If you have no plans to retire any time soon, it might be tempting to pay no mind to the money going into your CPF. However, you could actually be missing out on thousands of extra dollars for your retirement if you settle for default contributions.
By topping up your CPF funds, you could gain access to higher CPF interest rates to maximise your retirement fund. This will give you more freedom to live your ideal lifestyle during your golden years.
If you’re looking to make the most of your CPF savings, we’ve listed some simple ways to grow your CPF interest.
| Age Group | Account | Interest (p.a.) |
|---|---|---|
| For members below the age of 55 years old | Ordinary Account | 2.5% |
| Special Account | 4% | |
| Medisave Account | 4% | |
| On the first S$60,000 of combined CPF balances (capped at S$20,000 for Ordinary Account) | up to 5% | |
| For members aged 55 years old and above | Ordinary Account | 2.5% |
| Special Account | 4% | |
| Medisave Account | 4% | |
| Retirement Account | 4% | |
| On the first S$30,000 of combined CPF balances (capped at S$20,000 for Ordinary Account) | up to 6% | |
| On the next S$30,000 of combined CPF balances (capped at S$20,000 for Ordinary Account) | up to 5% | |
| ^Source: Central Provident Fund Board | ||
Move Money From Your Ordinary Account To Your Special Account
The easiest way to grow your CPF interest is to transfer your money from your Ordinary Account (OA) to your Special Account (SA).
Unlike the OA’s 2.5% p.a. base interest rate, the SA earns a 4% base interest rate p.a (the interest rate is reviewed quarterly), so transferring any extra funds you don’t need for from your OA to your SA can end up adding hundreds of dollars per year to your retirement fund. For instance, doing a CPF transfer of $50,000 from your OA to your SA will net you at least an additional S$8,027 over 10 years compared to if you left it in your OA.
While moving your money from your OA to your SA is relatively simple and can be done online, there are some limitations. If you are below 55, the amount you can have in your SA is the Full Retirement Sum of the year (which is $205,800 in 2024).
| Years | Ordinary Account (2.50% p.a.) | Special Account (4.00% p.a.) |
|---|---|---|
| Year 0 | $50,000.00 | $50,000.00 |
| Year 1 | $51,250.00 | $52,000.00 |
| Year 2 | $52,531.25 | $54,080.00 |
| Year 3 | $53,844.53 | $56,243.20 |
| Year 4 | $55,190.64 | $58,492.93 |
| Year 5 | $56,570.41 | $60,832.65 |
| Year 6 | $57,984.67 | $63,265.95 |
| Year 7 | $59,434.29 | $65,796.59 |
| Year 8 | $60,920.14 | $68,428.45 |
| Year 9 | $62,443.15 | $71,165.59 |
| Year 10 | $64,004.23 | $74,012.21 |
That being said, there are drawbacks to moving the money to your SA account. For instance, moving the money is an irreversible action. However, contributing extra funds to your SA can be useful for people who are looking to maximise the funds in their retirement account.
Topping up Additional Amounts Can Generate Higher Returns and Give You Tax Relief
Another way to grow your CPF savings is to make cash top-ups to your CPF.
There are two ways you can do this, either via the Retirement Sum Topping-Up Scheme (RSTU) or via Voluntary Contributions. If you choose to go with the RSTU scheme, you will qualify for tax relief of up to S$7,000 per year. You should note that if you are younger than 55 years old, the maximum amount you can have in your SA account is the Full Retirement Sum ($205,800 in 2024). If you are 55 and older, the maximum amount you can have is up to the Enhanced Retirement Sum (S$308,700).
On the other hand, Voluntary Contributions are not tax deductible if you are contributing to your OA, MA and SA, unless you are contributing to your MA with cash only. Like the RSTU, there is also a limit to how much you can contribute, which is the difference between the CPF annual limit of S$37,740 and the mandatory annual contributions made.
Defer Your Monthly Payouts
If you don’t need the money immediately when you retire or are planning to delay your retirement, you can consider deferring your CPF payouts. For every year that you delay, your CPF LIFE monthly payouts will increase up to 7%. Furthermore, you could defer payments up until you turn 70 years old. At that point, you would have received up to an additional 35% in monthly payout if you choose to defer your payouts until age 70.
Alternative Ways to Grow Your CPF Balance
If you want another way to grow your interest and don’t mind taking a bit of risk, you could apply for the CPF Investment Scheme. This allows you to invest money from your OA and SA into CPF’s pre-approved stocks, ETFs, unit trusts, government bonds, and more.
On the other hand, you could also invest your money into a wider range of products and markets with an online trading platform and deposit the extra gains you make into your CPF account. Please be aware that investment always comes with risk, so if you are not comfortable with risk, you could just leave your money in your CPF accounts to earn risk-free interest.
Related: What Can You Invest in Under the CPF Investment Scheme (CPFIS)?
By Growing Your CPF Savings Now, You Can Enjoy More in Retirement
While you may not be actively thinking about your CPF fund and retirement, especially if you have recently entered the workforce, knowing how CPF works and optimising your returns for retirement can be a great help further down the line. This way, when you eventually need the money, you will have enough to enjoy your retirement.
If you are interested in exploring different platforms to invest and grow your retirement nest egg, check out our comparison page of the best online brokerages and trading platforms in Singapore.
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Read More:
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- What Are Singapore Treasury Bills and Are They a Good Investment?
- 6 Retirement Planning Mistakes To Avoid
- 4 Financial Platforms to Help You Manage Your Money From Home
- How to Plan Your Finances for Short, Medium and Long Term Goals
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