Remove minimum sum in CPF Special Account to spur early investing: SGX paper

FREEING up more Central Provident Fund (CPF) savings by removing a mininum threshold amount in the Special Account for investment could help boost the retirement income of Singaporeans.

A report released on July 22 by the Singapore Exchange and consulting firm Oliver Wyman said allowing Singaporeans to invest monies from the Special Account even if it is below the minimum balance of $40,000 into lifecycle funds will help them save more for their old age.

Lifecycle funds invest in higher risk-return assets when an individual is younger, and then automatically move into safer but lower return assets as retirement approaches.

Currently, only monies in excess of $40,000 in the Special Account can be invested in selected financial instruments approved under the CPF Investment Scheme.

CPF members receive a risk-free interest rate of 4 per cent on their Special Account.

The average Singaporean reaches the minimum $40,000 threshold balance for investing funds from their Special Account at around age 40 - halfway through working life, said the report.

It suggested lifting the minimum balance restriction to allow individuals to begin investing in equities at a younger age while progressively lowering their investment risk as they approach retirement.

Such an extended time period for investment could give Singaporeans a chance to accumulate higher returns initially and curb the risk of market volatility.