CPF going to see BIG OUTFLOWS in 2025? Consequence of NO MORE CPF SPECIAL ACCOUNT after age55
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- เผยแพร่เมื่อ 11 พ.ค. 2024
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Today I'd explain to you why I see potentially BIG outflows from CPF in 2025.
This comes after the news that CPF changes include the closure of special account SA after the age of 55. Interest rates you will get from cpfoa is only 2.5% and I'd show you many alternatives to park that money. Note, moving out OA after age55 is only IF YOU HAVE FRS in RA account.
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0:00 Introduction
1:19 Nobody benefits from cpf special account closure
4:02 Singapore savings bond for cpf savings
5:10 Offers for your CPF money
9:36 Insurance plans
12:23 Why people not doing now
#cpf #cpfshielding #cpfsa #cpfoa
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Note: Moving out OA after age55 is only IF YOU HAVE FRS in RA account.
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Today I'd explain to you why I see potentially BIG outflows from CPF in 2025.
This comes after the news that CPF changes include the closure of special account SA after the age of 55. Interest rates you will get from cpfoa is only 2.5%
and I'd show you many alternatives to park that money that may still exist then
Banks only insure up to $100k (Apr 2024). If they collapse your money in excess of that is wiped out. Plus if the market bank interest rate goes down to below 2.5% or even 0%, you cannot put your money back into CPF OA to get back that 2.5%.
I think this is looking at a 2 to 3 year view only as once you draw out from OA, you cannot put back… then when outside interest drop below OA interest, we are stuck and even SSB with a 10 year horizon may be an option but after that nobody knows… agree even OA may drop but look at the trend when interest was low, it has been a darling… so draw out knowing the possibilities on the down side after a few years.
Depends on the rate env and other opportunities' available yields. I dont see rates falling for next2 yrs
Parliament reported that total of 2% of cpf members 4.5m in 2023 = 90k members were tx from sa to cpfis before age 55 and then tx back to sa after 6 months in 2021
If 90k members with avg of $100k in sa, then ,govt will save the 1.5% at about $135 millions yearly before compounding yet
How have the outflows been since they kicked out the non residents/citizens? Was it significant or just a drop in the pool of money they still hold? (I see that the accounts will be closed 1st April 24
Sound logic. I also believe that there will be an exodus of funds. It will be good if banks or insurance companies will come up with plans to "replace Special Account", but I am skeptical; they can just continue to sell their ILPs or life plans and greatly benefit from any outflow. At the end of the day, the one on the losing side will be the regular retail customers.
@joshconsultancy
pls share more on diff betw annunity/savings plans vs ILPs.
agree with @sydraiz dat there may be advisers trying to sell the "flexibility" of ILP without highlighting the risks.
What are the possibilities of an increase on the interest rate of the CPF ordinary account in future?
Thanks Josh. I probably will do that. Not just for the interest, but for the fact that after contributing for decades till age 55, we're deprived of the the prevailing extras to rejoice our remaining life or retirement. Enhanced RA top up and locking our money even more as "advertised"? No thanks.
Can you make a video for PR who reach 55y, what is the optipn? i believe there is no video talk about this and it can great help as i guess many PR are confuse with this
Thanks Josh for creating this super informative video :)
Thanks Alan for the high praise
Those not affected are those who had started shielding early. They got early birds which whispered into their ears the lobang
Gd value as always 😊
Thanks Eric!
Good sharing Josh! Especially on the FI offering products part.
Hey Chris, thanks great to cya around
SGD money fund is already well above 3.7%pa beating any existing FD or saving accounts. Dont understand why would people consider putting in FD. If there's a disadvantage of money fund, that would be taking 2 or 3 working days to withdraw into bank accounts. But at least there's no other strings attached.
SA was a part of the citizen's retirement plan for donkey years so to remove it suddenly would be to destroy many years of well thought through planning and feels like someone robbed us of our money.
Ordinary account money cannot be used for SSB. Anyway, SSB is very much lower than SA interest.
Draw out the OA if above FRS and but the SSB. But ya its not 4% unfortunately
I'm looking at long dated high grade bonds to hikd for the coupons. Thise 20 years and above. Theres a few having effective yields of about 4.5% but many are in USD. If looking at this as an option... better do it soon, before the Fed drop rates and bond yields follow
US bonds are USD based, note currency risk
Josh, what happened few years down the road, if the climate changes and we are back to a low FD rate 1% environment. What are the options for OA investing? Invest in CPF stocks?
