Our Special Account is one of three CPF accounts we start with from the moment we are born, with the other two being our Ordinary Account (OA) and MediSave Account (MA). When we turn 55, a Retirement Account (RA) will be opened. From 2025, our Retirement Account will replace our Special Account, which will be closed at the same time.
Each of our CPF accounts is meant for different purposes, and in this article, we look at the role that our Special Account plays.
#1 The CPF Special Account Was Introduced In July 1977
When the CPF system started in 1955, people only had one account. This functioned similarly to our Special Account today. In 1968, the government introduced the Public Housing Scheme, allowing Singaporeans to use our CPF savings to pay for our homes.
While this served the purpose of enabling Singaporeans to own a home, which is a key pillar in retirement security, CPF savings were being depleted.
To address this, the Special Account was introduced in July 1977 – providing a more targeted accumulation of retirement savings. The MediSave Account was introduced in April 1984 and the Retirement Account came into effect in January 1987.
Read Also: What Happens To Your CPF Monies After Transferring It To Your Retirement Account (RA) At Age 55?
#2 We Contribute Between 1.0% and 11.5% Into Our Special Account Throughout Our Career
Most of us grow our Special Account through monthly contributions from our salaries. Depending on our age, we contribute up to 20% of our salary to our CPF accounts, while our employers contribute another up to 17%. This combined amount is segmented into our OA, SA and MA. When the Retirement Account replaces the Special Account for those 55 and above, the amounts that is currently channelled into the Special Account will instead flow into the Retirement Account.
A small group of employees earning below $750 a month do not have to make any employee CPF contributions. However, employers still have to make their share of the Employer’s CPF contributions for anyone earning more than $50 a month, including temp-staff, part-timers and other types of ad-hoc workers.
Age (Years)
Allocation Rates (for monthly wages ≥ $750)
Ordinary Account
(% of wage)
Special Account
(% of wage)
Medisave Account
(% of wage)
Total
(% of wage)
35 and below
23
6
8
37
Above 35 to 45
21
7
9
37
Above 45 to 50
19
8
10
37
Above 50 to 55
15
11.5
10.5
37
Above 55 to 60
12
7
10.5
29.5
Above 60 to 65
3.5
6.5
10.5
20.5
Above 65 to 70
1
4
10.5
15.5
Above 70
1
1
10.5
12.5
Source: CPF
As we can see in the table, contributions to our Special Account start as the smallest component at the beginning of our career – at approximately 6% of our monthly salary. It gradually grows to become the biggest component just before we turn 55 – at around 11.5%. After 55, it again falls to the smallest component, as many of us should already have set aside our Full Retirement Sum (FRS) by 55.
Of course, we can also see that CPF contributions start off at 37% of our wage, up to the point we turn 55. Our CPF contributions then taper off until we only contribute up to 12.5% by the time we are above 70.
Since Jan 2022, the government has announced that CPF contribution rate for older workers will gradually increase – with a target rate by 2030:
Age
2016-2021
2022
2023
2024
2025
By 2030
≤55
37
No Change
>55 – 60
26
28.5
29.5
31
32.5
37
>60 – 65
16.5
18.5
20.5
22
23.5
26
>65 – 70
12.5
14
15.5
16.5
No Change
>70
12.5
No Change
During his Singapore Budget 2024 speech, DPM Lawrence Wong announced that CPF contribution rates will be increased for those aged above 55 to 65 in 2025. This will bring the contribution rates one step closer to the target rates. For those aged above 65 to 70, the target rates were hit in 2024 – and there are no foreseeable increments.
The higher contribution rates will be fully allocated to our Special Account (or Retirement Account from 2025), to secure our retirement adequacy.
Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55
#3 Our Special Account Balances Is Protected By A Floor Interest Rate of 4.0%
While both employees and employers contribute to ensuring retirement adequacy, the government also does its part to grow our Special Account balances by providing a floor interest rate of 4.0% p.a. This floor rate commitment was set by the government in 1999, but is not part of legislation. The legislated floor interest rate, on any CPF accounts, that is set in the CPF Act is 2.5%.
From 2008, the Special Account rate was pegged to the “12-month average yield of 10-year Singapore Government Securities plus 1%”. Using this calculation, our Special Account savings have been earning slightly higher interest returns since the tail-end of 2023.
For the quarter of October to December 2024, the interest rate on our Special Account is calculated to be 4.14%.
Read Also: Why CPF Needs To Review Interest Rates For Our Ordinary, Special, MediSave And Retirement Account
#4 Extra 1.0% Interest Payments Goes Into Our Special Account (Until Our Retirement Account Is Opened)
In 2008, to strenghten our retirement adequacy, the government also committed to paying an extra interest of 1.0% p.a. on the first $60,000 of our combined CPF account savings (capped at up to $20,000 from our OA).
Extra interest received on monies in our Ordinary Account and Special Account will both flow into our Special Account or Retirement Account if we are over 55.
After we turn 55, we also earn an additional extra interest of 1.0% p.a. on the first $30,000 of our combined CPF account savings (capped at up to $20,000 from our OA). As our Retirement Account would have replaced the Special Account by this point, Additional extra interest earned on our RA or OA will flow into our RA.
Read Also: 15 Little-Known Things About CPF That Most Singaporeans Are Still Unaware About
#5 Our Special Account Is Closed At 55, And Replaced With Our Retirement Account
From 2025, those who turn 55 will no longer have four CPF accounts. The Retirement Account, which is created after we turn 55, will replace the Special Account.
