Home Getting Started Breaking Down The CPF Investment Scheme: Part 1

Breaking Down The CPF Investment Scheme: Part 1

The CPF Investment Scheme provides investors with the opportunity to earn more returns on their CPF money.

But not everyone who makes use of this scheme can earn more than the 2.5% earned in the CPF Ordinary Account.

In fact, from the period October 2018 till September 2019 (i.e. before the COVID-19 pandemic), less than half of those in the scheme managed to earn returns that exceeded the “risk-free” rate that the CPF provides.

With this in mind, we are here to help investors understand and tap on this scheme better by breaking down the investment options available in the CPF Investment Scheme.

The CPF section will be split into three parts.

What is the CPF Investment Scheme?

The CPF Investment Scheme provides the option for you to invest your CPF Ordinary Account (OA) funds and Special Account (SA) funds in a range of approved investing vehicles.

By doing so, investors have an opportunity to earn more than the 2.5% earned per year in their CPF OA or 4% in their SA.

Singapore Government Bonds and Treasury Bills (T-bills)

The first and perhaps least risky asset that you can invest your CPF money in is the Singapore government bond or the treasury bills.

Government bonds are bonds issued by the government that pay out periodic interest payment to the investor.

At the maturity date, the government will repay the principal. These bonds may also vary in length and interest rates.

Treasury Bills, or T-bills, are similar to government bonds but have a shorter maturity rate.

Instead of paying the investor interest rates over time, T-bills are bought at a discount to their face-value.

The amount earned is the difference between the purchase price and the face value.

Both these forms of investment are considered extremely safe because they are backed by the full faith and credit of the Singapore government.

Unfortunately, for the same reason, government bonds usually pay very little by way of interest.

As of March 2021, the yield on a 10-year Singapore government bond is just 1.61%, notably lower than the long-term inflation rate of between 2% to 3%.

For a government bond with the longest duration, 30 years, the yield barely beats the lower end of the inflation rate at around 2%.

Singapore Savings Bonds

The Singapore government has introduced another option for investors with the launch of the Singapore Savings Bonds (SSB).

The SSBs are fully guaranteed by the government and investors can always redeem these bonds in full at no capital loss.

These bonds can be bought with as little as S$500 and have a tenure of up to 10 years.

The interest rate scales up over time, meaning the longer you hold on to your SSB, the more interest you earn.

However, this stability and guarantee also mean that the interest rate offered is very low.

As of March 2021, the average return for an SSB of 10-year tenor is around 1.15%.


An annuity is a sum of cash invested to produce regular monthly income for a predefined period or in some cases, for life.

The size of the monthly payout may vary depending on the kind of annuity that the investor has chosen.

Annuities are typically a good option for investors who are looking to secure a regular income stream after retirement.

This sort of investment provides a more predictable income flow and offers certainty to retirees.

On the other side of the coin, some annuities charge a high annual fee and large surrender penalties.

What this means is that if you choose to terminate the agreement, you may end up losing a huge chunk of your initial capital.

Get Smart: Exploring all options

The CPF Investment Scheme provides Singaporeans with a chance to earn more than the promised CPF “risk-free” rate.

However, before diving into any decision, it is important we all know the options available and which will best suit our financial goals.

In the next article, we will take a look at another two available investment options, which are unit trusts and investment-linked insurance products.

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Disclaimer: Royston Yang does not own any of the companies mentioned.