Should I do voluntary contributions to my 3 CPF accounts or do voluntary housing refunds to my CPF OA account or purchase Singapore Saving Bonds?

CPF accounts, Singapore Saving bonds or SGS bonds and bank deposits are readily accessible to Singapore citizens and Permanent Residents, and I am sure many are familiar with them.

I guess when it comes to the CPF account, we will face different situations at certain milestones.

It is even more confusing when we are in a rising interest rate environment when yields from Singapore Saving Bonds/SGS Bonds and bank fixed deposits are rising.

In fact, the interest rates of some 1-year bank fixed deposits and Singapore Saving bonds interest rates have breached the key psychological level of 2.5% (eg. CPF Ordinary Account interest rate).

The high bank deposit rates have sparked a lot of interest in recent times. The interest rate on 12-month fixed deposits is currently as high as 2.75%. It was last above that in November 1998 (almost 24 years ago). The rate has been stuck below 1% for most of the past 20 years.

Best Fixed Deposit Rates in Singapore (Sept 2022) — DBS, UOB, OCBC & More (read here)

Singapore’s Highest Deposit Rates in 24 Years Spark Waits (read here)

On the other hand, for now, there is no news that CPF interest rates will be changed.

No change to CPF interest rates: Tan See Leng (read here)

To quote the above article dated 2 Aug 2022:

“There is no change to the interest rates being paid out to Central Provident Fund (CPF) members, given that the current bank interest rates continue to be below the effective CPF floor rates, said Manpower Minister Tan See Leng in Parliament on Tuesday (Aug 2)…

In a follow-up question, Mr Chua asked if CPF would consider granting extra interest and noted that local banks have raised interest rates for their savings accounts, such as for DBS’ Multiplier account.

Dr Tan replied that the banks’ interest rates and their fluctuations are “very short-term volatile instruments”, while the CPF system takes a longer-term horizon to provide security in retirement with risk-free interest rates.

“The rates that are chosen are effective basic rates with no further conditions,” Dr Tan said.”


I did a small poll on the Seedly Facebook page and also a poll in Investing note.

The question raised in the polls being:

“If you have already achieved Full Retirement Sum (FRS) in your Special Account (SA), hence are unable to convert part of the funds in your Ordinary Account (OA) to SA, or further top up your SA.

Which option would you choose (to safely keep your cash)?
Eg. To do a one-time lump sum contribution/purchase now.”

From the polls, we can see that majority of the voters prefer to purchase Singapore Saving Bonds / SGS Bonds (Yield an average of 2.75% per annum over ten years). The next popular option will be to do a voluntary housing refund to their CPF Ordinary Account (OA).

Seedly Facebook page poll:

There are in total 101 votes here (which is a bigger sample pool as compared to the poll in Investing Note which has 39 votes).

Investing Note poll:

Unable to achieve Full 4% interest using CPF Special Account

In my case, I have already achieved Full Retirement Sum (FRS) in my Special Account (SA), hence I am unable to further top up my SA account or convert part of the funds in my Ordinary Account (OA) to SA.

Hence, despite the rise in interest rates in the SSB or bank fixed deposits, etc, this 4% per annum yield offered by CPF Special Account remains somewhat elusive to me (well, at least not for the full sum contributed if I opt for voluntary contributions to my 3 CPF accounts).

Note: If we have already reached the FRS in our Special Account before the age of 55, we also would not be able to make further top-ups to our Special Account or enjoy the tax benefits of the Retirement Sum Topping-Up Scheme (RSTU) for topping up our own account. We would also not be able to make transfers from our Ordinary Account to our Special Account.

Voluntary Contributions to 3 CPF accounts

Nevertheless, as mentioned earlier, on top of the contributions from my employer, I can still do voluntary contributions to my 3 CPF accounts (unfortunately no tax relief will be given). The percentage contribution will vary depending on age.

When we are younger, our OA receives the bulk of our CPF contributions. About 62% of our CPF contributions go into our OA, 16% to our SA and 22% to our MediSave when we are aged 35 and below. This allocation changes, with more going to our MediSave as we grow older. When we are aged above 70 years old, 84% of our CPF contributions would go to our MediSave.

In my case, I am in my mid-40s. So if I contribute $1,000.00, $513.60, $216.20 and $270.20 will go into my SA, OA and MA accounts respectively.

Voluntary Housing Refund to OA

Alternatively, I can choose to do a voluntary housing refund to my CPF OA account, to take advantage of the 2.5% interest in my OA account.

Options for investments via CPFIS

The next question is the options beyond keeping my funds in my CPF OA or SA accounts, what can I invest in, using those funds.

I can choose to invest via the CPF Investment Schemes (CPFIS).

