What Can You Do With Your CPF Money?

With inflation on the rise and changes to the CPF system, is it worth investing some of your CPF monies to boost your retirement savings?

- Lin Yanqin

With elevated inflation rates grabbing the headlines in the last two years, you might be wondering, will my Central Provident Fund (CPF) savings be enough for my golden years?

If you’re under the age of 55, your CPF Ordinary Account (OA) savings earn 2.5 per cent interest per annum (p.a.), while your Special Account (SA) balances earn 4.08 per cent. Inflation, however, is projected to range from 2.5 to 3.5 per cent for 2024; last year, it hit 4 per cent, outpacing real median income growth for certain wage groups.

Even if inflation eases, with growing longevity and changes to the CPF system, it may be wise for all of us to reconsider how we are planning for retirement, and adjust our investment strategies. Under the CPF Investment Scheme (CPFIS), we can invest our OA and SA balances (savings in excess of $20,000 for OA, and savings in excess of $40,000 for SA).

But given that we already earn risk-free interest rates on our CPF savings, is investing the money worth our while? Two experts and one savvy investor weigh in.

THE EXPERTS

LORNA TAN Head of Financial Planning Literacy, DBS Bank

With inflation on the rise, we are seeing investment platforms advising people to invest their CPF OA funds to “beat” inflation. What are the pros and cons of taking this approach? There is a growing suite of products that you can invest in with your OA, such as unit trusts, annuities, endowment policies, exchange traded funds, shares, and gold ETFs.

If you choose to do nothing, your CPF savings will compound and grow over time (when the interest earned on your savings starts to earn interest on itself). If you wish to make your CPF monies work harder via investing, do your due diligence first.