Breaking Down The CPF Investment Scheme: Part I

The CPF Investment Scheme provides savvy investors with the opportunity to earn more returns on their CPF money. But not everyone who makes use of this scheme can earn more than the 2.5% earned in the CPF Ordinary Account. In fact, more than 20% of those in the scheme fail to earn returns that exceed the “risk-free” rate that the CPF provides.

With this in mind, I thought I would help investors do the dirty work by breaking down all the investment options available in the CPF Investment Scheme. This will be split into four parts.

What is the CPF Investment Scheme?

The CPF Investment Scheme is the option to invest your CPF Ordinary Account (OA) funds and Special Account (SA) funds in a range of approved investing vehicles. This gives investors the ability to earn more than the 2.5% earned per year in their CPF OA or 4% in their SA.

Singapore Government bonds and treasury bills (T-bills)

The first and perhaps least risky asset that you can invest your CPF money with is the Singapore government bond or the treasury bills. This is a bond issued by the government that pays out periodic interest payment to the investor. At the maturity date, the government will repay the principal. Bonds may also vary in length and interest rates.

T-bills are similar to government bonds but have a shorter maturity rate, and instead of paying the investor interest rates over time, T-bills are bought at a discount to their face-value. The amount earned is the difference between the purchase price and the face value.

Generally speaking, both these form of investment is considered extremely safe because they are backed by the full faith and credit of the government. Unfortunately, for the same reason, government bonds usually pay very little in interest.


An annuity is a lump sum of cash invested to produce regular monthly income for a pre-defined period or in some cases, for life. The size of the monthly payout may vary depending on the kind of annuity that the investor has chosen.

This is a good option for investors who are looking to secure a regular income stream after retirement. This sort of investment provides more predictable income flow and certainty to retirees.

On the other side of the coin, some annuities charge a high annual fee and large surrender penalties. This means if you choose to terminate the agreement, you may end up losing a huge chunk of your initial capital.

The Foolish bottom line

The CPF Investment Scheme provides Singaporeans with a chance to earn more than the promised CPF “risk-free” rate. However, before diving into any decision, it is important we all know the options available and which will best suit our financial goals. In the next article, I will take a look at the following two investment options available, which are unit trusts and investment-linked insurance products.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.