From May 1, the threshold of the CPF Special Account (SA) will be raised from $20,000 to $30,000.
This means members can only invest amounts in the SA in excess of $30,000.
Existing investments will not be affected and the restriction on the first $20,000 in the Ordinary Account remains unchanged.
“Given the higher interest rate on the SA and the uncertainty of CPFIS returns, it is better to be more conservative,” said Acting Minister fr Manpower Gan Kim Yong in Parliament on Friday.
The CPF Investment Scheme (CPFIS) allows CPF members to invest a portion of their savings in a wide range of investment products.
Since April 1 last year, the CPF Board has paid an extra 1 per cent in interest on CPF accounts – 3.5 per cent per annum for the first $20,000 of savings in the Ordinary Account and 5 per cent per annum for their remaining $40,000 in the Special, Medisave and Retirement Accounts.
The new threshold has drawn mixed responses from financial experts interviewed by Weekend TODAY.
Me Leong Sze Hian, president of the Society of Financial Service Professionals, said the new limit would make it harder for people to invest.” As it is, quite a number of people don’t even have, or will have trouble fulfilling, the required Minimum Sum in the CPF accounts.
“Yet, there is a greater need for people to grow their money for their old age, but this new ceiling might delay their ability to invest slightly longer,” Mr Leong said.
However, Financial Alliance’s managing director Vincent Ee felt the new ceiling would not cause much grief to investors as “people who have suffered losses are not investing”. He added: “Maybe when the market picks up, they may question the ceiling. But $30,000 is not a lot – we also advise our clients to keep a certain amount in CPF as it is a safe form of asset.”
MP for Ang Mo Kio GRC Inderjit Singh, who is also a businessman, agreed: “The best of investors have lost a lot of money outside, so this new ceiling safeguards more of members’ money.”
Meanwhile, from Jan 1, 2011, all funds under the CPFIS that have been around before 2006 will have to follow the rules introduced in that year for new investment funds.
Under the 2006 rules, a fund’s relative rating, track record and expense ratio are all taken int account before it can be included under the CPFIS.
Article taken from WEEKEND TODAY, February 14 – 15,2009
