Transferring from OA to SA in CPF

[Harvest Time]

4% is good for fixed income. If you don't mind New Zealand, you can get high 3% to low 4%.
Some go for bank perpetual bonds.
There are pro and con for any investments.

[aspeed]

Seem like a lot are drawn to the guarantee long term risk free 4%. Just to highlight, the guarantee minimum floor rate of 4% is only until Dec 2014.

From CPF website,
"From 1 January 2015, the SMRA rates will be pegged to the 12-month average yield of 10YSGS plus 1%, subject to the statutory floor rate of 2.5% per annum that applies to all CPF accounts."

The 4% floor may be extended again another year, but my key point is it is not guarantee over long term.

[chialc88]

The 4% floor may be extended again another year, but my key point is it is not guarantee over long term.

aspeed,
by that time, interest rate should be rocket high and that's a good time to remove the 4% floor.

right?

Love Compassion



Earth day - save the world everyday.

[CityFarmer]

Seem like a lot are drawn to the guarantee long term risk free 4%. Just to highlight, the guarantee minimum floor rate of 4% is only until Dec 2014.

From CPF website,
"From 1 January 2015, the SMRA rates will be pegged to the 12-month average yield of 10YSGS plus 1%, subject to the statutory floor rate of 2.5% per annum that applies to all CPF accounts."

The 4% floor may be extended again another year, but my key point is it is not guarantee over long term.

From CPF official statement, the keyword is "whichever is the higher". What is the concern?

"Savings in the Special and Medisave Account (SMA) currently earn either 4% per annum or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, whichever is the higher.

http://mycpf.cpf.gov.sg/Members/Gen-Info/Int-Rates

[aspeed]

"Savings in the Special and Medisave Account (SMA) currently earn either 4% per annum or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, whichever is the higher.

http://mycpf.cpf.gov.sg/Members/Gen-Info/Int-Rates

As I have said, the statement you have paste is only valid till Dec 2014. After that read the para that I paste. You see the difference?

http://mycpf.cpf.gov.sg/CPF/News/News-Re...ep2013.htm

[tanjm]

and so?

You go from a very high risk free rate to a "merely" high risk free rate. And on top of that it floats (resets every 6 months I believe). You still would be unlikely be able to get a better riskfree investment outside CPF SA. It is possible you might be able to buy a 30Y SGS with a higher yield at spot, but the coupon rate on your SGS bond would be fixed and would not float and is therefore subject to interest rate risk.

Normally, floating rate deposits/loans are based on a resettable 3M or 6M interbank rate. This one is based on a 10Y bond yield plus 1%.

[weijian]

The 4% floor may be extended again another year, but my key point is it is not guarantee over long term.

aspeed,
by that time, interest rate should be rocket high and that's a good time to remove the 4% floor.

right?

The 4% floor rate has came in useful in light of Helicopter Ben's zero interest rates+QE for the longest time now. Floating rates work in a normal operating market, ie. rates rises with inflation and help retirees fight off inflation, but not in this artificial "QE pumped-up" financial world order.

Looking at the historical prices of SGS 10Y bonds, crossing finger for higher risk free rates one day:
https://secure.sgs.gov.sg/fdanet/Benchma...ields.aspx

[angtc11]

Hi all

Thank you very much for all the advice.
I learnt much about CPF strategies from this thread.

For me, the 4% in SA is good enough.
I bought quite abit of equities using cash, so the money in CPF is the risk free part of my portfolio.
But if there is a stock market crash, I will consider using SA to buy something like the STI ETF. (Thanks to angtc11 for the info, didn't know SA can be used for investments)

I am now leaning towards making the transfer, but will think abit longer, since the transfer is irreversible.

Hi, you can invest, but it does not include sti etf. The products available for investment from SA are different from OA. What I gather is the SA investments are via a tie up with individual investment firms.

Will try to clarify with CPF and let you know

[CY09]

Hi all

Thank you very much for all the advice.
I learnt much about CPF strategies from this thread.

For me, the 4% in SA is good enough.
I bought quite abit of equities using cash, so the money in CPF is the risk free part of my portfolio.
But if there is a stock market crash, I will consider using SA to buy something like the STI ETF. (Thanks to angtc11 for the info, didn't know SA can be used for investments)

I am now leaning towards making the transfer, but will think abit longer, since the transfer is irreversible.

Hi, you can invest, but it does not include sti etf. The products available for investment from SA are different from OA. What I gather is the SA investments are via a tie up with individual investment firms.

Will try to clarify with CPF and let you know

Hi,

ETF cannot be bought with SA proceeds. I have confirmed this with CPF before. This is why I am hesitant to put into SA as I will not have a war chest ready despite enjoying tax benefits from putting more money into SA account

[kyle]

Why not buy some low risk short duration bond fund? This will give you a reasonable interest rate at a low risk while providing a higher flexibility...