How to optimise Singapore CPF: Ordinary Account into Special Account

05 Apr 2016 
SOURCE: Heartland Boy

To help grow the retirement nest egg, the Singapore government has implemented various CPF Investment Schemes to allow Singaporeans and Permanent Residents (members) to invest the savings in their Ordinary Account and Special Account. However, young members who just started working may not be able to participate in these schemes as they may not meet the minimum balances in their respective accounts yet. Fret not, Heartland Boy would like to discuss the investment option of transferring savings in your Ordinary Account into Special Account early.


Advantages of Transferring Savings from Ordinary Account into Special Account

Your savings works "harder" in the Special Account than in the Ordinary Account.

  • Savings in the Special Account earn a guaranteed 4% while savings in the Ordinary Account only earn a guaranteed 2.5%.

    Take full advantage of the extra 1% interest
  • An extra 1% is paid to the first S$60,000 in your combined Singapore CPF accounts, but limited to $20,000 from your Ordinary Account. Therefore, even if you have S$50,000 in your Ordinary Account, only the first S$20,000 can earn 3.5% interest per annum while the remaining S$30,000 would earn the guaranteed 2.5% interest per annum.

    Compound interest takes care of the rest
  • As an illustration, a member aged 25 who transfers S$20,000 from his Ordinary Account into Special Account, he would have a guaranteed S$22,917 more at the age of 55 compared to the default scenario of doing nothing and leaving his savings in the Ordinary Account. That is more than double the original principal and really illustrates the beauty of compound interest.

Table 1.png 

Table 1: Comparison of the compounding interest impact on Ordinary Account and Special Account


  • The illustration above only assumes a conservative 4% for the Special Account. It is obvious that the difference will be greatly magnified if you can take advantage of the extra 1% levied to the Special Account that would otherwise not be available in the Ordinary Account if your Ordinary Account already exceeds the S$20,000 savings. Therefore, it is imperative that you start as soon as possible to allow compound interest to work its magic.  Alternatively, you can view this transfer as purchasing a long term, non-redeemable, triple AAA bond that does not pay annual dividends. Upon the age of 55 and after setting aside the savings for the Full Retirement Sum, you can withdraw the excess savings to enjoy the fruits of your labour.

    Disadvantages of Transferring from Ordinary Account into Special Account
  • Note that there is no tax relief for transferring from Ordinary Account into Special Account. Not to worry, the Retirement Sum Top Up Scheme attracts tax relief for cash top-ups and Heartland Boy would write about what Heartland Girl did to minimize her tax expenses in future articles.
  • The process is irreversible so it is better to start learning to live life with no regrets once you have done it.
  • Before the age of 55, savings in the Special Account cannot be withdrawn and utilized for any purpose, including paying off your housing mortgages.

    Why Young Members are Especially Eligible

    You can transfer your savings from Ordinary Account into Special Account if you are
  • Below 55 years old, and
  • Do not have more than S$161,000 (Full Retirement Sum) in your Special Account

    Transfer OA to SA.png

    Source: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme

     Heartland Boy Transferred Savings from his Ordinary Account into his Special Account

    Heartland Boy did a transfer of the savings from his Ordinary Account into his Special Account after settling the 5% down payment for his Build-to-Order (BTO) purchase in early 2015. As a prudent measure, he did not transfer the entire savings in his Ordinary Account into his Special Account. Instead, he set aside the other 5% down payment that could be due in another 3 years. For couples who are about to collect the keys to their long-awaited HDB flats, do note that HDB would empty all the savings in your Ordinary Account before extending you a HDB loan on the remaining unpaid balance. Therefore, transferring savings from your Ordinary Account into Special Account may be one way to prevent this from happening.


This article first appeared on Heartland Boy.



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