One of the ways to grow your retirement funds over the long term is to invest your CPF.

Under the CPF Investment Scheme, you can invest your CPF Ordinary Account (OA) and Special Account (SA) balances in various investment products.

However, there are regulations under the CPFIS, including minimum account balance, withdrawals, and the types of investment products you can invest with CPF funds, that you should know before committing. Learn more about them in this article before you invest your CPF.

What is CPFIS?

The Central Provident Fund Investment Scheme (CPFIS) is a government initiative in Singapore that allows CPF members to invest their savings from the OA and SA into a variety of financial products. 

The primary goal of CPFIS is to provide CPF members with the opportunity to potentially achieve higher returns on their savings compared to the standard interest rates offered by CPF accounts.

While the interest rates on your CPF accounts are risk-free means of growing your wealth, you may potentially achieve higher returns by investing your CPF funds through CPFIS. 

Here are a few important things that you should bear in mind before deciding if you should consider investing your CPF funds.

Who can and should invest with CPF?

You must also be at least 18 years of age and not an undischarged bankrupt.

New investors need to take the Self-Awareness Questionnaire (SAQ) before they can start investing through CPFIS, and then open a CPF Investment Account with an agent bank. You may follow these step-by-step instructions.

Investment is a long-term commitment, you do not want to be forced to sell off your CPF investments when there is a market downturn. Therefore, you should only invest your excess OA balances after setting aside or accounting for housing and mortgages.

How much can I invest with CPF OA and/or SA?

Only money in excess of S$20,000 for your OA and S$40,000 for your SA can be invested. To check your investable amount, follow these steps: 

Log in to your CPF account > Click on my cpf > My dashboards > Investments. 

The dashboard will show investable amounts in both your OA and SA. 

What investment instruments can I invest in?

Through the CPFIS, CPF members can use their CPF monies to invest in approved SGX-listed stocks and bonds, unit trusts/mutual funds, fixed deposits, and investment-linked products (ILPs).

Note that there are differences between what you can invest in using your OA versus your SA.

To improve your chance of investment success with your CPF monies, you should consider investing in a globally diversified and low-cost manner. However, due to the restricted list of assets within CPFIS, the easiest way to do so would be through unit trusts.

Can I withdraw my CPF investment returns?

Any gains you make in your investments using funds from your CPF accounts will be returned to your CPF accounts (after fees). 

CPF withdrawals start at 55 years old unless you have a proven medical illness with certification that leads to lowered life expectancy, permanent inability to work or lack of mental capacity. The withdrawal amount depends on how much you have in combined savings across OA and SA.

Read more: How much can you withdraw from your CPF?

For example, if you invest S$10,000 into a stock today using your OA funds and sell it for S$12,000 a year later, the entire amount, inclusive of profits, will be returned to your OA account.

Similarly, any dividends or interest you receive on CPFIS investments will be channelled to your CPF accounts rather than be paid out to you. These funds can then be used to make further investments if you wish. 

To help your CPF investments compound more efficiently, you should favour accumulating funds over distributing funds.

Should I invest my CPF funds? Key considerations

Your investment period

Over the long term, investing your CPF funds gives you a better chance at achieving your retirement goals. The largest CPF LIFE payout you can get is by having the Enhanced Retirement Sum in your RA past 65 years old.

If capital preservation is your primary concern, especially if you intend to use your OA for housing or educational purposes in the next three years, then you are encouraged to keep your money in your CPF OA.

Your risk tolerance

Consider the risk-return trade-off. One may expect higher returns when investing in other products, which potentially come with additional risk. Interest earned in CPF accounts is risk-free and guaranteed by the government. 

Investing in securities such as individual stocks, bonds, ETFs and unit trusts comes with a higher level of risk and volatility. 

Perform due diligence before you invest and choose an investment product that is appropriate for your risk tolerance and investment goals.

Investment fees

Watch out for investment fees. Most investment instruments you can invest in will charge some form of fee. 

These include sales charges, management fees, wrap fees and brokerage fees. Even a 1% difference in fees can amount to a significant cost over the long run. 

Should I invest using my OA or SA?

Relative to OA investments, investing your SA monies is less attractive as only lower-risk products are available. 

As the saying goes, “risk and return, you cannot have one without the other.” To get higher investment returns, you will need to invest in higher-risk products. 

The highest-risk products for SA are limited to balanced funds with large fixed-income exposure, which reduces long-term returns. Combined with the higher threshold of 4% yields to beat, SA investing is less compelling. 

Note that SA will be closed when you turn 55 years old. If you have any SA investments, you can hold on to them until they mature or when you decide to sell them. The proceeds will be paid to your RA up to your FRS, and any balance will go into your OA.

With CPF, always think long term

When investing through the CPFIS, it makes sense to take a long-term approach. Over time, markets display efficient characteristics and investors are rewarded commensurately for the risks that they take. 

It is time in the markets that will give you the highest probability of success in growing your wealth over the long term.

Endowus can help you curate a personalised CPF portfolio adjusted to your needs and risk tolerance. Learn more about investing your CPF with Endowus, or speak to our client advisors.