The Central Provident Fund (CPF) is Singapore's pension scheme set up in 1955 to provide financial security for workers in their retirement or when they are no longer able to work. Over the years, it has evolved into a comprehensive social-security savings scheme, which not only takes care of a member's retirement, home ownership and healthcare needs, but also provides financial protection to CPF members and their families through its insurance schemes.
The CPFIS comprises the CPFIS-Ordinary Account (CPFIS-OA) and CPFIS-Special Account (CPFIS-SA). These schemes provide CPF members with more options in investing their CPF savings to help them meet the long-term objective of financial security in old age.
The whole idea of investment is to maximise gains and minimise costs. With such a wide range of approved financial instruments, you should try to find the most suitable investment with the best return. A few guidelines can help you in the selection process:
Find out how much excess funds you can invest
Look at which financial instruments fall within this budget
Consider your risk threshold
What is the real rate of return offered by the different instruments?
Determine how much time you are willing to spend on monitoring this portfolio
Within the short listed group of financial instruments, choose the one that suits your requirements
In this way you can make an informed choice about your investments.
Tax Implications
Capital gains from investments are not taxable. However, dividends or profit distributions are. These deductions are usually done at the source and at the corporate tax rate.
The CPFIS comprises the CPFIS-Ordinary Account (CPFIS-OA) and CPFIS-Special Account (CPFIS-SA). These schemes provide CPF members with more options in investing their CPF savings to help them meet the long-term objective of financial security in old age.
Under the CPFIS-OA, investments may only be made using Ordinary Account savings while under the CPFIS-SA, investments may only be made using Special Account savings. The instruments available for investment under CPFIS-OA and CPFIS-SA are different as can be seen below.
Investments from Ordinary Account
(i) Full Ordinary Account balance can be invested in:
Fixed deposits with approved banks
Singapore Government bonds
Statutory Board bonds
Bonds guaranteed by the Singapore Government
Unit trusts
Fund Management Accounts
Annuities
Endowment Insurance Policies
Investment-Linked Insurance Products
Exchange Traded Funds
(ii) Up to 35% of investible savings can be invested in:
Shares
Corporate bonds
(iii) Up to 10% of investible savings can be invested in:
Gold
(i) Full Ordinary Account balance can be invested in:
Fixed deposits with approved banks Singapore Government bonds Statutory Board bonds Bonds guaranteed by the Singapore Government Unit trusts Fund Management Accounts Annuities Endowment Insurance Policies Investment-Linked Insurance Products Exchange Traded Funds(ii) Up to 35% of investible savings can be invested in:
Shares Corporate bonds(iii) Up to 10% of investible savings can be invested in:
GoldInvestments from Special Account
Full Special Account balance can be invested in:
Singapore Government bonds
Statutory Board bonds
Bonds guaranteed by the Singapore Government
Unit trusts classified under the lowest three tiers of the CPFIS Risk Classification System Table
(Fund Management Accounts not allowed)
Fixed Deposit
Annuities
Endowment Insurance Policies
Selected Investment-Linked Insurance Product
Selected Exchange Traded Funds
The CPF also provides guidelines and restrictions on the purchase of investments. The rules include:
All investments must be made in Singapore dollars
Profit/loss from OA investments can only be realised annually each October. However, profit made after 30th September 2002 cannot be withdrawn
No withdrawl permitted for profit made from Special Account investments.
When realising profit/loss from these investments, the agent bank first deducts the cost of the investment from the sale proceeds and arrives at the gross realised profit/loss. If the investments were bought at different prices, the weighted average price is used.
How to get the best deal?
Full Special Account balance can be invested in:
Singapore Government bonds Statutory Board bonds Bonds guaranteed by the Singapore Government Unit trusts classified under the lowest three tiers of the CPFIS Risk Classification System Table(Fund Management Accounts not allowed)
Fixed Deposit Annuities Endowment Insurance Policies Selected Investment-Linked Insurance Product Selected Exchange Traded FundsThe CPF also provides guidelines and restrictions on the purchase of investments. The rules include:
All investments must be made in Singapore dollars Profit/loss from OA investments can only be realised annually each October. However, profit made after 30th September 2002 cannot be withdrawn No withdrawl permitted for profit made from Special Account investments.When realising profit/loss from these investments, the agent bank first deducts the cost of the investment from the sale proceeds and arrives at the gross realised profit/loss. If the investments were bought at different prices, the weighted average price is used.
How to get the best deal?
The whole idea of investment is to maximise gains and minimise costs. With such a wide range of approved financial instruments, you should try to find the most suitable investment with the best return. A few guidelines can help you in the selection process:
Find out how much excess funds you can invest Look at which financial instruments fall within this budget Consider your risk threshold What is the real rate of return offered by the different instruments? Determine how much time you are willing to spend on monitoring this portfolio Within the short listed group of financial instruments, choose the one that suits your requirementsIn this way you can make an informed choice about your investments.
Tax Implications
Capital gains from investments are not taxable. However, dividends or profit distributions are. These deductions are usually done at the source and at the corporate tax rate.
