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Usage of CPFSA

In Singapore, the Central Provident Fund (CPF) is a compulsory savings plan for working Singaporeans and Singapore permanent residents (SgPR) primarily to fund for their retirement, housing, and healthcare needs. The contribution into your CPF account derives from your gross income and the contribution rate differs across age bands. For example, those who are 55 years and below will contribute 20% of your gross income into your CPF account while your employer contributes 17%. Out of this total 37%, 6% goes into your Special Account (SA). What can you do with your SA money? Unlike the Ordinary Account (OA) where you use can it for various needs, the SA money is mainly to accumulate for your retirement nest. Upon attaining age 55, both your OA and SA money will combine into a new account call, Retirement Account (RA). The grand total in RA determines how much retirement income you will receive during the statutory retirement age at 65. While you are accumulating the money in your SA, you earn an interest rate of 4% per annum, which is deem as a decent risk-free interest yield. Some may even choose to transfer their OA money into SA in order to earn that higher interest rate. Yes you can do that, however, before you rush into it, a word of caution, this transfer is irreversible: once the money is in SA, you can’t transfer it back to OA anymore.

So do be very sure you are not utilizing your OA for housing and education needs before you do the transfer. Interest rate of 4% per annum is also not guaranteed for life, it may be subjected to review and changes.


Special Account money is mainly to accumulate

for your retirement nest.


Similarly, you also have the option to invest your SA money in Unit Trust instrument. The risk exposure for SA investment is much lower and controlled. The first $40,000 in your SA will not be allowed for investment, only for the amount above $40,000 then you can put it through for investment. Is it advisable to invest your SA money? It depends on your risk appetite and time horizon. If both are low, then the answer is a clear No. Lastly, you may do Voluntary Contribution (VC) to all 3 CPF accounts up to the annual maximum limit. Your mandatory annual CFP contribution and VC cannot exceed $37,740. In summary, usage of SA:

  • retirement fund👨🏽‍

  • investment growth📈

  • voluntary contribution💰

More details can be found on CPF.gov.sg

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