Second phase of CPFIS fee cuts deferred to Oct 1, 2020

Central Provident Fund (CPF) members who are looking forward to lower costs of investing their retirement funds under the CPF Investment Scheme (CPFIS) will have to wait longer.

The Ministry of Manpower (MOM) said yesterday that the second phase of reductions to the CPFIS sales charge and wrap fee cap will be deferred by one year, from Oct 1 this year to Oct 1, 2020.

This is in response to industry feedback that financial advisers require more time to adjust to the revised CPFIS fee structure, MOM said.

Mr Leong Sow Hoe, president of the Insurance and Financial Practitioners Association of Singapore, said the deferment will allow affected financial advisers - namely, those who are more focused on CPFIS sales - to find other lines of business in the financial planning space. This will enable them to compensate for the loss in such products.

The lower CPFIS fee structure was one of the factors that led to lacklustre sales of single-premium plans last year.

In March last year, MOM announced the removal of the sales charge and a reduction of the wrap fee cap for the CPFIS in two phases.

The first phase of reduction took effect from Oct 1 last year.

Currently, financial advisers are allowed to levy a sales charge of up to 1.5 per cent for investment-linked insurance policies and unit trusts offered under CPFIS. This is down from the 3 per cent charged before Oct 1 last year.

The removal of the sales charge - to take place on Oct 1 next year - reduces the cost of investing for CPFIS members and better aligns investment behaviour with members who have the time and knowledge to invest.

Investors are already able to buy unit trusts directly on online platforms at zero sales charge.

Financial advisers currently charge a wrap fee of up to 0.7 per cent of assets under management (AUM) per annum for CPFIS members with wrap accounts. This is down from 1 per cent, prior to Oct 1 last year.

The cap on annual wrap fees will be lowered to 0.4 per cent of AUM per annum on Oct 1 next year, similar to the fees charged by online investment platforms in the cash market.

A version of this article appeared in the print edition of The Straits Times on March 13, 2019, with the headline 'Second phase of CPFIS fee cuts deferred to Oct 1, 2020'. Print Edition | Subscribe