4. CPF Special Account can be used to invest
Beyond the minimum balance of S$40,000, savings in your CPF SA can be used to invest under the CPF Investment Scheme (CPFIS) in any of the approved investment schemes below. But before you do, make sure you can get the same or better returns than the maximum 5% interest on your SA account.
Also take note that any profits go straight back into your SA account, which you can only withdraw at the age of 55. Below are the investment assets available to you:
- Fixed deposits
- Treasury bills
- Singapore government bonds
- Unit trusts
- Annuities
- ETFs (Exchange Traded Funds)
- Endowment policies
- Investment-linked insurance products
- Statutory board bonds
Cons of keeping your savings in your CPF Special Account
There are a number of issues you may face:
- You have to pay for your housing the hard way -- in cash
- You'll need to rely on banks for education loans
- Transfer from OA to SA are permanent and irreversible
1. You have to pay for housing the hard way
When you take an HDB Concessionary Loan, you need to pay at least 10 per cent of the flat price. This can come from your CPF OA or your pocket. And since you have transferred everything from the OA to the SA, your pocket it is.
A typical 3-room resale flat costs around S$350,000. This means you should be prepared to fork out at least S$35,000 in cash somehow (a little less after grants).
If you are buying private housing or an Executive Condominium (EC), you will have to take a bank loan and put down 20 per cent. So a S$700,000 EC would mean a cash payment of S$140,000, if you have nothing in your CPF OA.
In addition, many Singaporeans pay their mortgage through their CPF OA. This will, of course, not be an option for you if all the money has been transferred to your SA.
You have to be very disciplined at money management, in order to make the significant down payment without CPF. And because you are paying the mortgage in cash, you will have to plan your monthly finances carefully. This is exactly what Singaporean Loo Cheng Chuan, aka Mr CPF, did to accumulate a million dollars in his CPF account -- he saved and scrimped during his early years of his career, and is now reaping the benefits.
For bank loans, this entails knowing details like when to refinance, or how to pick between one and three-month interest rate periods with the most efficiency. Fortunately, we've made it easy for you to find the best home loan that suits your needs.
2. You'll need to rely on banks for education loans
Your CPF OA can be used for education loans when applying for studies from a recognised institution (and yes, you do have to pay back your CPF account, with interest!).
If you have not completed your diploma or degree but intend to, you will have to turn to banks if your OA is empty. If you do decide to take out an education loan from a bank, be sure that you are careful to repay on time. Failure to do so can greatly impact your credit score later.
Needless to say, it's very important to choose the one that best suits your needs based on your desired loan amount and tenure.
3. Transfers are permanent and irreversible
Transferring savings from Ordinary Account to Special Account is permanent and irreversible. If you have a sudden need for cash, you cannot undo the process. If you're still young, that means you first have to build up an emergency cash fund (roughly 6 months of your monthly salary) and then gradually transferring what savings you feel comfortable with to your SA.
You will only be able to withdraw savings in the CPF SA when you reach the age of 55, which is when the savings from the SA will be transferred to your retirement account. This retirement account can then be used to join CPF Life, which offers lifelong monthly payouts to CPF members.
Conclusion
Given that the SA offers very decent interest rates and is guaranteed, many Singaporeans would be better off gradually transferring money and building up their SA nest egg, provided they have planned ahead and have enough cash savings to last until the age of 55.
Read these next:
CPF Has No Equal As Investment Vehicle: Singapore's Mr. CPF
Uniquely Singaporean Things We Do To Accumulate Wealth
HDB BTO Launches In 2021
How Much Do You Need To Buy Your First Home In Singapore?
How To Buy A House In Singapore: A Complete Guide

By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men's Health, Her World, Esquire, and Yahoo! Finance.