CPF Special Account (SA) closed for those 55 and above. What should you do?

What happened?

Big changes are happening in the CPF system this year.

We’ve previously covered the CPF contribution changes effective from 1 January 2025. 

Now, another major update is here—the closure of the Special Account (SA) for CPF members aged 55 and above.

As of 19 January 2025, the CPF Board has closed the SA accounts of approximately 1.4 million members in this age group. Notifications will be sent out via hardcopy letters, emails, or SMS (where applicable) starting 20 January 2025.

The Beansprout community has been actively discussing the options available after the CPF SA closure. 

If you’re wondering how this change might affect you, I’ll be sharing the key factors I’m considering to navigate this transition. 

What is the CPF Special Account?

As a quick recap, the CPF Special Account (SA) is a key component of our CPF system, designed to help members save for retirement with higher interest rates compared to the Ordinary Account (OA).

Unlike the OA, which supports housing, education, and investment needs, the SA is specifically reserved for long-term savings to ensure financial security in your retirement years.

From 1 Jan to 31 Mar 2025, your OA earns you 2.5% interest while your SA earns you 4.0% interest.

Why is the CPF SA closure happening?

Both SA and RA savings earn the same long-term interest rate. However the difference is that some SA savings can be withdrawn on demand from age 55 onwards.

According to CPF, the rationale of the change is to ensure that only savings that cannot be withdrawn on demand should earn the long-term interest rate, and savings that can be withdrawn on demand should earn the short-term interest rate.

For CPF members nearing the age of 55, it’s essential to understand how these changes might impact your retirement planning strategies.

What happens to your CPF SA funds?

So, what now?

More importantly, how does this affect your money that is still coming in (i.e. CPF contributions) and how is it going to affect money that is already inside?

Let’s take a closer look to understand what will happen to the funds in our SA.

Prior to turning 55 years of age, Singaporeans have three CPF accounts — OA, Medisave (MA) and SA.

Upon turning 55 years of age, your RA is created which then becomes the main CPF account for your retirement years.

When your SA is closed at the age of 55, the balances in your SA will be transferred to your RA if you have reached the Full Retirement Sum (FRS) for your cohort, providing you with monthly payouts through CPF LIFE when you retire.

Any savings in excess of your FRS will be transferred from your SA to your OA, where they remain withdrawable and will earn the 2.5% interest rate.

Let’s say you turn 55 years old in 2025 — your FRS would be S$213,000.

Hypothetically, if you have $313,000 in your SA, the balance of $100,000 will simply be transferred to your OA.

If you have reached FRS and are still making new CPF contributions, they will go towards your OA.

However, CPF members who have met the FRS can always choose to top up their RA up to the Enhanced Retirement Sum (ERS) — which is $426,000 for those turning 55 in 2025.

But you may also choose to preserve the flexibility to withdraw your savings by leaving them in your OA albeit earning the lower interest rate of 2.5%.

For members who have yet to meet the FRS at the age of 55, your OA balances will be transferred to your RA to set aside the FRS. Your new CPF contributions will also go to your RA, up to the FRS.

In summary,

Should you choose to leave your balances to your Ordinary Account (Option 2), you can then either make cash withdrawals from CPF, earn the prevailing CPF Ordinary Account rate, or invest through the CPF Investment Scheme (CPFIS).

In this option, the CPF would then act like a high-yield savings account with no frills.

You would be able to earn a base interest rate of 2.5% per annum, with the flexibility to withdraw anytime.

Should you transfer your balances to Retirement Account if you are 55 and above?

To me, the key factor to consider when deciding whether to transfer your balances to your Retirement Account (RA), is your preference for higher retirement payouts versus higher liquidity and flexibility. 

This decision boils down to whether you prioritise a more substantial and predictable income stream in retirement or if you prefer to maintain more access to your funds for unexpected needs or opportunities.

One of the most compelling reasons to top up your RA is the ability to secure a higher CPF LIFE payout. CPF LIFE acts as a life annuity, meaning once you begin your retirement withdrawals, you'll receive a fixed monthly payout for as long as you live. 

The more you contribute to your RA, the higher your monthly income will be. For anyone looking to ensure they don’t outlive their savings, this guaranteed income is invaluable.

By topping up your RA, you increase the base of your CPF LIFE payouts, resulting in a more comfortable and predictable income stream during retirement. This certainty can offer peace of mind, knowing that regardless of market conditions or unforeseen circumstances, you will always have a reliable source of income from your CPF.

However, one major disadvantage of transferring your RA is that the funds are irreversible. Once the money is transferred to your RA, it is locked in for the long term.

This lack of flexibility can be an issue if unexpected financial needs arise, such as medical emergencies or urgent investment opportunities.

Therefore, while topping up can significantly increase your CPF LIFE payout, it’s essential to balance this with the need for flexibility. 

Would I leave it in CPF Ordinary Account or invest? 

Should you choose not to transfer your balances to your Retirement Account, the next decision would be whether to leave the funds in the OA to earn the 2.5% annual interest rate or seek higher returns through other investment options.

To make this decision, it's important to assess their investment objectives, time horizon, risk tolerance, and knowledge of available investment alternatives. 

For example, someone who is 55 years old may have a longer investment time horizon and be better positioned to ride out short-term market volatility compared to someone in their 70s, who may prioritize stability and lower risk as they approach retirement.

What are some investment options to consider?

If you're looking to explore investment options, consider choices like Singapore Savings Bonds (SSBs), T-bills, bond funds, REITs, dividend stocks, and managed portfolios. 

