The CPF system forms the bedrock of Singapore’s retirement planning process.
It comprises the build-up of funds from years of hard work, and these funds can then be utilised for our golden years.
In particular, the CPF Ordinary Account (OA) can be used for various purposes such as education, housing, and investments.
The current interest rate on balances in the CPF OA is 3.5% for the first S$20,000 and 2.5% for amounts above S$20,000.
What you may not realise is that you can open a CPF Investment Account (IA), which is tied to their CPF OA, and invest the funds within their OA.
While a risk-free 3.5% per annum is by no means shabby, it is probably only sufficient to keep pace with long-term inflation.
Singapore recently reported that core inflation had hit 2.4%, the highest in more than nine years.
Continued supply chain disruptions may keep inflation elevated for quite some time.
In order to grow your retirement funds, it’s necessary to invest it in companies with both growth and dividend yields higher than this risk-free rate.
Here are two stocks that investors can consider for their CPF IA accounts.
1. Mapletree Commercial Trust
Mapletree Commercial Trust (SGX: N21U), or MCT, is a Singapore-focused REIT that invests in income-generating properties used for office and/or retail purposes.
Its portfolio consists of five properties – VivoCity, Mapletree Business City I and II, PSA Building, Mapletree Anson and Bank of America Merrill Lynch Harbourfront.
These properties have a total net lettable area of five million square feet with a value of around S$8.8 billion.
MCT reported a 5.3% year-on-year rise in its distribution per unit (DPU) for the first half of fiscal 2021/2022 (1H2022) to S$0.0439.
Both gross revenue and net property income also saw year-on-year increases of 11.5% and 10.7%, respectively.
VivoCity, MCT’s only retail mall asset, has introduced new tenants to offer shoppers a wider variety of shopping choices.
The mall has introduced new stores such as Puma, Tai Cheong Bakery, and House of Samsonite recently.
Based on the annualised DPU for 1H2022 of 8.78 Singapore cents, the REIT’s forward dividend yield is around 4.8%.
MCT has announced a S$4.2 billion merger with Mapletree North Asia Commercial Trust (MNACT) (SGX: RW0U) to become one of the top 10 largest REITs in Asia.
The deal is pending approval at an extraordinary general meeting to be held by MCT in mid-April.
2. Frasers Centrepoint Trust
Frasers Centrepoint Trust (SGX: J69U), or FCT, is a REIT that owns retail suburban properties in Singapore.
Its portfolio consists of nine malls and an office building that are valued at around S$6.1 billion as of 30 September 2021.
Some of these malls include Causeway Point, Changi City Point, White Sands, and Hougang Mall.
FCT’s malls are located mainly in suburban areas and have a large and diversified tenant base.
In addition, FCT also owns a 31.15% stake in Hektar REIT (KLSE: 5121), which is listed on Bursa Malaysia.
FCT has an excellent track record of growing its DPU every single year since listing, except for fiscal year 2020 (FY2020) when the REIT had to dole out rental reliefs to its tenants because of the COVID-19 pandemic.
Still, the REIT has more than made up for this in FY2021 when it declared a DPU of S$0.12085, its highest since its IPO.
The REIT pays half-yearly distributions and its units provide a trailing dividend yield of 5.3%.
The REIT’s malls are located in suburban areas, which means their footfall and tenant sales should remain resilient.
This attribute makes FCT a very attractive investment to own in one’s CPF IA.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