Interest rates r coming down n u know the answer to FD’s rates….And that is one reason don’t top up money into CPF for u never know what policy will change. I understand top up is to minimize paying extra taxes,the government will get u in other taxes too, so sacrifice the taxes n control yr own investment n money. If u don’t know how, engage Josh to do it.
There will not be outflow cos many are broke, especially those sell hdb to buy ec n condo, actually nothing g much left inside
2.5% in OA is NOT low especially from
2000 to 2022 when interest rate was mostly below 1%. The government has been very generous to CPF members for over 20 years! So, don't start screaming just because interest rate was higher for just the past 2 years. Moreover, you can always invest your OA balance for higher returns but at a higher risk of course. Don't expect to have the cake and eat it all the time! Learn how to appreciate!!
Better to buy bank stocks for around 6% yield. 😊
Good to see if actually there is so much liquidity in system hahahab
Thanks for your insights. You asked a couple of times "why would anyone want to leave money in the OA after 55 years old". There are many who are using their OA to pay existing housing loan. These people will still need to ensure they have sufficient money in OA right?
Home loan can be cash paid also.
As long as the interest is better it could make sense?
Or maybe more savings account like DBS multiplier come out that rewards for paying home loan with?
Actually, i think that is to enlarge investment base for RA and keep it stable. There is an inherent need for such pension funds to be of good size to withstand risk. Plus to pay you 4% means they have to earn 5-6% at low risk. Not so easy.
Sad to hear that SA will be no more. Can only guess that 4.5% guaranteed cannot be sustained. Having benefited from compounding max SA amount over 10yrs, I personally have experienced the power of compounding interest (what else can one do right?).
Just continue to buy tbills with oa
one need to understand the risk of having too much money stuck with bank. right now SDIC is only insured SGD75k per bank account. This might be one consideration point if ppl will wan to yolo out money from OA without sufficent understanding of risk and reward by doing this. Thou there are talks about increasing the ceiling to SGD 100k, but there was no conclusive bill/policy decision made yet.
While it is true, I doubt many worry there is risk keeping big amounts in our SG big3 bank
Ya.. in SG, government won't allow bank run
Spread the risk
Yup. There's risk with CPF too. No one can tell for sure what and when the next policy change will happen. Of course, accompanied by "experts" justifying the change.
Sdic will increase to 100k in apr 2024
Anyone assessing whether OA withdrawal incurs tax since putting in funds can de-tax bcoz most 55-65yo still salaried…
With increased ceiling of RA, we have the potential to boost max CPF Life payout to 3300 per month and for life. I see this is a positive thing. Ultimately, CFP Life is the best annuity plan around. This should be part of every retirement planning.
One other reason why people do take out money from CPF OA or SA is that funds in CPF accounts can automatically compound unlike short FDs, Bond, T-Bills.
To compound, simply reinvest with the interest/coupon earned 👌🏻
What if inflation n rates r engineered to continue uptrends? This will explain CPF pushing away its interest liability, knowing it’s harder to grow higher profits due to costs.
The gov wants you to put into TBills as expected rates to trend higher
Hi Josh, Are you aware what will happen to the investment in UT from SA account? Do we need sell the UT before 55?
Dont think its a force sell. My guess is it will be returned to OA when u sell?
Hi Josh, thanks for your comments!@@joshconsultancy
Hi Josh. When outside interest rates fall below 2.5% one day, can we put back the money into OA? Even if it’s possible, is it capped at annual limit of $37740? Thanks.
just use all CPF OA to repay Housing loan....
The OA account interest rate should be raised if there is a need to retain funds.
Govt aware of the vulnerability of seniors losing retirement money to scammers and yet encouraging this outflow.
Govt did not encourage outflow 🙏
The hdb loan interest is pegged to OA interest, so will affect a lot of people
How did the government encourage outflow?
2025，after my sa being transfer to oa, I will still keep all my cpf money in oa. (Just want to live with simple life.)
This CPF change does not have benefits, but neither does it make the average Singaporean worse off. People who are really impacted by this change are those people who are CPF rich and now cannot do CPF shielding.
