Roadshow gives tips on maximising CPF savings

CPF Board deputy chief executive (services) Soh Chin Heng speaking at the Maximising Your Money session moderated by The Sunday Times’ Invest editor Lorna Tan. The other panel speakers were Providend chief executive Christopher Tan and CPF member L
CPF Board deputy chief executive (services) Soh Chin Heng speaking at the Maximising Your Money session moderated by The Sunday Times’ Invest editor Lorna Tan. The other panel speakers were Providend chief executive Christopher Tan and CPF member Loo Cheng Chuan. The 660 or so people present got useful tips on how to grow savings and invest for one’s golden years. PHOTO: CENTRAL PROVIDENT FUND BOARD

Panel's advice includes keeping savings in CPF accounts, making transfers to Special Account

Timely tips on how to grow savings and invest for the golden years had plenty of people taking notes at a Central Provident Fund (CPF) Retirement Planning roadshow last Sunday.

Panel speaker Soh Chin Heng, the CPF Board's deputy chief executive (services), told the 660 or so people present to take advantage of avenues to increase their "pay cheque". This is the portion of our retirement income that fulfils our daily needs such as utilities, transport and food expenses.

For instance, CPF members could top up their CPF accounts and refrain from withdrawing their savings at age 55 if they do not need to.

Mr Soh considers the CPF Ordinary and Special Account savings the "best emergency fund" for members over 55 as they can enjoy interest rates much higher than bank rates and can get the money within a few working days after a withdrawal application.

Another avenue is to use cash instead of CPF savings for mortgage payments. After all, CPF Ordinary Account savings attract an annual interest rate of 2.5 per cent, higher than some housing loan rates.

CPF statistics indicated that many members have caught on to this. Last year, the top-up amount in Special and Retirement Accounts rose 96 per cent to $1.8 billion while CPF withdrawals fell by 1.1 per cent to $18.53 billion.

Calling the national annuity CPF Life scheme a cheque book that never stops paying, Mr Soh said that a CPF Life plan with an escalating payout option to hedge retirement savings against inflation will be available from Jan 1 next year.

Another panel speaker, CPF member Loo Cheng Chuan, outlined his "1m65" ($1 million by age 65) strategy. This involved him and his wife diligently transferring money from their Ordinary Account to Special Account from the age of 30 to earn the higher interest rate of 4 per cent.

Calling the national annuity CPF Life scheme a cheque book that never stops paying, Mr Soh Chin Heng, the CPF Board's deputy chief executive (services), said that a CPF Life plan with an escalating payout option to hedge retirement savings against inflation will be available from Jan 1 next year.

By the time Mr Loo and his wife turned 34, they had hit the then prevailing cap of around $120,000 in their Special Accounts.

Assuming the interest rate remains at 4 per cent, his savings and those of his wife in these two accounts could compound to almost $1 million by the time they reach 65, even if they choose to stop working and contributions to these accounts cease. However, he cautioned that such transfers are one-way only.

Parents can also opt to set aside some cash to grow their children's CPF savings. Mr Loo said that $10,000 placed in a newborn's Special Account will grow to $100,000 in 60 years.

Panel speaker Christopher Tan, chief executive of Providend, advised that time in the market is more important than timing the market.

By staying invested, you get average returns and it is less stressful - but ensure that you have time, at least 10 years, to ride out the market volatility, he added.

Other important factors to consider when investing include the use of low-cost tools like exchange-traded funds and index funds, as well as assessing your risk profile, which should take into account your need, ability and willingness to take a chance.

After the talk at Suntec Convention Centre, participants asked about CPF top-ups, the CPF Life scheme and investments.

Administration manager Albert Khoo, 35, said the session helped him understand how to make good use of the various CPF schemes.

The next roadshow will be at Compass One in Sengkang next Saturday and Sunday. For more information, visit cpf.gov.sg/bigRchat

A version of this article appeared in the print edition of The Sunday Times on October 29, 2017, with the headline 'Roadshow gives tips on maximising CPF savings'. Print Edition | Subscribe