#1 - Singapore Savings Bonds (SSBs)

Singapore Savings Bonds are a safe and flexible investment option, offering a guaranteed return backed by the Singapore government. 

They provide increasing interest rates over the years, with the latest issuance of the SSB offering a 10-year average return of 2.82% p.a.

The principal is also guaranteed, making it a low-risk choice. 

However, the returns may not be as high compared to other investments, and there is an investment limit of S$200,000 per individual. 

Learn more about Singapore Savings Bonds (SSBs) here.

#2 - Singapore T-Bills and SGS Bonds

Singapore Treasury Bills (T-Bills) and Singapore Government Securities (SGS) Bonds are low-risk, fixed-income investments backed by the Singapore government. 

T-Bills are short-term, typically with a maturity of 6 months to 1 year. The cut-off yield on the 6-month 

Singapore T-bill was at 3.05%, slightly higher than the CPF interest rate. 

SGS Bonds, on the other hand, have longer tenures and provide more stable, predictable returns. 

These are solid choices for conservative investors seeking stability and liquidity.

Learn more about Singapore T-bills and SGS Bonds here.

#3 - Bond Funds

Bond funds invest in a diversified portfolio of bonds, which may include government, corporate, or international bonds. 

These funds offer higher potential returns than government bonds but come with higher risk, as the value of the bonds may fluctuate. 

Bond funds may be considered by individuals willing to take on moderate risk for the possibility of better returns, with the added benefit of diversification. 

However, returns depend on interest rates and market conditions.

Learn more about Bond Funds here.

#4 - Singapore REITs (Real Estate Investment Trusts)

Singapore REITs are a popular choice for investors looking to gain exposure to the real estate sector without directly owning properties. 

They invest in income-generating real estate and typically distribute a large portion of their income as dividends. REITs offer the potential for regular income as well as capital appreciation. 

They are generally considered less volatile than stocks but can be affected by property market conditions and interest rate changes. 

REITs are suitable for investors looking for income and diversification, but it’s important to carefully assess the underlying assets and market trends before investing.

Learn more about Singapore REITs here.

#5 - Dividend Stocks

Dividend stocks are shares in companies that regularly pay out a portion of their profits to shareholders. 

Investing in dividend stocks can provide a steady income stream through dividends, alongside potential capital appreciation. 

This option is suited for those seeking both income and growth, though it comes with higher market risk. 

Dividend stocks are more volatile than bonds, but they can offer attractive long-term returns if chosen carefully.

Learn more about top Singapore dividend stocks here.

#6 - Managed Portfolios / Robo-advisors

Managed portfolios involve entrusting a professional manager or firm to invest your funds across various asset classes, such as stocks, bonds, and other securities. 

These portfolios are designed to match your risk tolerance and investment goals. 

It’s a hands-off approach for investors who prefer not to manage their own investments. 

While they can offer diversification and professional management, fees may apply, and returns depend on the portfolio’s performance.

Learn more about top Singapore robo-advisors here.

How do the CPF changes affect you if you are below age 55?

If you have yet to reach 55, it does not necessarily mean that the latest changes to the CPF system do not impact you.

After all, the CPF is the bedrock of retirement savings for all Singaporeans.

To us, the key lesson from the changes is the need to start our retirement planning early.

As CPF withdrawals only start at 55, we take a long-term view to investing our CPF with an approach that can ride out short-term market volatility. 

By investing early, our CPF returns can compound over a longer time, giving us the best shot at achieving Full Retirement Sum (FRS).

How will interest in SA be calculated for January 2025?

If you’re 55 and above, here’s how interest will be calculated on your CPF savings when your Special Account (SA) closes:

• RA transfers: Any SA savings transferred to your RA, up to the FRS. will earn the same interest rate as the SA for that month.
• OA transfers: Any SA savings exceeding the FRS will be moved to your OA and earn the OA interest for that month.

If you want to maximise your returns and receive higher payouts in retirement, you can consider transferring your OA savings back into the RA. 

For example, if you make this transfer in January 2025, the amount will start earning RA interest from that month onwards. However, do note that if you wish to earn the higher interest from January onwards, the transfer must be processed by 31 January 2025.

Just remember that CPF transfers are irreversible, and any savings transferred to your RA will be reserved for future retirement payouts.

You can learn more here about the interest calculation earned on the CPF SA here.

What would Beansprout do? 

When deciding whether to transfer your balances to your Retirement Account (RA) and earn higher lifelong payouts through CPF LIFE, the key factor to consider is whether you prioritise higher retirement payouts or greater liquidity and flexibility. 

Should you decide not to transfer your balances to your RA, the next decision is whether to leave them in the OA to earn the 2.5% annual interest rate or explore higher-return investment options. 

To make this decision, it's crucial to evaluate your investment objectives, time horizon, risk tolerance, and understanding of available investment options.

Low-risk options like Singapore Savings Bonds (SSBs) and Singapore T-bills offer stable returns, while bond funds provide potential for higher yields but come with added risk. 

Singapore REITs offer exposure to real estate, delivering income and potential capital appreciation, while dividend stocks provide income and potential growth opportunities, though they carry market risk. 

Managed portfolios offer professional management and diversification, tailored to your investment goals and risk profile.

What are questions or concerns that you have about the closure of the CPF Special Account? Tell us here.

Join the Beansprout Telegram group get the latest insights on Singapore bonds, stocks, REITs, and ETFs.