CPF SA Shielding hack - RIP (Obsolete)

[Oldnerd79]

Even without SA shielding, my projected SA after setting aside FRS will be more than 300k if I work till 55. That's like almost 5k lesser interest every year! I just hope they don't change the rule again like force everyone to transfer to RA above FRS, just accept the fact that no more risk free 4% and have to do more work n take out the money to invest myself.

 

[BBCWatcher]

SA closure is a LOSS to every working indivuduals age 55 and above

That's not quite true. If you miss the Full Retirement Sum on your 55th birthday — if you were/are in the queue for the "second sweep" — then the age 55 closure of Special Accounts shouldn't matter (or shouldn't matter much, at least) unless and until you hit the FRS. Basically (oversimplifying a bit) those incremental SA dollars were going to end up in RA anyway, up to the FRS. From early 2025 they'll go into RA directly.

Even without SA shielding, my projected SA after setting aside FRS will be more than 300k if I work till 55. That's like almost 5k lesser interest every year!

Well, only if you were going to park them there indefinitely, there are no other rule/rate changes that affect them, and a few other assumptions.

In your (revised) retirement financial plan you would now expect those dollars to wash into OA at 55. You can pump them into your RA (a lot of them at least), and that's great deal. So great it might even improve your financial plan. (You'll be better insured against longevity risks.) For the remainder, to equal the performance of 4.0+% you'll need an alternative long-term investment portfolio that would include a mix of (low cost) stock and bond index funds. That is, you'll have to take a little more portfolio risk. But you can afford to take that little bit more risk after you boost RA.

In short, you've got plenty of time to adjust to this new rule and with reasonable ways to adjust. The older members have less time (or no time) to adjust, although they can do something broadly similar: buy more CPF LIFE (or join it if under age 80), invest in a retirement-oriented mix of low cost stock and bond index funds.

I just hope they don't change the rule again like force everyone to transfer to RA above FRS, just accept the fact that no more risk free 4% and have to do more work n take out the money to invest myself.

I expect you'll make it work, maybe even better than your prior plan.

 

[snowcrabramyeon]

Even without SA shielding, my projected SA after setting aside FRS will be more than 300k if I work till 55. That's like almost 5k lesser interest every year! I just hope they don't change the rule again like force everyone to transfer to RA above FRS, just accept the fact that no more risk free 4% and have to do more work n take out the money to invest myself.

You could transfer all these into RA and continue to enjoy the 4/5/6% risk-free interest...

 

[BBCWatcher]

You could transfer all these into RA and continue to enjoy the 4/5/6% risk-free interest...

Yes, or in many cases boost both CPF LIFE and non-CPF investments. That happens to be what my household will end up doing.

 

[fr33d0m]

"SA shielding" is a loophole, and nobody should've relied on that technique as part of a retirement plan.

But having surplus SA dollars (after setting aside the Full Retirement Sum), and having more SA dollars from compulsory contributions from age 55 onward, are not loopholes. Many CPF members expected these SA dollars, and they were/are reasonable to expect them. And if they're age 55+, or (for example) within 10 years of age 55, it can be hard for them to adjust to this particular CPF rule change. If they had known there'd be zero SA dollars from age 55 onward in many cases they would've done something different.

We don't know the exact percentage of CPF members who are materially affected by this change, but it's probably most members who are able to meet the FRS (so about 45% for that), who did not "shield" SA, and who continue working after their 55th birthdays. That's a lot of members, probably roughly 40% of members age 55+.

It obviously does not make financial or social sense. First, no one should expect a 4% floor in Singapore without restrict on withdrawal. Second, it obviously benefits the richer more than the poorer. If the government would like to help certain group, it can create a very targeted policy. I reject any idea that use the general public for his/her own leverage.

 

[starlight318]

Is the CPF life payout really a good deal? Singapore life expectancy as of 2023 is 84yo, I assume this means half of the people would die before 84 and half after correct? And the so-called breakeven age for CPF life is around 90yo. This means the interests in the pool coming from the half that pass on before 84 and also those that pass on between 84-90 would be used to pay for those that live past 90yo. The intention is for the majority (say 80%) to pay for the 20% with long lives, there is very very low probability that the pool will become insolvent. If this is the case, shouldnt the payout be higher? Like that the CPF is bao jiak?!

Update: sorry I have forgotten that those that died before starting CPF life payouts will not be in the pool. Pls ignore.

