CPF Investment Scheme (Original Account): What It Is, How It Works

In Singapore, 20% of your monthly salary is automatically allocated to your Central Provident Fund (CPF), with a portion going into your CPF OA. This account is primarily used for housing, insurance, and investments.

You can use your CPF OA to:

• Pay for housing costs, including home loans, downpayments, and legal fees.

• Cover insurance premiums like the Housing Protection Scheme (HPS).

• Invest under CPFIS-OA to potentially grow your savings.

While CPF OA funds earn 2.5% per annum (p.a.), CPFIS-OA allows eligible members to invest in approved financial products, such as stocks, bonds, unit trusts, and ETFs. The goal is to potentially earn higher returns than the default 2.5% per annum (p.a.) interest rate.

The CPFIS-OA allows CPF members to invest a portion of their CPF OA savings in approved financial products. This means that instead of leaving your CPF OA funds to earn 2.5% per annum (p.a.), you can choose to invest in options that may offer higher potential returns — but also come with risks.

To invest through CPFIS-OA, you must first meet eligibility criteria and open a CPF Investment Account (CPFIA) with an approved agent bank. Once set up, you can use your CPF OA funds to invest in:

• Stocks (limited to certain SGX-listed counters)

• Bonds (including Singapore Government Bonds)

• Unit trusts and ETFs

• Gold-related investments

• Endowment policies

Your CPF OA balance will be automatically deducted when you make an investment, and any returns will be credited back into your CPFIA. However, it’s important to remember that returns are not guaranteed, and investments may fluctuate based on market conditions.

A portion of your monthly salary is automatically contributed to CPF, with allocations to different accounts, including OA. The contribution rates vary by age group, and adjustments are made periodically to enhance retirement savings.

Here’s the latest contribution breakdown for employees earning more than $750 per month:

>> Read more: CPF contributions for self-employed individuals

The CPF Investment Scheme offers a range of investment options to help you grow your retirement savings. While these products provide the potential for higher returns, they also come with varying levels of risk.

Here’s what you can invest in:

Investing in shares means owning part of a company. With CPFIS, you can buy stocks like SoFi Technologies, listed on SGX, allowing you to benefit from potential capital appreciation and dividends. However, stock prices fluctuate, so thorough research is essential.

Investment limit: You can invest up to 35% of your investible savings in stocks and REITs.

These are debt instruments issued by companies or the government. Singapore Government Bonds (SGBs) are considered lower-risk, offering a fixed return. Corporate bonds, on the other hand, may provide higher yields but come with credit risk.

Unit trusts pool money from multiple investors to invest in a diversified portfolio managed by professionals. They can include stocks, bonds, and other assets, offering diversification without the need for active management.

ETFs work similarly to unit trusts but trade on stock exchanges like individual shares. They typically track indices or specific sectors, providing exposure to broad markets or niche industries at a lower cost.

Gold is a hedge against inflation and market volatility. You can invest in:

• Gold ETFs – Traded on the exchange, tracking gold prices.

• Gold certificates – Representing ownership of physical gold.

• Gold savings accounts – Allowing you to accumulate gold over time.

• Physical gold – Requires secure storage.

Investment limit: You can invest up to 10% of your investible savings in gold-related products.

These are life insurance plans that provide a lump sum upon maturity or death. They are typically used for long-term savings goals, such as education or retirement, but may have limited flexibility.

If you’re planning to invest your CPF savings, you’ll first need to set up a CPF Investment Account (CPFIA) with one of the three agent banks: DBS, OCBC, or UOB. This account acts as a gateway for CPF investments in stocks, unit trusts, ETFs, bonds, and gold-related products.

1. Complete the Self-Awareness Questionnaire (SAQ) – A mandatory CPF Board requirement to assess investment knowledge.

2. Open a CPFIA – Apply online or at a branch with one of the three agent banks.

3. Choose your investments – CPFIA allows you to invest up to 35% in stocks, REITs, and corporate bonds and 10% in gold products.

