Breaking Down The CPF Investment Scheme: Part II

With so many investment options to choose from from the CPF Investment Scheme, navigating your way around may seem like a daunting prospect. Even the most experienced investors might not be familiar with all the investment vehicles available to them.

In light of this, I have decided to break down each investment option available on the CPF Investment Scheme in this series of three-part articles. In the first part here, I looked at government bonds, treasury bills, and annuities. This is the second part, which looks at unit trusts and investment-linked insurance policies (ILPs).

Unit trusts

One of the more popular investment options in Singapore is the unit trust. By investing in unit trusts, investors pool their money together, which is then invested in a portfolio of assets that suit the fund’s objectives.

Only unit trusts that meet certain criteria are available under the CPF Investment Scheme. Because of this, Singaporeans are only limited to a number of choices.

Unit trusts offer investors exposure to a portfolio of different assets and the chance to earn higher returns than the money in their CPF. However, not all unit trusts have a good track record. Investors need to choose the unit trusts that have a long and stable track record which give them the highest chance of beating the “risk-free” rate.


ILPs have both investment and insurance components where your premiums are invested in funds. A portion of that is then sold to pay for your insurance premiums.

Generally, there are two kinds of ILPs, one in which you pay a premium regularly, and the other where you only pay one lump sum at the start of the policy.

ILPs are suitable for people who want greater exposure to investments than the standard life insurance products. ILPs also provide the investor with the flexibility to vary the insurance coverage and investment mix that suit the individual investors needs over their lifetime.

Unfortunately, as with any investment, there are downsides and risks involved. For one, your capital invested is not guaranteed. It depends on the performance of the sub-fund that it is invested in. There are also numerous fees that eat into your investment returns and insurance coverage. These include fund management fees, policy charge and sales fee. If you wish to make changes to your investment, you may also incur further charges like surrender charge (when terminating the contract) or fund-switching charge (choosing a new sub-fund).

The Foolish bottom line

These are two of the common investment options available in the CPF Investment Scheme. In the next article, I will dive into the details of two more investment options – endowment policies and exchange-traded funds.

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