19 Jul 2024
SOURCE: CPF Board
During Budget 2024, it was announced that the SA for CPF members aged 55 and above will close in early 2025. This is to better align CPF interest rates to the nature of savings in each CPF account.
Read on to learn more about this change and how you can optimise your CPF savings to prepare for it.
What happens when the CPF Special Account (SA) closes for members aged 55 and above in early 2025
When your SA is closed, your SA savings will be transferred to the RA, up to your FRS, so that you can get higher monthly payouts. These savings will continue to earn the long-term interest rate.
If you have set aside your FRS, whether fully in cash or with a mixture of property and cash, any remaining SA savings will be transferred to your OA. These savings will earn the short-term interest and can be withdrawn when you need them.
Options to maximise your CPF savings
1. Boost monthly payouts by transferring OA savings to RA, up to the prevailing Enhanced Retirement Sum (ERS)
If you wish to earn higher interest and receive higher retirement payouts, you can consider transferring your OA savings (including savings that were channelled from your SA due to the closure of SA), to the RA, up to the prevailing ERS. The RA interest rate is the same as the SA.
Please note that top-ups to the RA are not reversible. Your top-up monies will be paid to you as monthly payouts, and cannot be withdrawn for other purposes.
2. Help your loved ones with their retirement by transferring your CPF savings to them to top up their CPF accounts
If you have set aside the FRS for your monthly payouts, you can consider transferring to your loved ones – that is, your grandparents, grandparents-in-law, parents, parents-in-law, spouse or siblings – to help them get higher monthly payouts in retirement.
3. Have the flexibility to withdraw or invest your CPF savings by keeping them in your OA
You can continue to keep the SA savings transferred to your OA to earn 2.5% interest each year while retaining the flexibility to withdraw anytime. Alternatively, you can invest them under the CPF Investment Scheme – Ordinary Account (CPFIS-OA), if you have assessed that CPFIS is suitable for you.
You can also read more from Lorna Tan, Head of Financial Planning Literacy at DBS Bank and the author of four bestselling works – Money Smart, Retire Smart, More Talk Money, Talk Money, on how she plans to allocate her CPF savings.
Commonly asked questions regarding the closure of the SA in early 2025
Here are some commonly asked questions from members of the public. You can also visit the FAQ page on SA closure for answers to the other questions you might have.
1. Why will SA be closed for members 55 and above from early 2025?
Today, members aged 55 and above have two CPF accounts that hold savings intended for retirement payouts: the SA and the RA.
Both SA and RA savings earn the same long-term interest rate. However, some SA savings can be withdrawn on demand from age 55. As a principle, 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.
Closing of SA for members aged 55 and above is to better align CPF interest rates to the nature of CPF savings in each CPF account.
2. With the closure of the Special Account for CPF members aged 55 and above, which account will my CPF contributions be allocated to?
With the closure of SA, CPF contributions that go to the SA currently, as well as any increase in CPF contributions allocated to SA from 1 January 2025, will be fully allocated to the member’s RA instead, up to the FRS, to boost retirement payouts. For members who have set aside the FRS in the RA, these contributions will be channelled to the OA.
This will ensure that the additional contributions continue to earn the highest possible CPF interest rate to provide an even bigger boost to retirement payouts.
RA balances currently earn a minimum interest rate of 4% a year, compared to a minimum of 2.5% in the OA. Plus, members aged 55 and above earn an extra interest of 2% per annum on the first $30,000 and 1% per annum on the next $30,000 of their combined CPF balances (capped at $20,000 for OA).
3. Is there still SA for members below age 55?
Yes. Members below age 55 would still have SA to help them accumulate savings for retirement. Their SA will only be closed when they turn age 55 and their RA is created.
4. I have earlier invested my SA savings. Do I have to sell my SA investments after the closure of SA?
You can still hold your existing CPF Investment Scheme-Special Account (CPFIS-SA) investments.
Upon sale or maturity after the SA is closed, the proceeds will go to the RA up to your FRS. The remaining amount will then be transferred to your OA.
Plan ahead for the closure of the SA
The closure of the SA will affect members aged 55 and above from early 2025. It’s a good idea to take a moment to review your retirement plans, and make any necessary adjustments.
Be sure to also check out our article on the CPF retirement sums or these handy tools for your retirement if you want to learn more about retirement planning!
Information in this article is accurate as at the date of publication.