The govt is right to make this move as there is no way they can give a high FD-like interest rate yet give full liquidity/flexibility. This is a logical move for any business/bank, much less a govt, given the RA earns the same as SA.
Yes, it is the right move, cos it not only easy money, it is fast money, cos the compounding is crazy.
Cpf is plugging the oppy chance to continue using it as a punching back. Good job
OCBC Premier Dividend Plus will soon be cutting rates too. No more 3.7% soon
Hi Josh, what is your decumulation plan? Is there anything out there that is better than that provided by CPF Life? Perhaps you could do a video on this please. It would help folks think beyond accumulation into the final phase of a guaranteed monthly payout with any reminder as bequest to next of kin. Cheers!
For a guaranteed lifetime payout CPF life is perhaps the best.
The work that I do mainly revolves around building around it with excess cash than replacing it
@@joshconsultancy DPM recently said more than 99% of CPF members would be able to combine SA into RA before reaching the raise enhanced retirement sum of $426k. If CPF Life is the best guaranteed annuity, then less than 1% would have excess cash above $426k .
Die with zero, after bequest a certain amt. It is a shift of mindset to decumulation and spending.
Taking money out of CPF may result in some people squandering or seeing losses in poor investments.
A safer alternative maybe to take advantage of the raised ERS until age 65, where withdrawal of 20% of the then $635k is allowed and then pledge property for the Basic CPF Life.
What do you think?
What about doing CPFIS SA investment now?
No difference imo
Not usually advisable btw
The dust will settle in time. Previously more and more people were retaining their money in the OA instead of withdrawing after 55 years old.
Agree there will be outflow. I planned to finance my bto with cash, to achieve 2 FRS b4 55yo, 1 FRS in OA and 1 FRS in SA, to execute SA shielding. With the SA closure news, I will finance my bto with OA instead.
Sounds good. Congrats on your bto purchase
Hi Josh
I have a question.
My friend is 69 years old. She joined CPF Life
Receive payout every month.
Now she still have funds in OA and SA account.
Can she draw funds out from her SA to her bank account now for investment.
If can, how to do it?
Thank you
From limited info, it is likely yes. But SA is now still paying 4.05%.
Best to get advice from CPF k
Pls be advised that once OA above 55 are withdrawn entirely, it’s irreversible to put it back for 2.5% again. What’s good now in the market may not be good in the long term.
Why would anyone want to lock up money back into CPF again? And banks would also change its interest payout accordingly to the market at the time to remain attractive.
😅
Thanks for the heads up. 2.5 is meagre compared to current bank rates. But there are 2 risks to banks. 1 is the SDIC is only $100k (Apr 2024) and the interest rate can be reduced down to 0% if the market turns.
Banks are crafty. Once they have enough funds, they will reduce the returns. It is a supply and demand issue.
@@johnwong1194 Banks are dirty establishments, legalized loan sharks.
That was my answer too: banks. Totally agree, deplete your OA n buy banks, good dividends n SP growth.
Banks are no government.
Definitely better than whatever nonsense ILPs the insurance companies gonna come up with to line their agent's pockets with FAT bonuses.
Reminder in the rare case of Bank Run, SVB depositors were protected but not shareholders.
@@soulawaken24 the only insurance one should buy is term insurance n maybe medical for life insurance is expensive n returns r low. Calculate the term vs life premium n b better putting the life premium money in your own investment .
@@kennethlim886 rare case of bank run? In Sg, this will b extra rare to non existence, look at the history of ODBC, UOB DBS, CITIBANK
Hi Boss, your simulation of FD is based on current Feds benchmark rate of 5.25-5.5% . Feds likely 2 cut rate in June . Might be 3-4 times . So by next Jan , local FD rate will be lesser ,even T-bills also kena if Feds cut rate . For me when SA closed up n flow back to OA , i will assess T-bills yield first while waiting for attractive quality counters price drop . Last tue, my wife n i buy some more DBS at $32.48 ! Waiting 2 collect 54 cts DPS on 5th Apr n in May . While waiting for bonus share issue XD on 22nd apr n hope price drop below $29 ! 😊
Maybe. This presentation is a situation when deposit rates do not drop substantially
Siao la Josh, you now say it later gov chut pattern and block the OA account .😢 I still got 4 yrs to reach 55.
big outflows might be a good thing. people can finally relax and start enjoying life. whats the point of tying up so much money in a paper account. How much can you spend when you at in your 70s?
not to mention there are other aspects we should consider.
