Martin Lee @ Sg
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Upcoming CPF Changes

From 1st April 2008, there will be some changes to the Central Provident Fund (CPF) scheme where investments are concerned. Basically, the first $20k in both your OA and SA will be unavailable for investments. This does not affect existing investments so you will not need to liquidate any investments if you have less than $20k in your accounts now.

If you wish to deploy the first $20k in your CPF OA or SA funds for investments, you will need to do so in the next one or two days as it takes time for the CPF funds to be transfered out.

For your reference, leaving that amount in your CPF will earn you 3.5% p.a. for OA and a floor rate of 5% p.a. for SA (for this two years).

After 1st April, if you have less than $20k and sell or switch any of your CPFIS-OA investments, the money will be temporarily held in your agent bank first. If you want to use the amount for investments, you will have to do so before it gets transfered back to the CPF board.

Once it gets transfered back to CPF, the $20k rule will apply.

For CPFIS-SA, it will not be possible to do a switch as any sales proceeds will go directly into your CPF account. However, if your funds are under IA status (purchased from a CPFIS Registered Investment Administrator), switching will not be a problem for both CPFIS-OA and CPFIS-SA regardless of the amount left in your CPF account.

Refer to Annex C for list of CPFIS Registered Investment Administrators

For ILP products, switching might not involve a transfer of your monies to your CPF account. I’m not 100% sure on this so you might want to confirm with your insurance agent.

Should you rush to invest all your CPF monies now? It depends.

Some people might be reluctant to do so because of current market volatility. What I did is I moved most of my CPF to a money market fund. Subsequently, I will be doing RSP investments into unit trusts. This avoids investing all my CPF at one go.

Some people might have a high contribution to their CPF accounts every month. In their case, even if they move out all their money now, their CPF OA and SA will still build up to $20k very soon.

Moving out those funds from the CPF for investments might be a worthwhile consideration for those who have a very small contribution to CPF every month.

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