Mandatory CPF contributions meant for our Special Account will instead go into our Retirement Account – further beefing up our retirement adequacy.
The interest rates that we earn on our Retirement Account is exactly the same as the interest rate we earn on our Special Account. It was slightly different before 2024, but was aligned from January 2024.
#6 If You Hit Your Basic Healthcare Sum (BHS), Your MediSave Contributions Go Into Your Special Account (Only Up To The FRS)
The Basic Healthcare Sum (BHS) is a cap on the amount that we can save in our MediSave Account (MA). The current cap is $71,500.
If we have reached this figure before we turn 55, there will be excess amounts from our salary contributions that cannot go into our MA anymore. These excesses will flow into our Special Account or Retirement Account, up to the Basic Retirement Sum (BRS) or Full Retirement Sum (FRS) from 2025.
However, if we have already hit the FRS, it will then flow into our Ordinary Account. The current FRS is $205,800 in 2024 and $213,000 in 2025. The FRS also represents the maximum amount of money we can top-up to our Special Account.
Read Also: CPF Medisave: Here’s How Your Basic Healthcare Sum Might Look Like When You’re 65
#7 We Can Top Up Our Special Account Via The RSTU (And Earn Tax A Relief)
There are generally two ways to make cash top-ups to our CPF – via the Voluntary Contribution (VC) or the Retirement Sum Topping Up (RSTU) schemes. However, we can only make top-ups up to the Full Retirement Sum into our Special Account and Enhanced Retirement Sum into our Retirement Account (after we turn 55).
If we are choosing to make cash top-ups via the VC scheme, we can opt to contribute to all three of our CPF accounts (i.e. OA, SA or RA and MA) or just to our MA. When doing so, we are limited by the CPF Annual Limit, which is $37,740. In addition, we only receive tax relief for making VC top-ups to our MA, but not if we are making Voluntary Contributions to all three CPF accounts.
If we make RSTU top-ups instead, we receive a dollar-for-dollar tax relief of up to $8,000 for contributions to our own SA or RA and another up to $8,000 for contributions to our loved ones’ SA or RA. We can make RSTU contributions for any amounts up to the Full Retirement Sum (FRS) for those under 55 and up to the Enhanced Retirement Sum (ERS) for those 55 and above. RSTU contributions go into our Special Account if we are below 55 and into our Retirement Account for those 55 and above.
Apart from making cash top-ups via the RSTU scheme, we can also choose to transfer our OA funds into our SA to earn a higher interest rate.
Do note that we will not receive any tax relief for making RSTU contributions to our own RA or our loved ones’ RA beyond the FRS amount.
Read Also: What’s The Maximum Amount You Can Contribute To Your CPF Accounts Each Year?
#8 We Can Invest Our Special Account Balances
Another way we can build our Special Account savings is by investing our SA balances through the CPF Investment Scheme (CPFIS). We can invest both our OA and SA balances if we choose to. Doing so, we are effectively trying to beat the interest rate paid on our SA balances (4.14%, and 2.5% paid on our OA balances). Of course, we can also choose to transfer our OA balances to our SA to earn more interest returns.
However, we can only invest anything above $40,000 in our Special Account (and anything above $20,000 in our Ordinary Account). We also need to take a Self-Awareness Questionnaire (SAQ) before we can invest our CPF monies.
The investments we can invest in for our Ordinary Account and Special Account are not the same. The list of available investments for our Special Account is more limited. Just as an example, we cannot utilise our Special Account funds to invest in shares or gold but we can do so with our Ordinary Account funds. With our Special Account funds, we can generally invest in unit trusts, investment-linked plans (ILP), Annuities, endowment plans and others.
To safeguard people who are investing our CPF funds, the government has mandated a removal of sales charges for new purchases and a reduction of wrap fees for both new and existing investments. For the full list of products we can invest in, we can head to the CPF website.
Read Also: Building Your Retirement Nest Egg: Pros & Cons Of Investing Your CPF Savings
#9 There Is A Maximum Cap We Can Top-Up To Our Special Account (And It Is Earmarked For Our Retirement Account)
In general, we can only top-up our Special Account up to the Full Retirement Sum (FRS). As mentioned, the FRS is $205,800 in 2024 and $213,000 in 2025. However, even after hitting our FRS, our Special Account can continue to grow from our salary contributions and interest returns.
When we turn 55, up to the Full Retirement Sum (FRS) will automatically flow into our Retirement Account. Funds in our Special Account will be drained out first. This is because our Special Account will be closed and has always been meant for our long-term retirement needs. If we have insufficient SA balances to hit the FRS, then funds from our Ordinary Account will be drained next.
We can also choose to contribute up to the Enhanced Retirement Sum (ERS) to our Retirement Account. The ERS is $308,700 in 2024, or 1.5x the FRS. From 2025, the ERS will be raised to 2x the FRS – rising to $426,000 (4x FRS) rather than $319,500 (1.5x FRS).
Read Also: 8 Things To Know About The CPF Enhanced Retirement Sum (ERS)
#10 If You Continue To Work After 55, Your “Special Account” Contributions Will Go Into Your Retirement Account
As our Retirement Account replaces our Special Account after 55, it will continue growing with contributions from our salary contributions. For Those who continue to work after 55, our CPF contributions will continue to flow into our OA, RA and MA.
If we have saved our BRS or FRS, our RA contributions may flow into our OA instead.
This article was first published on 6 September 2021 and updated to reflect the latest information.
The post CPF Special Account: 10 Things You Need To Know About It appeared first on DollarsAndSense.sg.