4. Start investing – Place an order, and funds will be automatically deducted from CPFIA.

Each bank has its own fee structure, so compare costs before choosing where to open your CPFIA.

Before investing with CPF-OA, you must meet specific eligibility criteria: 

• You need at least S$20,000 in your OA and/or S$40,000 in your SA.

• You must be at least 18 years old.

• You cannot be an undischarged bankrupt.

• You must complete the Self-Awareness Questionnaire (SAQ) before investing.

CPFIS-OA investments. CPFIS-OA allows members to invest their CPF funds in a wide range of financial products, including stocks, unit trusts, ETFs, corporate bonds, REITs, and gold-related investments. While these options offer the potential for higher returns, uninvested OA savings continue earning 2.5% p.a., with the first S$20,000 receiving an additional 1% interest.

CPFIS-SA investments. CPFIS-SA is designed for more conservative, long-term growth and does not permit investments in stocks or gold. Instead, your Special Account (SA) savings can be used for low-risk options such as government bonds, endowment policies, and annuities. Unlike CPFIS-OA, uninvested SA savings earn a guaranteed 4% p.a., with the first S$60,000 receiving an extra 1% interest.

Key differences between CPFIS-OA and CPFIS-SA. CPFIS-OA offers greater investment flexibility but comes with higher risks, while CPFIS-SA focuses on stability and long-term security. Deciding whether to invest your CPF savings depends on your risk appetite and financial goals, as uninvested CPF funds provide risk-free returns.

Two of the biggest draws of CPFIS-OA are:

• Potential for higher returns. CPFIS-OA allows you to invest in a variety of financial products, such as stocks, bonds, ETFs, and unit trusts. If your investments perform well, you could earn returns that exceed the 2.5% p.a. interest rate offered by CPF-OA, potentially accelerating the growth of your retirement savings.

• Diversification opportunities. Unlike leaving your CPF-OA funds idle, investing lets you diversify across different asset classes. This can help reduce risk and improve long-term financial resilience, depending on market conditions and investment strategies.

Despite its advantages, CPFIS-OA also comes with notable risks:

• Market volatility and uncertain returns. Unlike the guaranteed 2.5% p.a. interest on CPF-OA savings, CPF investments are subject to market fluctuations. Historically, about half of CPF investors have failed to outperform the default interest rate, meaning you could end up with lower savings than if you had left your funds untouched.

• Limited liquidity and long-term commitment. Once your CPF-OA funds are invested, they remain locked in until you turn 55. Even if your investments perform well, you won’t be able to cash out early unless you meet CPF withdrawal conditions. This makes CPF investments less flexible compared to cash investments.

Before diving into CPF investments, there are a few important factors to consider.

• Funds are locked until age 55. Once invested, your CPF funds cannot be withdrawn until you turn 55. Even then, you can only withdraw S$5,000 unless you’ve met the Full Retirement Sum (FRS) in your Retirement Account (RA).

• Not all CPF OA savings can be invested. You must keep a minimum of S$20,000 in OA before you can invest. Similarly, CPFIS-SA requires at least S$40,000 in SA to qualify.

• No accrued interest on investment funds. Unlike CPF funds used for housing, invested CPF OA money does not incur accrued interest. This means there’s no need to return the lost 2.5% p.a. interest if your investments underperform.

• CPF policy changes. From early 2025, CPF will close the Special Account (SA) for members aged 55 and above. Any extra SA funds beyond the retirement sum will be moved to OA, earning a lower 2.5% p.a. instead of 4%.

• Market risks and investment fees. CPF investments are not guaranteed. Factors like inflation, interest rates, and economic downturns can impact returns. Additionally, investments come with extra costs, such as brokerage platform fees, surrender fees, etc.

If you're still unsure about CPF investments, you can start by investing spare cash instead. A good way to gain experience is through robo-advisors or brokerage accounts, which allow you to explore diversified portfolios and individual stocks.

>> Read more: Investing with the CPF Investment Scheme