Incentivising CPF Members with High Ordinary Account Savings Tap On Investment Options with Higher Interest Rates
Ministry of ManpowerSpeakers
Summary
This question concerns Mr Yip Hon Weng’s inquiry on incentivizing CPF members with high Ordinary Account (OA) savings not intended for housing to utilize options like the CPF Investment Scheme (CPFIS) for higher returns. Minister for Manpower Dr Tan See Leng explained that members can transfer OA savings to the Special or Retirement Accounts to earn interest of up to 6% within prevailing limits. He highlighted that members can also invest via CPFIS in products like Treasury Bills, with the CPF Board working with agent banks to enable more online application options. Minister for Manpower Dr Tan See Leng cautioned that CPFIS involves risks, noting that approximately 20% of members incurred cumulative losses according to the latest FY2021 data. To help members evaluate their suitability for such investments, the Ministry continues to promote the CPFIS Self-Awareness Questionnaire as a tool to assess individual risk appetites.
Transcript
22 Mr Yip Hon Weng asked the Minister for Manpower (a) whether the Ministry intends to incentivise CPF members who have high Ordinary Account (OA) savings and have no plan to use their OA savings for a housing purchase, to tap on alternative options for higher interest rates such as the CPF Investment Scheme; and (b) if so, how does the Ministry intend to promote these options and make them easier for CPF members to invest in.
Dr Tan See Leng: CPF members who have high Ordinary Account (OA) savings and have no plans to use their OA savings for a housing purchase have a range of options to grow their CPF savings for retirement, depending on their individual needs and risk appetite.
These members can consider transferring their savings from the OA to the Special or Retirement Account (RA) to earn higher risk-free interest of up to 6% per annum. Members can transfer up to the prevailing Full Retirement Sum in their Special Account if they are below 55 years old, and up to the prevailing Enhanced Retirement Sum in their RA if they are aged 55 and above. They can do so easily through the CPF mobile app or the CPF Board website.
Members can also invest their OA savings through the CPF Investment Scheme (CPFIS). Under CPFIS, members have access to a range of investment products of varying risk profiles. For example, with rising interest rates, more members have invested their CPF OA savings in short-term Singapore Government Securities (SGS) products like the Treasury Bills through CPFIS. CPF Board has been working closely with financial institutions to allow members the option to submit applications online. CPFIS members with DBS as their agent bank have been able to apply online via internet banking to invest their CPF OA savings in SGS products since late January 2023, while OCBC and UOB are targeting to launch similar services by the first quarter of 2023.
Nonetheless, as with all investments, members participating in CPFIS may be better or worse off, depending on the timing and selection of investments. Based on the latest data, while the majority of CPFIS-OA members made cumulative profits or broke even in the reporting period of FY2021, about 20% made cumulative total losses. The CPFIS Self-Awareness Questionnaire introduced in 2018 will continue to help prospective CPFIS participants to assess if CPFIS is suitable for them.