CPF Special Account (SA) is intended precisely for the fulfilment of your financial needs once you retire and for investing in financial products after retirement. Funds in Special Account is like a steady source of income after retirement. That said, the money in this account cannot be taken out before your retirement.
Here’s What the Special Account Gives You
- A buffer that offers regular income after retirement.
- Guaranteed rate of interest (currently up to 5% p.a.), which is often more than the rate offered on other accounts. The interest rates are reviewed quarterly.
- Funds for investment in retirement-related financial instruments to secure your financial future.
- Safety for your savings as the CPF funds are invested in Singapore government-backed Special Singapore Government Securities. No matter what the financial market conditions are, your savings in this CPF account will stay safe.
- Funds in the Special Account will be shifted to your Retirement Account once you are 55 years old to form your retirement sum.
What You Earn With the CPF Special Account
The rate of interest earned on the money in the Special Account is reviewed every quarter. The funds in this account earn either the 12-month average yield of ten-year government securities plus 1% or the current floor rate of 4% p.a., whichever is higher.
For April-June 2018 quarter, the interest rate for Special Account savings has been fixed at floor rate of 4% p.a., which is higher than the current computed rate of 3.14% p.a.
In view of the sluggish interest rate environment, the government of Singapore has decided to extend the floor rate of 4% p.a. until 31 December 2018.
Additionally, you can earn an extra 1% p.a. interest on your first combined CPF accounts balance of S$60,000 (including not more than S$20,000 from your Ordinary Account). This way, you can earn up to 5% p.a. on your savings in Special Account.
Difference Between Special Account and Other CPF Accounts
Other CPF Accounts such as Medisave Account and Ordinary Account are meant for medical treatment, housing expenditure, insurance, education, unlike Special Account. Also, the rate of interest offered with Special Account is more than what is offered with Ordinary Account, since there are many restrictions to withdrawing money from Special Account.
What Can You Do With Your Special Account?
Funds from your Special Account can be used only for your retirement needs and cannot be used for other purposes such as housing, education, insurance and other things. However, once you retire, you can use the funds in any of the approved investment schemes such as government bonds, fixed deposits and annuities.
Why You Should Top Up Your Special Account
You should top up your CPF Special Account because of the following reasons:
- You will get huge tax reliefs. You will save even more if you top up the Special Account of your family members.
- Putting money in CPF Special Account is a risk-free investment and the money that you put will guarantee returns as it is not affected by the investment climate or the state of the economy.
- You will surely get good returns in the form of interest as the amount that you top up will let you earn at the rate of at least 4% p.a. This is a good rate of return considering that it is almost risk-free.
- If you do not have a personal retirement plan of your own, topping up your CPF Special Account will indirectly help you add to your funds for retirement.
How to Transfer Funds from Ordinary Account to Special Account
If you wish to transfer funds from your Ordinary Account to your Special Account, you can do it through the CPF website using your SingPass ID and password. However, you must keep in mind the fact that the transfer once done is irreversible.
Disadvantages of Transferring Money Into Special Account
The biggest disadvantage of transferring money from your CPF Ordinary Account to Special Account is the fact that the transaction is irreversible. So, if you transfer a large sum to your Special Account from the Ordinary Account, you will not be able to use it for funding your own home or your child’s education.
Calculate Additional Interest on Funds Moved to Special Account
The interest that you get from your CPF account is calculated on a monthly basis which is subsequently compounded and credited once a year to your corresponding account. The interest that you earn in the previous year will be transferred to your CPF account by the third working day in January. You will also get an additional 1% p.a. interest on the first S$60,000 of a member's total balance. You will also earn an extra 1% interest on the first S$30,000 of your combined balances, starting from January 2016, if you are 55 or older, otherwise, during the month you turn 55.
The priority list of the CPF accounts is as follows: 1st: Retirement Account 2nd: Ordinary Account, up to S$20,000 3rd: Special Account 4th: Medisave Account The additional interest that you will get on the Ordinary Account will go into your Special Account if you are below 55 years, or into the Retirement Account if you are 55 years or above to augment your retirement savings.
Make the Most of Your CPF Special Account
The money in your CPF Special Account can make a big difference to your retirement savings. You can make the most of it by investing it in collective investments such as unit trusts, bonds and shares. Be judicious with your CPF money by having additional savings over and above what you have kept aside to attain your financial objectives.