CPF SA Shielding hack - RIP (Obsolete)

[WeiHan]

CPF is just being stupid! They should deduct the money from OA first as much as possible instead of from SA. This is to be fair to everybody and to save everybody the need and trouble to "shield" their SA money.

 

[reddevil0728]

CPF is just being stupid! They should deduct the money from OA first as much as possible instead of from SA. This is to be fair to everybody and to save everybody the need and trouble to "shield" their SA money.

it might be intentional rather than oversight.

 

[WeiHan]

https://www.cpf.gov.sg/member/growing-your-savings/earning-higher-returns/investing-your-cpf-savings
Scroll down

Ok. Thanks. So if we want to buy Singapore government bonds, just approach DBS, OCBC or UOB?

 

[reddevil0728]

Ok. Thanks. So if we want to buy Singapore government bonds, just approach DBS, OCBC or UOB?

https://www.mas.gov.sg/bonds-and-bi...uy-SGS-at-Auction-Information-for-Individuals
SGS yield that high to worth investing with CPF SA meh.

 

[WeiHan]

https://www.mas.gov.sg/bonds-and-bi...uy-SGS-at-Auction-Information-for-Individuals
SGS yield that high to worth investing with CPF SA meh.

For shielding lah.

 

[reddevil0728]

For shielding lah.

eh i thought got better ways to shield than SGS....

 

[WeiHan]

eh i thought got better ways to shield than SGS....

I don't know. For example?

 

[WeiHan]

eh i thought got better ways to shield than SGS....

I am not refering to the SGS bond that you need to buy at auction each month but Singapore government bond that we can buy in free market anytime. I see "Singapore government bond" in my broker's online trading platform but there is no option to buy it using CPFSA money.

 

[reddevil0728]

I am not refering to the SGS bond that you need to buy at auction each month but Singapore government bond that we can buy in free market anytime. I see "Singapore government bond" in my broker's online trading platform but there is no option to buy it using CPFSA money.

you mean SSB?

 

[WeiHan]

you mean SSB?

Not the saving bond. Maybe SGS bond IS the Singapore government bond I refer to.

 

[reddevil0728]

Not the saving bond. Maybe SGS bond IS the Singapore government bond I refer to.

oh sgs bonds in the secondary market.

 

[lzydata]

We know SSB definitely cannot be bought with CPF funds, but if T-bills or SGS bonds can be, seems like that is a better option for shielders since they guarantee your principal and also have a better return than FDs now. But this is provided they can be bought at auction rather than secondary market...

 

[WeiHan]

oh sgs bonds in the secondary market.

yes. secondary open market. Now i see, it is quite le che, before you buy, you don't know what will be the price and they will deducted 115% amount from your CPF first. So, you use what fund to shield your SA account?

 

[reddevil0728]

yes. secondary open market. Now i see, it is quite le che, before you buy, you don't know what will be the price and they will deducted 115% amount from your CPF first. So, you use fund to shield your SA account?

the 1 u say is reopen SGS bond at auction.

 

[BernardWYF]

so shielding is actually putting SA funds into SGS (3months) latest 2 months before 55year old birthday so that all transactions can be timely carried out, and have the SA funds returned back into SA account 1 month after 55yo birthday .... so minimise SA 4% interest loss during the transition of funds right?

 

[a4973]

so shielding is actually putting SA funds into SGS (3months) latest 2 months before 55year old birthday so that all transactions can be timely carried out, and have the SA funds returned back into SA account 1 month after 55yo birthday .... so minimise SA 4% interest loss during the transition of funds right?

The shortest SGS Bonds are 6 month T-bills.

 

[BernardWYF]

No need so long. Place like 1 to 2 weeks before 55. Best to try out with min allowed 1 or 2 issues earlier to checkout the process and timing of when they deduct on application and return to CPF when mature.

6 mths Tbills will be better because there is an issue every 2 weeks and shorter time to hold.

But personally I feel that placing in short term bond fund is better. In and out within 1 week. If birthday is not beginning or end of month interest lost in CPF is just 1 mth. There is risk of small capital loss but the loss of CPF interest vs tbill rate for at least 7 mths is greater.

End of the day depends on how much risk you are willing to take. Also depends on amount you need to shield.

any good suggestions on what are the "short term bond fund" available for this shielding purpose?

 

[bargin]

any good suggestions on what are the "short term bond fund" available for this shielding purpose?

Would also like to know which short term bond using SA fund

 

[BBCWatcher]

Also make sure that your OA has enough funds such that the RA can be formed with FRS .

This part isn't a strict requirement. You can use cash, and/or a family member (such as a spouse) can transfer his/her OA into your RA.

 

[kelvinloh]

I used Nikko AM Shenton Short Term Bond SGD fund using FSMone.

Can refer to this :
https://secure.fundsupermart.com/fsm/funds/factsheet/370332/Nikko-AM-Shenton-Short-Term-Bond-SGD
Under Fund performance, can click on the icon Price History to view the past daily prices. Note that the prices do move up and down and there is risk of capital loss. So keep the shield period as short as possible by doing a trial run using the min allowed of $100 to iron out any issues.

From my personal experience, I would suggest to firstly work out the amount of SA that you can shield. Do your estimates of what would your SA be on your 55th birthday, then less $40,000 that cannot be invested. The SA that you shield must be of a reasonable figure otherwise it is not worth the effort. Work out how much more interest you can get annually if you were to shield SA (4% - 2.5% X SA shield amount) vs not shielding at all. Also make sure that your OA has enough funds such that the RA can be formed with FRS .

Thereafter, based on the estimated shield amount, start to work on the opportunity cost of shielding. Eg there are those who do not want any capital loss. So work out the opportunity cost of shielding using eg 6 mth tbill.

When I was 55 in Jan 2022, tbill yields was not high. 20 Jan 2022 issue of 6 mths Tbill cut off yield was only 0.48%. I looked at the Nikko AM Shenton Short Term Bond SGD fund prices for the last one year. It was quite stable initially, and started to get volitile from Dec 2021. So the risk of capital loss is real.

I did simulation of buy at highest price and sell at lowest price based on price history for last 1 month and last 1 week. This is quite extreme but just to have a gauge of the possible capital loss vs the extra interest earned per annum and whether it is worth the risk. Based on my estimate, capital loss based on 1 mth price worse scenario is $694 and 1 week worse scenario is $417. Loss of SA interest for 1 mth (because SA was returned within the same month) is $821. The extra interest earned for shielding SA is $2277 per year. So it works out to be still worth to do the SA shield as I would still have a overall nett gain in the first year alone, not to mention the extra interest for many more years to come.

The final capital loss I suffered was $134.59. Purchased on 17 Jan, sold on 24 Jan. CPF deducted with posting date 18 Jan. CPF return with posting date 26 Jan.

So do your sums first before deciding.

It seem there is no Sales Charges for buying and selling via FSMone for this fund, correct?