- Does this mean that govt dont want/cant afford to pay the 4% interest of SA?
- Good to test the system and see if there is actually that much funds in CPF when huge number of members withdraw
- might provide a good business opportunity to market participants to capture this opportunity (banks, insurance co. etc)
Ofcourse there are also downsides
- scams, gambling , anyhow spend. but pls bear in mind, the money withdrawn is only those ABOVE FRS(or BRS if property pledge) so minimum safety net is set.
Who knows? maybe next year budget govt come out new pattern and suddenly increase FRS? who knows?
last but not least, nobody can guarantee todays high interest rate will last in the future
I am 56 this year. Now, I just want to max the remaining months of SA. What’s the strategy and advice? Tell me how I can put max amount of cash into SA asap.
Hi, cannot top up to SA once above 55. It’s only from employment 👌🏻🙏
Bank interest changes once fed drop their rates this years. No guarantee of always more than 3%.
Agree. Use voluntary housing refund to move some money back to OA. Or do VC up to limit $ 37,740 ?
Is it worth moving OA to buy t-bills before 55? Thanks
S&P 500 derives 8-10% and DBS generates 5.30% yield .
The current bank stocks holder will benefit.. next year 2025 when SA is abolished, money will flow into bank equities DBS and OCBC
There's going to be a huge run on the CPF come 2025. Not sure where the government is going to take the money from to pay out those who are withdrawing their funds. Also, as more elderly take out their CPF, there might be potential social issues as some of them might gamble them away, anyhow invest or having them being scammed. There are potential issues that the government might not have taken into account with such a move.
Thats what Im presenting also. But taking out OA is only above FRS so its not drying out entire CPF
Those who can hit FRS are not dumb ppl to kena scam
Some banks would hv started early bird package this year to get a head start, test mkt reaction, etc… since higher than 4% isn’t that hard to match
@@9PassionsYou will be surprised. Prof basketball players do not equate to, say, golf or soccer pro! Same as a prof bank manager I know who can manage ppl but knows nuts about investm.
High interest accounts unlikely to stay for long, probably diminishing in 1-2 years if FED going to reduce rate, by the time if money drew out from OA would not be able to put back, then need to look for alternatives. High interest accounts may attract some but not most people in my opinion.
Can be put back to an extend via voluntary property refund or yearly VC limit
@@joshconsultancy personally not a good idea for me, anyway still thinking.
Is it true that RA upon members turning 65, the interest earned will be stop?
It will be moved into CPF life and the payout is calculated from there
If one is on the cpf standard plan right? If on the basic plan, we will still be receiving interest on our RA balance per my understanding.
For members aged 55 and above, the Government pays an extra 2% interest on the first $30,000 of their combined balances (capped at $20,000 for OA), and an extra 1% on the next $30,000. The extra interest received on the OA balances will go into the member's Special Account (SA) or Retirement Account (RA). Will the OA cap of 20000 being increased since SA no longer exists? I think in 2025, the extra interests go to RA only. Will this extra interest make people keep certain amount in OA?
MA is included also
What is the best option for a 70 yo who is already receiving monthly from CPF Life and still has OA and SA accounts?
Hi, might be to keep it there actually and settle for the simpliciity of guaranteed returns from CPF
What happens if majority of the cohort do not meet ERS? How will those who topped up to ERS be paid?
Nothing will happen
ERS is a llimit to voluntarily reach. As to how much can withdraw at age55, that still follows FRS
Hope it answers
property and financial advisor and brokers are standing at the door already....gov is showing the exit door from a 4% haven...in billions
Your presentation of Citi wealth first account is wrong. The 1.5% interest for increasing balance by $3k is only on the incremental balance, not the balances in the whole account.
Point im making is as long as hoops are cleared there are a lot of premier offers that can beat 2.5%
But error noted.
I keep 20k& in OA to earn 2.5 +2 % extra
The extra interest is from all accounts. If medisave has $60k, the extra is already earned k 👌🏻
Too many own $ pump into bank, if sdic only guaranteed 100k, if it collapse, you will lost a ton
What the odds our sg big banks collapse?
