figures in the CPF Board’s 2021 annual report, we noted that on an average basis, female CPF members up to 35 years old had higher balances than their male counterparts in the same age groups.

For instance, among individuals aged >20-25, each woman had $13,513 on average as at 31 Dec 2021, exceeding the $8,293 for each man. This difference gradually tapered off into the older groups – among those aged >30-35, women had $99,742 in balances per person, versus men’s $96,818.

However, once people crossed the 35-year-old mark, women saw their average CPF balances falling behind men’s levels.

A similar pattern can be observed in terms of total balances for each sex. Female CPF members up to 40 years old mostly had higher balances than male members, with the exception of those aged 20 or younger.

After 40 years old, women’s total CPF balances would fall behind that of their male counterparts. Among those aged >40-45, female members had almost $29 billion combined, a shade lower than the $29.2 billion held by men, the CPF Board figures showed.

This difference between the genders grew progressively larger for the next few older cohorts. In the >55-60 age group, balances totalled $33.7 billion for women, down $6.2 billion or 15.5% from the $39.8 billion for men as of end-2021.

Such a savings gap could in part result from some women taking career breaks due to family responsibilities, which may have an impact on their CPF balances in terms of missed contributions as well as lower subsequent incomes when they return to work, based on Milliman’s report.

In addition, some working mothers could potentially think there is little incentive to top up their CPF balances given that they can already claim tax relief from the Working Mother’s Child Relief (WMCR), which is meant to encourage women to remain in the workforce after having children. Those who are married, divorced, or widowed may claim WMCR, starting from 15% of your earned income for your first child.

Read about how Endowus has improved CPF investing in Singapore from this link. To find out more about our Endowus Flagship CPF Portfolios, click here.

Women live longer than men

Another reason investing your CPF OA funds is important is the fact that women typically live longer than men, and will thus need more retirement funds in old age. 

On the whole, everyone is also living longer. Overall life expectancies have been improving for Singapore residents over the last decade, barring declines in 2020 and 2021 amid higher mortality rates due to the Covid-19 pandemic.

Life expectancy at birth stood at 85.9 years for women and 81.1 years for men in 2021, according to data released by the Singapore Department of Statistics in June 2022. This is up from 84.1 years for women and 79.5 years for men a decade ago.

The minimum retirement age in Singapore is now 63, and the re-employment age is 68, after the Ministry of Manpower raised them on 1 July 2022.

As at the end of 2021, each woman in the >60-65 age group had, on average, $160,953 in their CPF accounts, about 7.7% less than the $174,296 for their male counterparts.

The gap persisted even in the >75-80 age group, with women posting an average CPF balance of $47,435 per person. That is 21.2% less than men’s average of $60,636.

The Endowus Singapore Retirement Report 2021, based on a survey of more than 1,000 CPF members, found that women may be at a higher risk of retirement inadequacy than men. Women were half as likely as men to “strongly agree” that they were confident of having sufficient funds for retirement.

To learn more about investing through a female lens and breaking the bias on female investors, click here. Watch our webinars on building financial wellness for women and why it is important for women to take charge of their own finances.

Boost your retirement savings

Total CPF members’ balances grew by 9.4% to $505.7 million in 2021. This excludes an additional net $246.6 billion withdrawn for housing and investments at the end of the year, although the annual report did not provide a breakdown of such withdrawals by age group or sex.

Under the CPF Investment Scheme (CPFIS), OA balances can be invested in a range of products including stocks, bonds, and unit trusts.

As of the end of 2021, about $17.1 billion of OA savings have been invested by 977,000 CPF members.

At Endowus, our CPF Flagship Portfolios are created with low-cost, diversified funds. Despite market uncertainty brought on by Covid-19, the CPF Flagship Portfolios delivered positive returns for most clients in 2021, generating 17% in returns for the 100% Equity Portfolio.

Besides investing your CPF, there are also other lower-risk ways to build your nest egg to achieve retirement adequacy and meet your long-term financial goals. 

One option is to transfer some of your OA funds to your Special Account (SA) to take advantage of SA’s guaranteed and higher interest rate. However, keep in mind that such transfers are permanent; once in SA, the monies can no longer be used for housing or education.

You may also choose to make cash top-ups to your SA if you are below 55 or to your Retirement Account (RA) if you are 55 and above. Top-ups can be done for loved ones, too, which means your spouse may wish to top up your accounts, especially if you have left the workforce.

CPF is an important part of our retirement goals, and we should be cautious with managing and investing it. Endowus has been an advocate for Singaporeans to manage their CPF better. Invest now for better peace of mind in your retirement years.

Learn more about our options on CPF investments. Explore the Endowus Fin.Lit Academy to understand investment fundamentals, grow your wealth, and get smart with your financial and retirement planning.

Read more:

• Will CPF interest rates change after recent rate hikes?
• With rising property prices, here's why homeowners should invest their CPF savings

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