CPF Special account closure: what are the options for investors?

However, on 19 January 2025, the Singapore Government decided to close the CPF Special Account (CPF SA) for anyone aged 55 and above. This will also apply to anyone turning 55 in future. Some people may be a bit peeved at this change but it does also open up some avenues for investors. 

First, let’s cover the basics, though. What happens to those funds in your CPF SA once you hit 55? They go into a newly-created Retirement Account (RA) and all CPF SA funds will then be transferred there to meet the Full Retirement Sum (FRS) for that year – for reference, in 2025 the FRS is S$213,000

The rest of the funds above the FRS? That gets whacked into your CPF Ordinary Account (CPF OA) and you can then decide what you want to do with it. Then your CPF SA is closed forever and you’ve got to figure out what to do with those funds.

Why does the CPF SA closure matter?

The main sticking point for most Singaporeans when it comes to the CPF SA closure is that it has long been the “go-to” option to earn an easy, risk-free 4% per annum (p.a.) in interest.

With that avenue now shut off for those 55 and over, it means being bumped down to the “inferior” interest rate of the CPF OA – which offers just 2.5% p.a. in comparison.

Forfeiting that 1.5% p.a. will be painful, especially for those of us who love to earn even 10 basis points (0.1%) more in interest per year from our savings. That leaves many of us flush with extra cash but allocating it to the right channels, according to our needs, is also important.

So, here are some easy options that every individual facing a CPF SA closure can consider.

1. Top up your RA to the Enhanced Retirement Sum (ERS) for higher CPF LIFE payouts

This is an easy option for those of us who want to utilise the CPF Lifelong Income For the Elderly (CPF LIFE) scheme of monthly payouts for life after retirement. Moving those funds from the CPF OA to the RA via a top-up gives you more.

While the FRS is certainly a solid start, we can also top it up further all the way to the Enhanced Retirement Sum (ERS), which is S$426,000 in 2025, so more than double the current FRS.

That cash can then still go on to earn your usual 4% p.a. in the RA, just like it did under the CPF SA. But your funds are obviously locked up until retirement and will then be used to fund the premiums for CPF LIFE, giving you monthly payouts post-retirement until you die.

Of course, by topping up your RA to the ERS, your monthly payouts will be higher when you retire versus if you had only topped up your RA to the FRS.  In essence, this is a safe option but it’s more of a “delayed gratification” route given the longer time horizon of CPF LIFE payouts.

2. Invest via the CPF Investment Scheme (CPFIS-OA)

Remember that if we have over S$20,000 in CPF OA funds, then we can invest the excess. That could be an attractive proposition for individuals with spare cash given the CPF OA’s relatively low interest rate of 2.5% p.a. but there are, of course, some things to consider.

While you can invest up to 35% of your CPF OA funds in individual stocks and Real Estate Investment Trusts (REITs) – listed only on the Singapore Exchange (SGX) – you can also invest up to 10% in gold too. There’s also the option of investing in Singapore Treasury Bills (T-bills), longer-dated Singapore Government Securities (SGS), or fixed deposits (FDs).  

However, it’s important to remember that if you’re only eight or nine years away from retirement, the goal of capital preservation is much more important than for someone who’s in, say, their 20s or 30s. 

In other words, taking on too much investment risk – particularly investing in stocks, at that age might not be the best idea with excess CPF OA funds as many investment products in the CPF OA space do not offer guaranteed returns.

3. Withdraw excess CPF OA funds

Next up, you can actually withdraw the excess funds from your CPF OA and keep it in cold, hard cash. Of course, we want to get a return on that cash but the beauty of this option is that it allows you the flexibility to choose what works for you.

By having it in cash outside of the CPF, you also have the freedom to explore other options rather than being constrained by what the CPF deems an eligible investment.

If we do happen to go down this route, as mentioned earlier, it’s important to earn more than the guaranteed 2.5%p.a. that the CPF OA pays out (or else why bother withdrawing?) but do so without taking on excessive investment risk.

One of the most obvious ways to deploy the cash to meet this goal is by buying low-cost money market funds (MMFs) on various platforms. These can include products like Chocolate Finance – which offers a mix of short-duration, investment grade (IG) Singapore Dollar bond funds that are run by reputable asset managers, earns daily returns, and carries no platform fee.

By providing a slightly higher yield, these products are still considered very low risk but, crucially, gives investors the flexibility and liquidity to manage their cash. 

The obvious drawback to going with this approach is that there’s the obvious temptation to either overspend our savings or invest it into something that isn’t suitable for our risk profile/age.     

4. Use CPF OA funds for housing needs

Finally, while this is a little unorthodox, CPF OA funds can actually be used to service your home loan or even pay for another property.

The one caveat to this is that to continue using your CPF OA for housing, you need to apply in advance to reserve a specified portion of your CPF OA savings in advance of you turning 55 – to ensure the reserved amount isn’t transferred into your RA.

These funds can be used to either continue paying off a housing loan or even purchasing another property, for the purpose of rental income.

While the option is there to utilise your CPF OA funds to do this, it probably isn’t a popular choice given the illiquidity of property and the obvious propensity to overleverage yourself which could be damaging in the event of a housing downturn. 

In that sense, it’s better to go with either more predictable or liquid options when deciding what to do with your excess CPF OA funds. 

What type of investor are you?

When figuring out how we should actually deploy our excess CPF OA savings, when our CPF SA does shut, it’s important to recognise what type of investor (or even personality) we are.

Ultimately, that will decide how we invest our excess funds and the amount of risk we are willing to take on. Many people may decide that they want to top up their RA to the ERS as that provides more of a monthly cushion of up to SGD3,300 in their retirement(from age 65) but others may value the freedom of cash in their hands today.

By ensuring we are taking on the appropriate level of risk for our profile, when we put our CPF OA funds to work, we can rest easier knowing that the approach we choose is suitable for us. 

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