@@joshconsultancy Dun need to collapse. Just need a bank run .... anyway if u are only covered 75k n putting any amount above it is additional risk. Anyone predicted the Msia stocks saga where lots of sg smart oldman lost their money
We need to be careful. What Josh mentioned is right, however, do note that: 1) When you move the OA fund to banks (which give higher yield), what happen when banks had too much funds, they will reduce the interests rate. This reduce rate may be lower than the OA 2.5%, then how? Can one shield back the fund back to OA? 2) Next, you take HDB loan against your OA fund, what about the "owing" + accursed interest? Can you really take out all the OA fund? (This is assuming once reaches age 55 and with SA being close.)
There are possible ways to put capital back to CPF which include voluntary contributions (which has yearly limits) and property refund. Accrued interest only applies when u sell a property funded with OA. If property is kept, it doesnt come into picture. If it applies, its just opportunity cost paid back to CPF which in this instance (assuming with FRS) can be drawn out.
Hope it clarifies and agree need to be careful
why use SSB or use Premier div, when u can transf to SA?? to earn 4%
There’re misconceptions. Follow on in the video in full
But after drawing out from OA we can't put it back for the stable 2.5 %. We will need to hop around to bank in and out after each deposit ends! Now when we are Young is ok ...but future if old about 70s you will not bother to think about it and end up money back into savings bank 0.05% interest 😂🤣
point of view noted
Same feeling, my first thought in my mind had to invest something stable and probably SREIT
REIT is very interest rate sensitive, not very stable, granted reit’s sp is very depressed offering opportunity to buy low now n go long n wait for interest rate cut. I would spread the OA money into banks, laddered GIC n low percentage in reit.
I finally hear a more safe saving option from a youtuber!
2025 interest is going to drop. CPF 2.5% may still be the best long term on 2025 onwards ..
i accept this possibility
Best is invest via OA, if interest drops, pump back to OA to at least secure 2.5%
Very big possibility!
@@dovetofree If you invest using OA, you must make sure you find an investment at 3% to break even with OA's 2.5%.
Because you lose 1 month of OA interest when you buy using OA and lose 1 month of interest when you sell off the investment back to OA. Logic is because OA only pay the lowest interest for the balance of the month.
Hi please be warned that banks will go insolvent if some major banks goes bankrupt. Impossible bank will never go insolvent. I am expecting a major bank failure in America within the next two years. Despite MAS tight monetary policies in Singapore governing banks. Is the leverage that kills the banks. I can’t imagine what’s the impact on Singapore banks would be , but one thing is for sure, there will be a major rethink on putting money in banks.
Many banks are highly leverage, that’s is what kills them. All banks are interconnected. Something happened in US will affect Singapore local banks. Especially if is a major bank failure of a massive scale. So we are not talking 1 bank but all banks round the globe!
That may be too pessimistic
We can use GFc for reference points on impact 👌🏻
@@joshconsultancy
I have no doubt that the world’s central bank will save the banks. MAS will save the 3 local banks off course but after this saga, people becomes more vigilant of saving their money in banks.
I thought government wanted to take seniors citizens where i never seen
Sreit giving out 4-6% dividend yield, as a proxy to Singapore properties. It’s the next best thing to cpfsa 4% guaranteed interest without the complexities of withholding and income tax, and more liquid than property
I got burned by SG Reits.Dividend cannot make up for capital deprecation
inflow more
Just sti index 4% dividend minimal downside…it’s time to pump local stocks
Let’s go! :)
Not just bank will be happy, scammers too.
Oops 😅
Oops 😅
The 2.5% interest rate in 2019 was so good - the government had to raise the gst from 7 to 9% :)
Gahmen will always find a way to claw back their money haha
most of the FD are giving 3.x% for short term because banks are expecting the Feb to cut rate after Jun, if US rate drop after Jun and continue to 2025, I don't think FD can maintain at 3.x%, high possibility will drop below 3%.
We don’t know what’s in 2025. What if it is? Locking in a 36mth fd or a 3y endowment at 3.2% would look very good
Then the more reason to move the money from OA to banks now since rates r going down later in the year. Laddered GIC is another good option if u don’t want to buy bank stocks.
Not true… getting >4% on one-month FD bout a year. The hassle is extending every month, but hey, it’s only online banking, higher usu if USD… >5%
Closing the SA is just the beginning.
