How can I use my CPF money? What are the myths and facts surrounding our CPF savings?

Published Date: 15 April, 2014

Edited on 6 May 2014-CPF monies are your money and this is a fact.  You can use CPF monies for housing, healthcare and investments. There are guidelines for their usage.

Blogs such as The Heart Truths have made allegations about our CPF monies that are inaccurate or outright false. These are some of the myths they have perpetrated and the facts:

Myth 1: Singaporeans have the least adequate pension funds.

Screen shot from ‘The Heart Truths’

This is not true.

Your CPF money is your nest egg upon retirement. The uniqueness of our system is that you can also use your CPF monies to pay for housing. Many Singaporeans have indeed done so and some have fully paid for their homes by the time they retire. The homes that we own are part of our retirement assets too, allowing us to save on rent while providing us with the option to sell our homes when we need to.

When international studies on pension systems make comparisons across countries, they often ignore this fact. They paint an incomplete picture of what members have in their accounts. They do not take into account the fact that Singaporeans also have used their CPF monies to pay for their homes. 

For a more complete picture about our retirement funds adequacy, read our Factually article on this here. In fact, more recent studies published by OECD and Mercer in 2013 reflect higher income replacement rates and adequacy levels, even without considering property ownership.

Myth 2: When I use my CPF money to pay for my HDB flat, I have to pay CPF Board (CPFB) back the accrued interest if I ever sell my HDB flat. Essentially, I am paying “extra interest” for nothing.

 Many Singaporeans know that we can use our own CPF monies ( which is our savings) to pay for a HDB flat as this can serve as another form of asset for retirement needs.

However, when we use CPF monies to buy a home, we are borrowing money from our own nest egg, which is meant for other retirement needs as well.

Hence, it is only right that if we were to sell our home, we should return what we have borrowed (i.e. the principal amount) plus the interest we would have earned had the money not been taken out from our CPF account (accrued interest). This amount is returned to our own CPF accounts for our future retirement needs.

Accrued interest needs to be refunded to our CPF accounts upon the sale of our home as long as the sales proceeds is sufficient to pay back the principal and interest.

Myth 3: Singaporeans get very low interest rates for our CPF savings. Moreover, we are paying an “implicit tax” as the returns on CPF monies invested by Temasek Holdings and GIC are not given back to Singaporeans. 

Our CPF funds are invested in risk-free Special Singapore Government Securities (SSGSs). The returns on SSGSs are pegged to the returns of other bonds in the market with similar risks. There is no connection between GIC’s rate of return and the interest paid on our CPF accounts. GIC invests our foreign reserves in stocks, bonds, real estate and other assets that carry higher risks that SSGSs. The value of SSGS is assured, as they are guranteed by one of the few remaining triple-A credit-rated governments in the world. With our CPF funds being invested in SSGSs, we can be absolutely certain our funds will be there when we need them.

CPF interest rates are guaranteed and risk-free. The interest is paid whether or not the Government’s investments backing its liabilities to CPF, including investments managed by GIC, do well or not. So if GIC’s investments actually lose money, as they did during the Global Financial Crisis of 2008-09, CPF members will still get the 2.5% interest on our funds in the Ordinary Account.

Finally, apart from the CPF system, it should be remembered that we Singaporeans benefit from GIC’s and Temasek’s returns though these are not linked to the returns we get on our CPF funds. GIC’s and Temasek’s returns supplement the annual Budget through their  Net Investment Returns Contribution (NIRC), which amounted to $8.1 billion this fiscal year. This money allows our Government to make further investments for our future, such as in education, R&D, healthcare and improving our physical environment.

Aside from the return on our Ordinary Account, Singaporeans enjoy higher interest rates on their other CPF accounts-

 4% on our Special, Medisave and Retirement Accounts, and an additional 1% on their first $60,000 in all our accounts:


 Source: CPFB’s website


Myth 4: The Minimum Sum prevents us from using our CPF money.

This is not true. The Minimum Sum(MS) is adjusted for inflation on an annual basis for each cohort. This is necessary because the retirement income needed in real terms for someone who turns 55 in 2014 will not be the same as what would be needed for someone who turns 55 in 2024.  $100 today would be worth less than $100 in 10 years’ time.

Considering that a price of your favourite kopi or kaya toast would keep increasing due to inflation, it helps to set aside a sustainable nest egg.

The Minimum Sum exists to ensure that our nest egg is spread out comfortably to last us not just for one or two years after retirement, but throughout our golden years.

The adjustment for inflation will not affect the Minimum Sum of people who have already turned 55. Here is a table of the changes:

55th birthday on or after Minimum Sum (in 2003 dollars) Minimum Sum (after adjustment for inflation)

1 July 2003



1 July 2004



1 July 2005



1 July 2006



1 July 2007



1 July 2008



1 July 2009



1 July 2010



1 July 2011



1 July 2012



1 July 2013



1 July 2014

 To be announced

To be announced

1 July 2015


To be announced

 Source: CPFB’s website on Minimum Sum

In fact, according to MOM, the percentage of active CPF members who are able to meet their Cohort Minimum Sum has been improving over the years. For the cohort who turned 55 in 2011, 45% of active members attained their applicable Minimum Sum (in cash or cash plus property). In 2012, this statistic increased to 48.7%.


Source : Facutally : How can I use my CPF money? What are the myths and facts surrounding our CPF savings?


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s