New life-cycle funds suited for CPF members with longer investment horizon: Financial experts

SINGAPORE – CPF members with a longer deployment horizon and who are not familiar with markets and investing will be among those who can stand to benefit from

proposed life-cycle investment funds,

say financial experts.

They added that those who prefer to just let their investments grow without actively managing them will also appreciate the additional option to boost retirement adequacy.

The

new investment scheme

,

which is expected to be launched in the first half of 2028, was

announced by Prime Minister Lawrence Wong during his Budget

speech

on Feb 12.

It will comprise simplified, low-cost “life cycle” investment products from two to three commercial product providers.

Life-cycle funds are designed to automatically adjust a portfolio’s asset allocation along a glide path. The investor holds more higher-risk assets such as equities when young and as he approaches a target, such as retirement, his portfolio auto-adjusts to hold more of the less risky assets like bonds.

This automated feature takes out the emotions in investing. Mr Afdhal Rahman, executive director of wealth advisory at OCBC, said that investors reduce their tendency to make poor equities choices, trade too often or time the market when the portfolio allocation process is automated.

For example, some investors sell their assets too early during market drawdowns or buy too late when markets are toppish.

A curated portfolio of funds encourages guided, disciplined long-term investing, he added. 

Mr Calvin Ong, head of consumer banking group at DBS Singapore, said the life-cycle approach addresses the need to empower more Singaporeans to invest by offering a few simple choices for them to pick from.

This will go some way to strengthening retirement adequacy and keeping them financially prepared for longer lifespans, he added.

DBS has a retirement digi-portfolio with JP Morgan Asset Management, which uses the glide-path strategy, and has said it “is keen to work with the CPF Board to explore ways to help Singaporeans grow their CPF funds”.

The proposed scheme will be the second option available for Central Provident Fund members who want to invest. Participation will be voluntary, just like the CPF Investment Scheme (CPFIS), which offers more than 700 investment options, including insurance investment-linked polices and annuities, unit trusts, bonds and shares.

CPFIS caters to members who have more financial expertise and time to actively manage their investments. They can select and manage their own portfolios, taking more risks to earn potentially higher returns.

Mr Leon Loh, a financial services consultant at Gen Financial Advisory, said there is potential for CPF members to deploy more of their balances to investments.

Combined balances in the Ordinary Account (OA) and Special Account (SA) hit $369 billion as at Sept 30, 2025.

Looking specifically at the OA balances, as at Sept 30, nearly 8 per cent of OA balances, or $16.7 billion, was invested. 

CPF members must have at least $20,000 in their OA and at least $40,000 in their SA before they can invest. 

One CPF member in her 30s, who wanted to be known only as Ms Tang, has never invested her OA or SA funds before because she does not know how to do so.

She said she will consider putting some of the money into the upcoming life-cycle funds because they are a simple and fuss-free way to make her CPF savings work harder.

“I do not have the time and interest to read up about investing and the stock market,” she added.

Ms Kelly Chiew, 33, also wants to try out these funds. The mother of one boy invested some of her OA funds in the CPFIS as she wanted to grow her nest egg for retirement. 

“I will likely put some money to observe and see how it goes,” she said.

Mr Alfred Chia, chief executive of advisory firm SingCapital, said those with a long investment time horizon of more than 20 years will benefit from this scheme. 

He said that if one leaves $10,000 in the OA over 20 years, he will get about $16,000 in total. 

If he puts the same amount into another investment that gives him 5 per cent returns every year, what he will get will be about $26,000, he said.

Mr Loh added that the scheme tends to favour younger CPF members, those in their 30s or early 40s, because they would still have a 20- to 25-year investment horizon.

He said: “Over that period, the market is going to go up, and it is going to come down.

“It may work for one who has a long enough runway.”

However, there are CPF members in the 30- to 40-year-old age cohort who may still have a housing loan commitment or who intend to tap their OA to buy a house.

OA savings can be used to pay for housing payments such as the initial down payment and the subsequent monthly home loan instalments.

SingCapital’s Mr Chia said many of his clients in this age cohort “still have a reasonable amount of CPF in their OA that is available for investment” even after using much of it for housing.

Others, like marketing manager Ang Jian Hui, 41, do not have much left in their OA.

Mr Ang said he is less inclined to invest the money in his SA as the interest rates are “already pretty high”. 

Instead, he is hoping that he can invest his Supplementary Retirement Scheme (SRS) account savings in these life-cycle funds.

“SRS gives more benefits with tax breaks and if this product indeed charges lower fees, it could be a good investment mix,” he said.

Some of the older CPF members, like civil engineer Leong Meng Sun, hope they can also invest in these funds.

Mr Leong, who is 58, said he will do so if the returns are more than 2.5 per cent a year. 

“It is a safe and low-cost option for me to grow what is left in my OA,” he said.

“With stagnating wages and rising costs of living, I just want to build a more comfortable financial cushion for myself and my family when I retire,” he added.

Former financial journalist-turned-novelist Frederick Lim, who is in his 70s, said life-cycle funds are not suitable for him as he has already retired.

He added that one has to start earlier to benefit from the scheme. The CPF member may also have to ride out some market downturn over the investment period, he said.

Although he is not investing in the new scheme, Mr Lim has some investments under the CPFIS. He said his holdings are profitable largely because he invested in them when they dropped during the 2008 global financial crisis.

However, he noted that his CPFIS investments were in the red for many years before turning a profit, and that he had held on to them as he believed investing with CPF funds should be for the long term.

While Mr Lim has managed to make a profit on his CPFIS investments, financial experts like Mr Loh are concerned that there will be some CPF members who may have to draw down their investments when the timing is not right. 

The CPF Board and Ministry of Manpower (MOM) said in a joint statement on Feb 12 that investments in the life-cycle funds will be liquidated in phases by the target date.

For example, if the CPF member chooses to start his payouts at 65, when he becomes eligible for payouts, his investment portfolio will be divested in phases a few years before 65.

This phased liquidation, CPF and MOM said, calibrates the amount of risks that investors are exposed to as they near retirement and mitigates the likelihood that they will have to exit all their investments in a market downturn.

Mr Loh said that even though the scheme has built in this measure, there could still be some CPF members who may be negatively impacted if the market downturn is prolonged.

For example, US stock indexes took five to six years to return to pre-crisis levels during the global financial crisis.

“The person could be exiting at a loss in a downturn when he or she is going into retirement,” he said.

All investments carry some risks with the relatively more risky ones offering higher returns and the relatively safer ones giving lower returns.

CPF members who feel that they cannot stomach any risks may want to leave their money in their OA and SA to earn the risk-free interest rates.

A CPF member who is below 55 would earn 2.5 per cent on his OA savings and 4 per cent on his SA savings, with an extra 1 per cent on the first $60,000 of combined balances. The extra interest is capped at $20,000 for the OA.

CPF members who are 55 and above would earn 2.5 per cent on the OA and 4 per cent on the Retirement Account, with an extra 2 per cent on the first $30,000 of combined balances and an additional 1 per cent on the next $30,000 of combined balances. The extra interest is capped at $20,000 for the OA.

Correction note: In an earlier version of the story, it was reported that there will be two to three simplified, low-cost “life cycle” investment products from commercial product providers. This is incorrect. The CPF Board will work with two to three reputable product providers to offer a small number of options. We also said that combined balances in the OA and SA hit $649 billion as at Sept 30, 2025. This is incorrect as the figure includes balances in the Retirement Account and the MediSave Account, which are not investible. The correct figure should be $369 billion as at Sept 30, 2025.