My opinion - you are playing a videogame and exploited a loophole, when the game moderators patch it, you should be grateful that it was a good run rather than kick up a fuss as though its an entitlement. Same thing with the CPF shielding situation
Fuss? I’m explaining what could happen
@joshconsultancy I think you misunderstood, my comment is for viewers like the one that made the comment at 1:25, I'm saying we should be grateful to have been able to use shielding in the past, pat ourselves on the shoulder and move on rather than make noise and complain as though shielding is an entitlement
Take CPF and go Batam!! Not i say one... I hear from kopitiam uncles one...
🤣
Yes, high risk high return and low risk low return. Don’t expect NO risk for high return, such as SA shielding at about 55, particularly for the (very) rich! Why should millions of taxpayers (ultimate losers) contribute to the rich in such manner?! Paying high interest rate to these SA balances and yet still allowing for withdrawals at any time above 55 is a serious loophole - it is long overdue and must be plugged!! People said no one benefits from removing the SA, that’s not true! The huge interest saved here (which is taxpayers’ money) could be used for the greater good towards more Singaporeans, particularly the lower income group!
👋
Interest rate will go down by 2025. In the end ppl will leave it in OA and less risk.
Maybe. This discussion is of interest rates do not drop substantially
Sounds like a penny wise, pound foolish policy...
Heng ah. Shield liao liao.
Those who have paid finished their h d b unit, and those who are working can withdraw from their o a and s a, after 2025, those with less o a will get less and have less to support their family expenses especially those who need more to support their children's education. Singaporean will be tougher ahead to make ends meet, why the sudden the government do this changes, especially when small island have trillion in reserves yet still cannot n not willing to return our local breed Singaporean whole-life hard-earned stressed n sweat c p f money sooner than keep dragging later and later till one die sooner than the retirement age they can see their own blood money
i will move all money out from the CPF rather than put it there.
Do note the pros and cons 👌🏻
Mari Invest is yielding like 3.9 to 4% p.a now. If this continues in 2025, can park some OA money there too.
Do note thats non guaranteed projected yield but yes can be strongly considered
@@joshconsultancy It's not projected yield but historical past 4-week return presented on an annualised basis.
Interest rates will be different in 2025!
I dont agree with you.
Reason: Ssb only 10 yrs.
Banks FD: 3.5% -6-12 mths
Cpf: 2.5% forever.
Wht happen if int rate goes down to 0.5% again?
Therefore u see , with cpf i can plan my cashflow till i die without having to worry that int rate go back to 0.
So the extra 1% i get is not attractive enough against future uncertainty.
U can also say cpf oa can also drop to 0% but the chance of this happenning is almost 0 as the zero% int rate enviorment had happen before but oa was still 2.5% back then.
I am retired so i left my funds in oa and buy t bills if the return is better than 2.5%. Otherwise i leave it in there n guranteen 2.5%. I can plan using 2.5% as a base. Anything more is a bonus. 2.5% is still decent.
N i dont hv credit risk in case there is a bank run
Surplus cpf is for consumption in retirement, SSB's 10y may be sufficient
If interest rates do drop
1) there is property refund option back to OA? Can use that to some extent?
2) mentioned VC $37,740 limit per year
No hard and fast rule for all. I understand different view points
@@joshconsultancy but in retirment planning, we need some degree of certainty for more than 10 yrs..In this case 2.5% base can provide that certainty throughout retirement which is more than 10 yrs. At the same time, we preserve capital as well. Its v straightfwd
Why not just top up max max bextvyearvto $426 K? You ger 4.05% instead of meagre2.5% and A GUARANTEE HIGHER PAYOUT EVERY MONTH FOR LIFE ! ONLY DOWNSIDE IS OLD RUMOURS GOVT WILL TAKE OVER YOUR MONIES BUT THIS IS 2024 OUR RESERVES IS EST S$5,000,000,000 ( 1/4 IN CPF, MOF, GIC, TEMASEK COMBINED) I DONT SEE WHAT'S ALL THIS HOO- HA BECAUSE IT US EXACTLYBWHAT I FIDCAS 65 YRS OLD RETIREE ENJOYING LIFE WITH MY BLOOD MONIES IN CPF ERS!