All You Need to Know About the CPF Special Account

Ever wondered what it would be like to retire with a million dollars in your CPF account? Well, it is certainly possible if you employ the right methods. Considering the number of years that you spend in the working world, you will have to put in the majority of your savings into the Special Account (SA) under CPF. The other two accounts are the Ordinary Account (OA) and the Medisave Account (MA). The OA is commonly used for buying houses, the SA for retirement purposes, and the MA for healthcare costs. The updated interest rates of CPF reflects that you can earn a maximum of 3.5% every year on your OA and a maximum of 5% a year on your SA and MA. They include an additional 1% interest paid on the first $60,000 of a member’s combined balances. If you want to save a million dollars in your CPF, the trick is to shift your money from the OA to the SA so that you can receive higher interest rates and save more money. Your monthly salary will also determine how long it will take you to accumulate a million dollars in your CPF. If you have an average income of an estimated $3,000 a month and enter the workforce at 25, there is the possibility of saving a million dollars by the age of 54 if you periodically transfer your money from the OA to the SA. What’s more, the retirement age is increasing in recent years so you have more time to accumulate savings in your SA. Not to mention that workers above 60 will receive higher CPF contributions from their employees from 2021 onwards. With this much talk about saving a million dollars, you might be enticed to transfer a huge bulk of your savings into your SA now. Despite so, there are various pros and cons that you should find out about before making your decision. Here is our list of benefits and drawbacks of putting your money in your SA. 


1. Inflation-Beating Interest Rate

In order to save up enough money for a comfortable retirement, it is best to put your money at a place where inflation won’t affect it. By keeping your money in the SA, you will experience a 3% inflation rate in Singapore and this will stay constant so you can be assured that your money is in good hands. This inflation rate translates to your SA receiving minimally 5% in interest yearly. Besides leaving your money in the SA, you can always opt for other investment plans like insurance but most only offer around 4% annual interest rates.

2. Enjoy a Reliable Absolute Return

If you enjoy financial stability and would love nothing more than to know that your savings are safe and growing at a comfortable rate, then SA is the one for you. Many Singaporeans invest in mutual funds or exchange-traded funds to earn supposedly higher interest rates in the long run but they incur the risk of depending on the indexes. This is because whether you get higher returns or deficits is reliant on indexes. In the event that the interest rates remain low for many years, you might end up making less money than if you left it in the SA; which has absolute returns. 

3. CPF is Safe from Creditors

In the unfortunate event that your business collapses or you go bankrupt, you need not worry about your retirement fund taking the hit if it is in your SA. This is a real risk for business owners and Forex traders; keeping your savings in the SA will act as a precautionary measure as the money there can never be used to pay debts. 

4. CPF Special Account can be used to Invest

As long as your SA has more than S$40,000, you have the freedom to invest it in a myriad of investment schemes like treasury bills, annuities, and endowment policies. It is best to check that they offer higher interest rates than the SA’s annual 5% to make investing worthwhile. 


1. Cannot Use CPF for Home Payments

Housing is probably one of the biggest payments that you will make in your life. You can expect your bank account to take a huge hit when you buy your first house; this is especially so if you transferred all your savings to the SA. As the OA is the only account you can use to pay for your house, you will have to pay out of your own savings without it. The usual downpayment for a HDB flat is around S$35,000 and $140,000 for private housing. As a result, if your focus is on accumulating a substantial retirement fund, you might struggle with paying off your home loans and will need to be prudent and disciplined in your spending for years to come. 

2. Need to Rely on Banks for Education Loans

Another thing that savings in the OA can pay for is your education loans as well as those of your children. Even though you will have to pay it back with interest, it can still be a load off your shoulders at that point in time. Thus, with money in the SA instead, you’ll need to save up money years in advance to afford sending your children to higher education institutions. 

3. Situations May Change in the Long Term

It is imperative that you do not rush into transferring all your savings into your SA. This is a permanent process with no exceptions made under any circumstances. A good saving habit will help you a lot in the long run and if you can comfortably manage without incurring huge debts, then putting your savings into the SA until you are 55 may be a good option for you. 

Weighing the pros and cons of the CPF SA will give you a better idea about how to draft a good and reliable savings plan for yourself. Perhaps you are not confident about saving up for retirement or foresee yourself needing help with buying your first house; all these considerations will determine your decision. At the end of the day, planning out your finances carefully and exploring different investment options will give you more confidence in making sound investment and saving decisions.


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