 

[henrylbh]

SA closure is a LOSS to every working indivuduals age 55 and above .. dont gloat that the gov did right to close and has no impact to you if you are not there yet. Ultimately you will if u continue contubuting to the economy. Closing the SA is a big loss to we working whether u shield or not shield, young or 55 above. You are laughing at own foolishness to think otherwise. Hope gov will relook and revise for those who is depending on SA as part of retirement plan. SA n RA/ cpf life should be seen as part of retirement strategy , supplementing together to our retirement nest so we retire at ease with less burden and dependent on gov . Removing SA is a bad move , crippling many retirement plans not just those who sa shield but those who are still contibuting to SA after 55.

To me, there is NO loss to anyone however young or old. SA is meant to be a retirement savings since its inception and should be appropriately named as RA. The gov is only concern should be about the adequacy of retirement fund and no more. Anything more, it's up to individual's own funeral.

Although the closure affects my retirement planning, I still think it's the right thing to correct the unintended purpose of leaving the SA alongside the RA.

I planned to withdraw accrued interest before principal sum in CPF in my retirement plan. At last, in 2022, the rule was changed to allow only principal sum from SA followed by OA to be withdrawn first. So I had to revise my worksheet. Then the worst happened when my plan to heck SA in late 2024 or early 2025 went up in smoke. Not only that, all SA above FRS will move to OA in 2025 at 55 and working CPF contribution will wholly end up in OA. Though I have more to lament, it is only right that SA should be closed and those not happy, think harder on what to do with your OA.

 

[henrylbh]

MP Yip Hon Weng, but obviously I should've been clearer. I agree with his point: “Years of financial planning based on the SA’s higher interest rate are disrupted, leaving them with limited time to adjust.”

His described exactly when I am facing but doesn't mean he made a valid point. That's akin to those who saved and saved to buy private property in the near future and some able to very soon and suddenly the gov announced effective tonite, the stamp duty will increase.

 

[henrylbh]

Is the CPF life payout really a good deal? Singapore life expectancy as of 2023 is 84yo, I assume this means half of the people would die before 84 and half after correct? And the so-called breakeven age for CPF life is around 90yo. This means the interests in the pool coming from the half that pass on before 84 and also those that pass on between 84-90 would be used to pay for those that live past 90yo. The intention is for the majority (say 80%) to pay for the 20% with long lives, there is very very low probability that the pool will become insolvent. If this is the case, shouldnt the payout be higher? Like that the CPF is bao jiak?!

Update: sorry I have forgotten that those that died before starting CPF life payouts will not be in the pool. Pls ignore.

I won't say it's a really good deal but it is fair bet on the whole. Some MUST lose for others to gain.

 

[micheritan]

Cannot understand that there is no loss. to everyone due to SA closure . the loss in SA closure is real. If gov did not think of closing the Sa , you mean the money and interest earned are fake? Now we not only loss interest but also monthly contribution to SA after 55. You money going to RA , you not going to get interest anymore after 65. SA n RA should supplement as a combo for our retirement needs. Both accounts needed to maintain retirement liquidity and flexibility if there is urgent need. OA shud be abolished. SA Maintained for after 55 n above.

 

[s0crates]

Yea sure, not many people have the FRS amount in their CPF balance, but that doesn't mean those folks can't intentionally shield that SA, only contribute to BRS, sell their SA investments, and use cpf SA as a high liquid, interest rate account.

Again, if we were to buy the argument that a liquid, high yielding account post 55 doesn't make sense, doesnt that mean that the government was wrong all these years, since CPF LIFE was introduced ~7 years ago?

Can we dock the bonus from the ministers and policy makers/civil servants for letting this inconsistency and mistake run for so many years?

Idk why people are making excuses for the MIW.

 

[BBCWatcher]

Yea sure, not many people have the FRS amount in their CPF balance…

I think the 2021 statistics showed that about 40% of CPF members fund their Retirement Accounts at least to the FRS when they turn 55. Another 7% reach the FRS by 65. So about half. I’d call about half “many people.”

but that doesn't mean those folks can't intentionally shield that SA, only contribute to BRS, sell their SA investments, and use cpf SA as a high liquid, interest rate account.

Individuals should never have expected “SA shielding” to remain an available option. That wasn’t/isn’t a reasonable expectation. If it’s available, great, but “don’t count on it.”

Again, if we were to buy the argument that a liquid, high yielding account post 55 doesn't make sense, doesnt that mean that the government was wrong all these years, since CPF LIFE was introduced ~7 years ago?

Can we dock the bonus from the ministers and policy makers/civil servants for letting this inconsistency and mistake run for so many years?

Idk why people are making excuses for the MIW.