There is a range of products in which I can invest in (read here). However, individual risky cryptos are not on the list. Still, in my opinion, with the OA there is no shortage of options (can’t say the same for SA).

However, personally I treat the funds in my CPF OA and SA accounts as the fundamental (risk free) layer and is a bit hesitant to invest them.

1 in 2 who uses CPF to invest ends up worse off (read here)

Beyond the type of funds in which I can invest, there are also other conditions, see below. (read here)

Funds untouchable in CPF prior to 55 years old

One key point about setting aside money in our CPF accounts through voluntary contributions is that money cannot be withdrawn before the age of 55 years old. Some may perceive this as a drawback.

Understand withdrawal options from 55 (read here)

Implementation of CPF SA Shielding Hack using (read here)

If you do wish to withdraw them, make sure you set aside enough funds for your Retirement Account (RA). This is where your SA and OA savings up to the Full Retirement Sum (FRS) will be transferred to the RA to prepare for your monthly CPF LIFE payouts when you turn 65 years old.

Alternative via Singapore Saving Bonds

Given the rising interest rates environment which we are in, the interest rates of recent Singapore Saving Bonds have been looking very attractive.

For instance, for the recent Oct 2022 SSB (SBOCT22 GX22100X), the average return over 10 years is 2.75%. 2.6% (year 1) – 2.99% (year 10).

Like the CPF, the Singapore Saving  Bonds are fully backed by the Singapore Government. We can always get our investment amount back in full with no capital loss.

The obvious advantage of SSB is the flexibility in redeeming our invested capital (liquidity). We can choose to exit our investment in any given month, with no penalties. There is also no need to decide on a specific investment period at the start.
With the freed-up cash, we can choose to invest in a myriad of investment products (including more risky products). Although I would think twice about being too heavily invested in risky growth stocks or cryptos.

Nevertheless, this freed-up cash would come in handy in times of drastic stock market corrections or crashes. In addition, this freed-up cash would also be useful should we need the cash for some sudden emergencies.

The next question will probably be, why not consider T-bills (or SGS bonds), since they offer better rates. I reckon I used SSB here because in comparison, in terms of liquidity, SSB is better.

Ultimately, we will have the liquidity of SSB on one hand and the effect of compounding in CPF on the other hand.

Comparing lump sum housing refund contribution to CPF OA vs lump sum contribution to 3 CPF accounts vs Singapore Saving Bonds

In gist, given that I have already reached the FRS in my CPF Special Account, I am unable to do voluntary contributions to my SA account or transfer funds from my OA to SA to enjoy the 4% annual interest.

So I am left with the choice of either contributing to all 3 CPF accounts (of which 62% of my contribution will go to OA and 16% to my SA) or doing a lump sum housing refund contribution to my OA (2.5% per annum).

Next, there is a limitation to the investment products I can invest in via CPFIS, and I cannot withdraw my CPF funds until age 55 years old. With SSB there is this flexibility to withdraw and use the freed-up cash to invest in a wider array of financial products.

Perhaps I am splitting hair, but for the interest accumulated over time, I reckon a fair comparison for lump sums would be between a lump sum housing refund contribution to my OA (at 2.5%) vs investing in the SSB (at average return over 10 years of approx. 2.75%). However, I will also be comparing these to the case whereby I do a lump sum voluntary contribution to my 3 CPF accounts.

To refer back to the earlier polls above, the 2 most popular choices to safely keep our funds and do a lump sum contribution/purchase are: (a) To purchase SSB, and (b) Do a lump sum housing refund contribution to the CPF-OA.

I will be using a 10 years horizon for simplicity (although the exact number of years/months may not be that). This timeline is useful for comparison to the SSB. In addition, I would be assuming that there will only be a one-time contribution of $1,000 (now).

Given that I cannot withdraw CPF funds prior to 55 years old, the funds will likely be in my CPF accounts, compounding interests (upon interests). Unless I intend to use my OA and SA for investment needs or have an emergency need for the funds in my MA account.

On the other hand, for the SSB, there will be interest payments every 6 months, and the likelihood of compounding earned interest is comparatively lesser. After all, I am free to use the SSB interest payments for my needs or wants (or invest in other products).

Scenario 1 (Purchase of Singapore Saving Bond, hold for 10 years)

Using the SSB calculator, with $1,000 invested in the Oct 2022 SSB (SBOCT22 GX22100X), and if I hold it till maturity (after 10 years), I will receive a grand total interest of $275.00 (Total amount inclusive of capital is $1,275). See below.

Scenario 2 (One-time voluntary housing refunds to my CPF OA account)

In the case of CPF, if I do a lump sum housing refund contribution of $1,000 to my CPF OA, and let it compound at a rate of 2.5% per year, the total interest I will receive at the end of 10 years will be $280.00 (Total amount inclusive of capital is $1,280). See below.

