Chapter 4: Introduction To CPF

Introduction

Welcome to Chapter 4 of Money Moves: Introduction To CPF. The Money Moves Series is designed to be actionable with bite-sized knowledge to improve your financial well-being! Let’s learn about how the CPF works in Singapore.

Central Provident Fund Account Singapore

The Central Provident Fund (CPF) is a comprehensive social security system that enables working Singapore Citizens and Permanent Residents to set aside funds for retirement, healthcare, home ownership, family protection, and asset enhancement. In other words, CPF’s main purpose is to provide financial security for people in Singapore to be financially independent throughout our financial life stages.

Given that there are opportunity costs to every decision made, the CPF aims to complement the financial portfolio with limited flexibility. By limiting the options available in CPF, the government is able to make financially sound decisions on our behalf, thereby ensuring that most people will be financially safe until retirement.

Introduction to CPF Accounts

There are 4 accounts that you will have in CPF.

The Ordinary Account (OA) is used for your housing, insurance, and investments.

The Special Account (SA) is used for old age and investment in retirement-related financial products.

The Medisave Account (MA) is used for hospitalization expenses and approved medical insurance.

The Retirement Account (RA) is automatically created on your 55th birthday for retirement.

Here’s why CPF Accounts are amazing. As a CPF member, you enjoy risk-free interest on your CPF savings. For OA, the interest rates are currently up to 2.5% per annum. For SA / MA / RA, the interest rates are currently up to 4% per annum. To make it even better, there are also bonus interest rates available at no cost! Including those bonuses, you can effectively earn up to 6% per annum on your CPF balances.

Specifically, you can get a bonus of 1% interest rates for the first $60,000 of combined CPF balances, with OA capped at $20,000 of the entire CPF balance. Also, from January 2016 onwards, those aged 55 and…