They were/are catering to older CPF members’ wishes for a liquid, high yielding account. That‘s called the CPF Retirement Account. Retirement Accounts are $5,000 liquid from age 55 for everyone with at least $5,000 (100% liquid at or below that), 20% liquid (inclusive of the up to $5,000) from age 65, and even more liquid from 55 (up to the age 55 BRS) with a property pledge or charge.

 

[snowcrabramyeon]

Yea sure, not many people have the FRS amount in their CPF balance, but that doesn't mean those folks can't intentionally shield that SA, only contribute to BRS, sell their SA investments, and use cpf SA as a high liquid, interest rate account.

Tell us one thing - do you truly and honestly believe that SA Shielding was not a loophole but something that was intended?

 

[RedsYWNA]

Tell us one thing - do you truly and honestly believe that SA Shielding was not a loophole but something that was intended?

Shielding has been blown out of proportion. The fact is that for people who hit FRS at age 55, if they continue to work, their SA interest has been reduced from 4% to 2.5% at the age when they precisely need higher CPF interest.

If Govt only wanted to target SA shield, they could have made some rules to disallow shielding once you hit a certain age, instead of a blanket policy that affects 1/2 of Singaporeans (could be higher in a few years time).

 

[henrylbh]

Tell us one thing - do you truly and honestly believe that SA Shielding was not a loophole but something that was intended?

I do believe that SA shielding was never in the mind of the body that incorporated SA into the CPF scheme. Only subsequently the members got smarter while the body was complacent and slow to act.

 

[henrylbh]

Shielding has been blown out of proportion. The fact is that for people who hit FRS at age 55, if they continue to work, their SA interest has been reduced from 4% to 2.5% at the age when they precisely need higher CPF interest.

If Govt only wanted to target SA shield, they could have made some rules to disallow shielding once you hit a certain age, instead of a blanket policy that affects 1/2 of Singaporeans (could be higher in a few years time).

As good as telling the gov to close CPF at 55 and return every cent and it's up to individual to take care their own funeral.

 

[royalmix]

If there is no abuse of SA at 55, all of us would still continue to have SA for life!

Who started it ? Internal leakage, then it starts to spread, authorities know and still dun take action cos they claim they are right (they think investing SA involves risk, so risk takers should be rewarded haha), then it was beyond control (maybe after TBills came, where is the risk?), then take the most drastic action to close SA!

There are many ways to solve the problem, but choose one which dun tell you there is a loophole that needs to be patched!

 

[henrylbh]

Yea sure, not many people have the FRS amount in their CPF balance, but that doesn't mean those folks can't intentionally shield that SA, only contribute to BRS, sell their SA investments, and use cpf SA as a high liquid, interest rate account.

Idk why people are making excuses for the MIW.

Firstly, who or why you think people are making excuses MIW?

Yea sure not many people, less than half, have FRS at 55. That means all of SA plus OA at 55 are not enough to meet FRS. So how many of these folks can effectively shield SA when they don't have much and first 40k cannot touch. Whatever they have, if any, to shield cpf SA as a high liquid, interest rate account is ill conceived as all SA will go to RA, when unshielded.

 

[henrylbh]

If there is no abuse of SA at 55, all of us would still continue to have SA for life!

Who started it ? Internal leakage, then it starts to spread, authorities know and still dun take action cos they claim they are right (they think investing SA involves risk, so risk takers should be rewarded haha), then it was beyond control (maybe after TBills came, where is the risk?), then take the most drastic action to close SA!

There are many ways to solve the problem, but choose one which dun tell you there is a loophole that needs to be patched!

Cannot say abuse of SA at 55. The members got smarter and got the better of the gov for being slow in catching up with time or resting on laurels

 

[Okenba]

Shielding has been blown out of proportion. The fact is that for people who hit FRS at age 55, if they continue to work, their SA interest has been reduced from 4% to 2.5% at the age when they precisely need higher CPF interest.

If Govt only wanted to target SA shield, they could have made some rules to disallow shielding once you hit a certain age, instead of a blanket policy that affects 1/2 of Singaporeans (could be higher in a few years time).

If they have hit FRS, why do they precisely need higher interest now?

If you look at the SA allocation from 55-65 yo, it will probably only crease by $15k/yr at max contribution.
At 4%pa, the SA earned from 55-65yo would be about $200k.
At 2.5%pa, the SA earned from 55-65yo would be about $185k.
Not sure how critical that $15k is going to be.

I think ppl are more upset at the removal of their CPF bank account (anytime withdrawal) that earns 4%pa that they assumed would last forever.
Not so much about post 55yo peeps who continue to work.