The difference between the above 2 scenarios is only marginal (for the moment).
In consideration of the flexibility of SSB (convert to cash), the option to contribute a lump sum for the housing refund (in OA) might not be that attractive.

Scenario 3 (One-time voluntary contributions to my 3 CPF accounts)

Another scenario is that I contribute $1,000 to all 3 of my CPF accounts (just to tally up the total interest earned over 10 years compounded). During the 10 years (prior to 55 yrs old), MA cannot be converted to cash or invested. The total interest I will receive at the end of 10 years will be $377.40 (The total amount inclusive of capital is $1,377.40). See below.

Working backwards, the aggregate interests (results of 3 CPF accounts) would be approximately 3.255% interest rate (if the funds are allowed to be in the accounts compounded annually). See below.

It is noted that assuming that when I am 55 years, and if I have met the FRS, I can withdraw any amount above it. (read here)

Note that I am referring to safely keeping cash while earning some interest. I believe this should form a fundamental layer in our investment portfolio. With this fundamental layer (bedrock) intact, I can then choose to invest my excess funds in other more risky products like stocks, REITs, ETF /Index funds or even cryptos, etc… Nevertheless, everyone’s situation is different (dependent on age, income/saving level, needs and wants, risk tolerance, etc). And circumstances might also change. Especially when market crashes occur and opportunities present themselves. Hence, it is important to consider the flexibility and availability of funds to invest during such opportunities.

In gist, it is a choice between the liquidity of SSB (to be withdrawn at any time and the ability to use the half-yearly interest payout), versus the effect of compounding by leaving the funds untouched in the CPF account(s).

Looking at the above, I think it is worth considering the lump sum contribution to the 3 CPF accounts (Scenario 3). However, given the flexibility of SSB (Scenario 1), it is not bad either. No wonder most of the people who participated in the polls opted for SSBs.

Nevertheless, I am sure there will be a group of people, with cash on hand, waiting for interest rates (of SSB or fixed deposits) to rise higher (eg. to be substantially higher than the 2.5% CPF OA interest rates) before making any moves.

Thank you for reading.


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2 Responses to Should I do voluntary contributions to my 3 CPF accounts or do voluntary housing refunds to my CPF OA account or purchase Singapore Saving Bonds?

  1. Sinkie says:

    If immediate liquidity is no issue, then 6 mths tbills is better than FDs & OA. Tbill interest is also better than SSB’s first year interest.

    Another advantage of tbill is that you’ll be able to get full allocation unlike SSB which will have cutoff allocations if oversubscribed.

    Tbills are tracking the rise in Fed rates & US tbills, so you can spread out your tbill purchases over the next few months.

    PS: If more people know about tbills, it will basically kill the FD market. Just like how CPF Life has killed the traditional annuity insurance market.


    • apenquotes says:

      Thanks for highlighting it.
      In fact, Seedly and Investment Moat have mentioned T-bills.

      The rates are slightly better than SSB’s rate but without the liquidity of SSB. And yes better than FD’s rate and no need some much initial cash outlay. I think those that queue for FD are not that knowledgeable about SSB, SGS, or Tbills… but still FD’s rate is better than nothing (if you read the news report, it is basically targetting the older generation conversative heart-landers who are not that tech savvy).

      Well, I guess the focus of this post is between SSB vs CPF. The same thought can be applied to SSB/SGSbonds/Tbills vs CPF… though there are slight variations in the annual interest rates between SSB/SGSbonds/Tbills. Yes, think there are advantages for Tbills like you mentioned above (full allocation and tracking Fed rates & US Tbills).
      But ultimately why I chose SSB (over SGS bonds or Tbills) to compare with CPF, is because of the SSB’s better liquidity.

      Ultimately, the key points are liquidity and compound interest.

      In the case of CPF, it is kind of like a ‘forced’ compounding as funds are locked in until 55yrs old (personally I don’t I have that much disclipine to compound if using SSB/Tbills etc… too many other options in the markets with equities, REITs, Options, and changing news).

      Personally I still prefer the liquidity of SSB (with being aware of the slightly lower interest rates as compared to Tbills/SGS bonds. For the moment.

      That may change (esp. if I don’t have any ideas or sniff out any other opportunities in the medium to long term). I basically treat them (SSB) like part of my warchest (earning nominal interest along the way). Hence, this basic question on liquidity. Some people would not view it that way, and want the highest yield for a safe place to park their cash (backed by the SG government).
      Some people actually advise against having too much in such products (SSB, SGS bonds, Tbills, and utltimately should not be long term holdings, since ultimately their rates, no matter how good, will not beat the rate of inflation in the long run unlike dividend stocks or REITs.


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