Deletion of CPF special account closes loophole
The 2024 Budget announcement relating to the CPF included the closure of special accounts once a member reaches the age of 55 and a CPF retirement account is set up.
If it goes into effect next year, it will eliminate a long-standing anomaly in which CPF members aged 55 and over have to have two accounts: a special account for saving for retirement and a retirement account.
Both these accounts have the same long-term interest rate this quarter at 4.08%.
However, while a portion of Special Account savings for CPF members aged 55 and over can be withdrawn on demand, retirement account savings are limited to the applicable CPF life benefit eligibility age (currently for those born after 1954). (if you are 65 years old) your CPF will be retained to make life insurance payments. .
Some savvy investors may be aware of this loophole that allows them to withdraw some of the funds in their special account as needed and transfer it whenever they want, even after they reach the age of 55. Therefore, these funds should not earn long-term interest rates that will adequately fund a long-term retirement.
Therefore, the continued existence of members’ special accounts even though retirement accounts have taken over the role of holding long-term retirement savings is unusual and is currently being resolved by the CPF Board.
Christopher Gee is a Senior Research Fellow and Deputy Director at the Institute for Policy Studies, National University of Singapore.