Budget 2026: Making your CPF work harder for a comfortable retirement

SINGAPORE – The CPF Board has finally started the ball rolling to procure

a new long-term investment plan

for its members after a full decade, and this only serves to reinforce the well-known fact that its basic 2.5 and 4 per cent interest rates are hard to beat.

In 2016, the board accepted the then recommendation from an independent advisory panel to set up a “lifetime retirement investment scheme” for members who were willing to take some risks to earn more than the guaranteed interest, yet were not savvy enough to make their own investment decisions.

In theory, the proposal looked good. But in reality, it is a tall order to create a fail-safe investment plan that can deliver higher returns but will not cause members to suffer any setbacks that reduce their retirement savings.

After all, older members will remember that even the best laid plans can go awry when a global financial disaster, such as the Lehman Brothers debacle in 2008, can in one fell swoop wipe out both the vendors and their investment funds.

Even as the CPF Board feels it is ready now to work with reputable private vendors to offer carefully curated investment products for its members, it has taken care to remind everyone that the new scheme is entirely voluntary.

The new scheme is designed primarily to suit less financially savvy members who are willing to take some risks and have the ability to stay invested for the long term to earn more.

To be launched in 2028, it is meant to complement, not replace, the existing CPF Investment Scheme (CPFIS), which currently allows members to choose from over 700 products on their own.

When Prime Minister Lawrence Wong unveiled the plan for the new scheme in

his Budget speech

, he noted that the CPF Board will do more to help interested members make informed choices, especially those who are younger and have a long runway to retirement.

Older members can invest in the scheme too, but they would do well to understand their own needs first before committing their savings in a long-term investment.

There is a general expectation among many CPF members that anything that is rolled out with the Government’s endorsement must be a sure-win product, but they should remember that all investments carry some risks and are impacted by global events.

For instance, of about 490,000 members who used their savings in their Ordinary Account (OA) to invest in various existing CPFIS products between 2016 and 2024, about 30 per cent of them made losses or cumulative gains that were below 2.5 per cent per annum.

What this means is that for about 140,000 CPFIS investors, they would have been better off if they had done nothing, which was to leave their money in their OA to earn 2.5 per cent interest that will be compounded year after year.

That said, the advent of technology can now enable investment products to be calibrated automatically to suit the risk profile of investors based on their age.

This means that without any effort from them, investors have the option of putting more money in higher risk products, such as public stocks, when they are younger, with their portfolio leaning towards safer products, such as bonds, when they are nearer to retirement.

To make it easier for interested members to decide, the new scheme will only offer a limited number of investment options from reputable vendors. Not only that, the relevant fees for these products are expected to be capped so that members’ gains are not eroded by high investment costs.

This development alone is expected to spur all financial product vendors to relook their investment fees to attract new customers, since this new scheme is expected to give them a run for the money when it is launched.

For now, here are two important things to note if you want to plan for a good retirement with your CPF.

CPF LIFE is the best investment

Members should know that the main purpose of creating a new option for them to grow their CPF balance is to enable them to put up a higher retirement sum for CPF LIFE, so that they can have more money to spend when they retire.

For instance, those reaching 55 can have the option of topping up their Retirement Account to reach the enhanced retirement sum of $440,800 so that they can start receiving monthly payouts of up to $3,400 from 65.

Those who do so can receive $408,000 by age 75, $816,000 by age 85 and over $1 million if they are blessed with longevity genes and live beyond 90.

There are no hidden costs or risks for the payout because it is guaranteed by the Government.

It is not easy to produce such results on your own with a similar sum. Some people have even ended up with losses when they tried to plan for similar retirement income, by investing up to $2 million in private products.

It pays to make use of CPF LIFE to plan for a higher payout because you certainly will not want to still make investment decisions when you are in your 70s and 80s.

Use your Special Account to grow your money

Younger members should think twice before investing money from their Special Account (SA), which gives them 4 per cent interest annually and is a risk-free scheme to grow their funds.

Take a young member who diligently tops up his SA with cash until it hits, say, $220,400, when he is 35. With compounding interest, the SA can grow this balance alone to over $480,000 in 20 years, when the member hits 55. The final sum will actually be a lot larger, as it will include monthly salary contributions over those 20 years.

What this means is that even as we await the new investment scheme, you can already make the CPF work harder for you the old-fashioned way, which is to make monthly contributions and regular top-ups, so that you can reap maximum rewards when you retire.

Read next: Goodies Singaporeans will get – from CDC vouchers to LifeSG credits for children