CPF review: 6 things to know about the new CPF Lifetime Retirement Investment Scheme

All CPF members who have more than $20,000 in their Ordinary Account and/or more than $40,000 in their Special Account will be eligible for the Lifetime Retirement Investment Scheme.
All CPF members who have more than $20,000 in their Ordinary Account and/or more than $40,000 in their Special Account will be eligible for the Lifetime Retirement Investment Scheme.ST PHOTO: DANIEL NEO

SINGAPORE - Central Provident Fund (CPF) members who want to take bigger risks to grow their nest egg, but lack the time or know-how to do so, can look forward to a new, simplified retirement investment scheme.

A government-appointed panel on Wednesday (Aug 3) suggested that the CPF introduce a low-cost investment option - known as Lifetime Retirement Investment Scheme (LRIS) - for its members that offers a smaller number of funds, which do not need active management.

Here are six things to know about the scheme:

 
 
 

1. How is the Lifetime Retirement Investment Scheme (LRIS) different from the CPF Investment Scheme (CPFIS)?

The CPFIS is a higher-risk option for more confident investors, offering more than 200 products. It operates under a retail model where funds are marketed by financial institutions and sold to individuals by intermediaries. It requires active management.

 

In contrast, the LRIS will only offer a few well-diversified products. It will have a single administrator and be passively managed. Investors are discouraged from "churning", or frequent switching of investments, and should instead focus on long-term investment.

2. Who is eligible for the LRIS?

All CPF members who have more than $20,000 in their Ordinary Account (OA) and/or more than $40,000 in their Special Account (SA).

3. What are the potential cost savings of the LRIS, compared to the CPFIS?

As the CPFIS is marketed and sold to the individual, investors pay high fees - sales charges could be up to 3 per cent of the invested sum, while annual fees could be as much as 1.75 per cent.

As the LRIS will be aggregated and passively managed by one fund administrator, independent consultant firm Mercer estimates it is likely that annual fees could be 0.5 per cent a year or lower.

4. Is there a risk that my LRIS investments will underperform?

Yes. It is possible your LRIS investments might not do as well as they would have had you left the funds in your OA or SA. However, based on Mercer's analysis, this probability decreases the longer you are able to hold the investment without liquidating it.

5. Must CPF members liquidate their LRIS investments when they turn 65 years old?

No. CPF members may be allowed some flexibility to liquidate their investments, in case their turning 65 coincides with a market downturn. This would still ensure they can start their CPF Life payouts by their chosen payout start age, which may be deferred up to the age of 70.

6. When will this be rolled out?

It is not confirmed. The panel recommends that the Government establish an expert investment council to set up and run the scheme. This could take a few years.