Once upon a time in Singapore, where the Central Provident Fund (CPF) was the cornerstone of retirement planning, a new opportunity arose for CPF members. Maybank Singapore, a foreign bank, had become the first of its kind to offer fixed deposits for funds from the CPF’s Ordinary Account (OA).
This groundbreaking move came with a promise of a 2.9% per annum fixed deposit rate for a minimum placement of $20,000 in OA funds for 12 months. Maybank’s chief executive, Alvin Lee, touted this option as a means for both new and existing customers to grow their OA funds for retirement, emphasizing the enduring appeal of time deposits as an investment choice.
However, Maybank wasn’t the only player in this landscape. Singapore had designated only four banks to accept OA funds as fixed deposits: the three local giants OCBC Bank, DBS Bank, and UOB, and now Maybank since April of the previous year. These banks held a special privilege, known as qualifying full bank (QFB) status, allowing them to provide fixed deposit services under the CPF Investment Scheme (CPFIS).
The competition among these banks was fierce. OCBC had started offering fixed deposits under CPFIS in November 2022, with the added advantage of digital transfers through their app, earning a higher 3.1% interest rate for placements made digitally compared to 2.7% at their branches. Meanwhile, DBS and UOB chose to focus on other investment products, such as Treasury bills (T-bills) and CPFIS-approved unit trusts, leveraging their strengths in the market.
CPF members had to carefully weigh their options. The interest rates for OA savings stood at 2.5%, with additional perks for members above 55 years old. Those under 55 got 1 percentage point more, while those above 55 could get up to 2 percentage points more on the first $20,000 in their OA.
The allure of fixed deposits was undeniable, especially with Maybank’s competitive offer. Yet, T-bills auctions had been yielding returns of 3.7% to 3.74%, making them an attractive alternative. CPF members needed to have a CPF Investment Account (CPFIA) with one of the designated banks to invest in these instruments. Upon maturity, the funds would return to their CPFIA, where they would continue to earn interest.
As CPF members pondered their choices, the financial landscape continued to evolve. Banks sought to innovate and offer the best options for retirement planning, while CPF members sought the right balance between risk and return. In this ever-changing world of finance, one thing remained constant—the importance of informed decisions in securing a comfortable retirement.
And so, the story of investment choices in Singapore’s CPF scheme continued, with each member navigating their path towards a financially secure future.
(Source: Singapore Business Review | Straits Times)
