REMOVAL OF CPF SPECIAL ACCOUNTS CLOSES A LOOPHOLE
Bundled in the Budget 2024 announcements relating to CPF was the closure of the Special Account once members are 55 years of age and their CPF Retirement Account has been set up.
When implemented next year, this would resolve a long-standing anomaly whereby a CPF member aged 55 years and up would have two accounts that hold savings intended to provide retirement payouts: The Special Account and the Retirement Account.
Both these accounts earn the same long-term interest rate at 4.08 per cent for the current quarter.
However, while some Special Account savings of CPF members aged above 55 can be withdrawn on demand, savings in the Retirement Account are held to provide CPF Life payouts at the applicable CPF Life payout eligibility age (currently 65 for those born in 1954 or later).
Some savvy investors may be aware of this loophole that enables them to withdraw some of their Special Account funds out on demand after they hit 55 years of age, and still transfer it back as and when they wish. Thus, these funds should not earn the long-term interest rates that fund long-term retirement adequacy.
The continued existence of a member’s Special Account when the Retirement Account has taken over the role of holding long-term retirement savings is thus an anomaly that the CPF Board is now resolving.
Christopher Gee is Senior Research Fellow and Deputy Director at the Institute of Policy Studies, National University of Singapore.
