Members who invested their Central Provident Fund (CPF) Ordinary Account savings under the CPF Investment Scheme (CPFIS) generally made a profit in the 12 months to Sept 30 last year.
The CPF Board said 441,000 members - or 78 per cent of the total CPFIS-Ordinary Account investors who invested their Ordinary Account savings - made profits in excess of the risk-free CPF-Ordinary Account interest rate of 2.5 per cent per annum. The board attributed the positive performance last year to improving financial markets.
The board has changed the methodology it uses to measure performance to get a more rounded idea of how members' investments made through Ordinary Account savings are performing. For the previous year ended Sept 30, 2015, the proportion of members in this category was 27 per cent, or 159,000 members based on the new methodology.
Besides excluding members with no investments in CPFIS, the new formula assesses not only the realised profits and losses of investments that were sold, but also the unrealised profits and losses that members held during the reporting period.
To reflect longer-term performance, the board is providing the cumulative profits or losses over time.
Previously, the annual report on the performance of the CPFIS-Ordinary Account captured only realised profits or losses and included all members with a CPF investment account, even if they had no investments.
Mr Michael Lim, executive director of the Investment Management Association of Singapore, said that including unrealised gains and losses is more indicative of proper market values, while excluding members with no investments in CPFIS makes comparison numbers more relevant.
"Providing cumulative numbers are in line with taking a long-term view of CPFIS investments' performance," he added.
Simplified scheme still in the works
The Central Provident Fund (CPF) Board says that it is still working on the design of the yet-to-be-launched Lifetime Retirement Investment Scheme (LRIS), and expects to provide an update early next year.
The LRIS is an alternative, simplified investment option that will offer a small number of low-fee, well-diversified and passively managed funds.
It is targeted at members who are willing to take some risk but do not have the financial expertise and/or time to select and monitor their investments.
The CPF Advisory Panel has recommended that the funds be professionally managed with net returns enhanced by low or zero sales charges and low fees.
Members who are willing to take risks, are knowledgeable and have time to manage investments can invest retirement savings via the CPF Investment Scheme.
Those who are risk-averse can leave their retirement savings uninvested and earn risk-free interest rates.
Based on the new methodology, the number of CPFIS-Ordinary Account investors who had investments during the reporting period amounted to about 567,000 last year, down from 583,000 in 2015.
Under the scheme, CPF members can invest in CPFIS-included funds such as approved unit trusts and equity funds, as well as other investment products such as stocks and shares, after setting aside $20,000 in their Ordinary Account and $40,000 in their Special Account.
The total amount of Ordinary Account savings invested as at Dec 31 last year amounted to $18.14 billion, while $5.03 billion of Special Account savings were invested.
About 60,000 members - or 10 per cent - made total profits equal to or less than the CPF-Ordinary Account interest rate of 2.5 per cent for the year to Sept 30 last year, compared with about 84,000 (15 per cent) in 2015.
About 66,000 members (12 per cent) made total losses last year, compared with about 340,000 in 2015. Over the two financial years from Oct 1, 2014, to Sept 30 last year, about 293,000 members made cumulative total profits in excess of the CPF-Ordinary Account interest rate of 2.5 per cent per annum.
About 128,000 members made cumulative total profits equal to or less than the CPF-Ordinary Account interest rate. The remaining 172,000 members made cumulative total losses.