On 19 January 2025, close to 1.4 million CPF Special Accounts (SA) were closed, for those who are 55 and above. Going forward, anyone who turns 55 will also have their Special Account closed, and have their Retirement Account opened at the same time.
This move was not a surprise. In fact, it was a year in the making, and was first announced during the Singapore Budget 2024 speech in February 2024. But, the exact date of the Special Account closure was not known until it was relatively close to the date.
Since the Special Account was closed, CPF members may have lost and be losing out on interest returns in 2 ways.
Read Also: 4 Ways That Closing The CPF Special Account Is An Elegant Solution For The Government
#1 CPF Members Who Are 55 And Above May Lose Their SA Interest Returns For January 2025
When your Special Account closes, the balances are transferred to your Retirement Account, up to the Full Retirement Sum (FRS), or Ordinary Account, if you have met your FRS.
The funds transferred to your Retirement Account in January will continue to earn the same 4.0% interest returns that you would expect to receive in your SA if it was not closed.
However, any SA funds transferred to your Ordinary Account will only earn 2.5% in January 2025, instead of the 4.0% you would expect to receive if the Special Account was not closed.
For example, if you had $10,000 in your Special Account before it was closed, you would expect an interest return of $33.33 in January 2025 if it was not closed. Following the transfer of the funds into your OA, you would only earn 2.5% or $20.83 instead, despite having the funds in your SA until 19 January 2025.
In a speech at the Committee of Supply (COS) 2024, Minister for Manpower, Dr Tan See Leng, mentioned that 720,000 CPF members had withdrawable SA balances following the closure of the SA. The median withdrawable balance was only about $2,000.
One final thing to note is that withdrawable SA balances may not mean all SA balances, since you would have been able to continue accumulating Special Account savings even if you did not hit the FRS at 55. Nevertheless, these Special Account savings would not have been withdrawable, as you can only withdraw anything above the FRS. One group that may lose out in this scenario is those who had done the CPF Special Account Shielding Hack, accumulating large sums in their Special Account, while only saving the minimum $60,000 in their Retirement Account.
Read Also: CPF Shielding Hacks (Special Account & Ordinary Account): Do They Really Make Sense?
#2 CPF Members Who Are 55 And Above Can No Longer Enjoy 4.0% Returns On A Relatively Liquid Pool Of Savings In Their SA
A second way that CPF members who are 55 and above may lose out is that you can no longer earn 4.0% on Special Account funds that are relatively liquid.
This is because after hitting the FRS, CPF members can withdraw your remaining OA and SA savings at any point. Hence, your Special Account balances become relatively liquid, and you can continue to earn 4.0% interest return.
For reference, the Special Account floor interest rate is higher than what the Singapore Government T-bills are currently paying (which was 3.04% at the latest 6-month T-bills auction on 28 January 2025).
After the closure of your Special Account, your SA funds will go into your Ordinary Account in this case (assuming you have hit your FRS already). If you want to keep your funds in your OA, they remain equally liquid, but will not earn only 2.5% instead of 4.0%. You effectively lose out on 1.5% of interest each year.
To depict how this plays out, if you had $10,000 in your Special Account, and have achieved your FRS, your SA funds would have been transferred into your OA. In your OA, you will earn $250 in interest returns for 2025, rather than $400 you would have earned if the money was still in your SA. The lost is the $150 in annual interest return.
Note, in this example, we did not take into account any potential interest lost from the transfer happening in the middle of the month in mid-January.
Nevertheless, in a LinkedIn post, Dr Tan See Leng did reiterate that earning 2.5% is still higher than most bank’s current account and is risk-free.
For those who want to seek out higher returns, there are a range of options, but you have to consider your risk appetite and liquidity needs. For example, you could earn higher returns simply investing in the Singapore Government T-bills, which paid 3.04% at the latest auction on 28 January 2025. While it is similarly risk-free compared to saving your funds in the CPF ecosystem, there liquidity may be liquidity and selling the investment before it matures might mean you do not earn the full interest return.
Editor’s note: An earlier version of this article stated that CPF members may lose their entire interest returns on SA savings transferred out on 19 January 2025. The reality is that they will earn an interest return based on the account the funds were transferred into. If it was transferred into the RA, they would continue earning 4.0% interest rate, and it was transferred into the OA, they would earn a lower 2.5% instead.
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