Central Provident Fund – Understanding the 3 Accounts


The starting point for Singaporeans and Singapore Permanent Residents to review their financial plans is to understand what they already have in their Central Provident Fund or ”CPF”.  The average Singaporean contributes about 20% of their monthly income into their CPF and after a while, the amount accumulated can be quite substantial. In fact, it’s not unusual to see people having more money in their CPF accounts than in their bank deposit accounts during a financial review.

Yet to many people, CPF seems to be something so near yet so unfamiliar. To begin with, the fact that the CPF funds are divided into 3 accounts, namely the Ordinary, Special and Medisave accounts, causes quite a bit of confusion to the lay person. Having different accounts means having different rules, schemes and contribution percentages. This makes understanding CPF more complex even if it is a very important and useful part of our financial planning.

And, I have not yet mentioned that at age 55, a new account called the “Retirement Account” will be created but you get my point.

Taking one step at a time, you should start by familiarizing yourself with the 3 Basic Accounts.

Here is a “CPF 101” about the Ordinary, Special and Medisave accounts that I hope will bring you some much needed clarity.

1. Ordinary Account – Think “O” for Overall

Your Ordinary Account is a multi-purpose account that is used to purchase basic, ordinary things; a roof (housing), an education to chase your dreams, basic life insurance (Dependents Protection Scheme) to ensure financial protection for your loved ones and investments in order to accumulate wealth. Also, savings in your OA can grow at up to 3.5% per annum.

Interesting Fact:  Did you know that as you age, your contribution into the CPF Ordinary account drops?  This means that you have to avoid budgeting your full monthly CPF contribution to pay for mortgage as you have to “top up cash” when your contribution drops.

2. Special Account – Think “S” for Savings

On the other hand, your Special Account is special because it is only meant for saving for your retirement.  Because of that, the only option you have is to invest the funds in approved investments.  Typically, only low to medium risks investments such as bonds and mixed asset balanced investment funds are approved.  However, in this account, your money grows at a special interest rate of up to 5% per annum[1] so most people choose not to do any planning with their Special Account monies.

Interesting Fact:  The interest rate of the Special account is not a fixed 4% but based on the 12 month average yield of 10 year Singapore Government Securities.  Many people think it is a 4% fixed rate because currently, there is a minimum “floor interest rate” of 4% provided.

3. Medisave Account – Think “M” for Medical

Medisave is an account that helps you pay for medical expenses that you, your spouse or family members may incur. However, there is a limit to how much you can use. Because of this, there are also 2 types of medical insurance that you can you purchase using medisave funds to enhance your financial protection.

Interesting Fact:  Did you know that you can use your medisave account to pay for your children, parents and grandparents (must be Singapore Citizen or PRs) but not siblings or parents in-laws?

Taken as a whole, the different accounts combine to provide us with a solid base to build the rest of our financial plans on.  We can purchase a place to stay, save for retirement, educate our children and provide for our medical needs.  However, it does not mean that all our needs will be provided by CPF and that is where the additional individual planning can make the difference.

(NOTE: Download this useful reference about how much of your monthly salary, subject to a maximum cap of $6,000 (from 2016), goes into the CPF contribution. You can download our Simplified CPF Contribution Guide HERE


Remember, every successful financial plan includes careful planning on the use of CPF.  If you are not sure if you are making the full use of your CPF funds, your GEN planner will be most ready to assist.

Good luck and have fun with the planning process!

Article by Diyanah Azmi
Email : diyanah.azmi@proinvest.com.sg

[1] Accurate as of 16th Nov 2015. Source: https://www.cpf.gov.sg/Members/AboutUs/about-us-info/cpf-interest-rates

<strong>Diyanah Azmi</strong>
Diyanah AzmiFinancial Adviser Representative

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