CPF SA Shielding hack - RIP (Obsolete)

[BBCWatcher]

No doubt one can choose the amount and when to enter and exit UT. Still there is a risk that the loss may be sour or very sour. If got time or start early, and keep bidding for TB at more than 4.6% for guaranteed profit over prevailing SA rate and hold till maturity. Well and good if SA rate stays unchanged or rise by the earliest in Apr/May that turns calculated profit into loss that is measurable and palatable for shielding. Failing that, then I would venture into UT when close to 55 and just hope the losses would be minimal in shielding SA.

In BOTH cases you don’t know the extent of the losses, if any. In the case of T-bill-based shielding not only do you not know the extent of the SA rate risk you have to wait months to get past it. Many people don’t like having to wait months to know whether and how much they lost and would prefer to get their risk behind them quickly.

Interesting hypothetical you’ve got, but we don’t have 4.6% T-bills. Not yet anyway. The previous T-bill had a cut-off yield of 4.28% equating to an EIR of about 4.36%. But that’s the rate when you’d only get a partial fill. Only bidders at or below 4.27% got full allocations. Bidders at 4.29% or higher got nothing. Yes, the SA rate risk is mitigated with a higher T-bill rate, but what if the T-bill rate isn’t higher? (And what if it’s lower?)

Net net, this is not a straightforward decision and has no clear winner, not right now anyway. And before TOO long T-bill rates will head down well below 4% again. You probably won’t give T-bill-based shielding even 5 seconds of thought if you’re age 53 or younger right now.

With TB opiton, one can choose to bid more than the amount available in SA including timed incoming contributions, if any. Eg, with 300k less 40k leaving available balance of 260k, you can bid more than 260k by ensuring the cut-off price will leave minimal amount (less than 1k) above 40k. If the COP is lower leaving more than expected above 40k, count yourself lucky. With UT you can only buy with available amount shown in SA i.e. 260k.

In both cases you can only buy what’s investible, but the unit trust-based method has better granularity (finer control) in both date (every business day instead of once every 2 weeks) and dollar amount. It’s the clear winner on those scores.

Of course you could use both shielding methods in combination if you wish.

 

[BBCWatcher]

Have you or anyone tried this ? ie applying for tbill more than investible amount from OA or SA although nett of discount is within investible amount.

Yes, this works. You only need the discounted purchase price for your T-bill when using CPF OA or SA dollars, not the face value. However, if you’re still concerned then you can place 2 bids. Let’s suppose your investible total is $100,000. You could do something like this:

Bid #1: 4.10% for $99,000 (face value)
Bid #2: 4.11% for $2,000 (face value)

 

[vsvs24]

Yes, this works. You only need the discounted purchase price for your T-bill when using CPF OA or SA dollars, not the face value. However, if you’re still concerned then you can place 2 bids. Let’s suppose your investible total is $100,000. You could do something like this:

Bid #1: 4.10% for $99,000 (face value)
Bid #2: 4.11% for $2,000 (face value)

You tried and confirmed both bid 1 and 2 in same tbill issue for $101,000 will not give issues if investible amount is only 100k ?

 

[dork32]

Have you or anyone tried this ? ie applying for tbill more than investible amount from OA or SA although nett of discount is within investible amount.

A bit risky to do this. DBS form has a clause on penalty charge if there is insufficient funds. I presume no one knows for sure how they define insufficient funds until someone kena.

Better to be cautious and just apply based on investible amount then do a second round for the discount amount and any incoming contribution

why risky? risk can be mitigated by bidding correctly

 

[henrylbh]

Have you or anyone tried this ? ie applying for tbill more than investible amount from OA or SA although nett of discount is within investible amount.

Take it or leave it It's not something that I want to leak.

A bit risky to do this. DBS form has a clause on penalty charge if there is insufficient funds. I presume no one knows for sure how they define insufficient funds until someone kena.

Of course if there is insufficient fund there must be penalty for the trouble caused to the parties involved.

Ok I leak another thing. You can buy CPF shares more than your available limit. You just have to pay the shortage by cash and no penalty. You can also sell more CPF shares than you own under CPFIS. The oversold portion will be rejected and redirected to your broking firm and you take it from there. Again no penalty whatsoever.

Better to be cautious and just apply based on investible amount then do a second round for the discount amount and any incoming contribution

Up to individuals to stray to discover the unknown.

 

[henrylbh]

There is limit on the amount eligible for investment. And any top up and interest earned on top up can’t be invested. The max allowed is amount -40 k. So you have no way to invest more than 260k if only 300k in SA.

I am assuming the case that SA have no top-ups which clearly cannot be used to investment. If have, it will flag the amount above 40k that is not available. Still it's possible to breach the limit. Only ensure that the topped up amount is taken into account.

 

[BBCWatcher]

You tried and confirmed both bid 1 and 2 in same tbill issue for $101,000 will not give issues if investible amount is only 100k ?

There are several reports in this forum that there's only one deduction when you successfully bid on T-bills with CPF dollars: the final (discounted) amount determined at auction. If you have enough investible dollars to cover this deduction then where's the problem?

CPF is different than unrestricted cash in this respect. With unrestricted cash you'll see something like this in your bank statement when you buy a T-bill:

Order date: -$10,000
After auction date: +$382.85

Two transactions, so you need the face value amount to place the order. Not with CPF dollars. There's only one transaction in your CPF statement per successful order.

 

[henrylbh]

You tried and confirmed both bid 1 and 2 in same tbill issue for $101,000 will not give issues if investible amount is only 100k ?

Yes, this works. You only need the discounted purchase price for your T-bill when using CPF OA or SA dollars, not the face value. However, if you’re still concerned then you can place 2 bids. Let’s suppose your investible total is $100,000. You could do something like this:

BBC has answered 'Yes' to your question 'Have you or anyone tried this?'

You tried and confirmed both bid 1 and 2 in same tbill issue for $101,000 will not give issues if investible amount is only 100k ?

Now your question is more direct. Most probably the answer is not a direct No

 

[BernardWYF]

If I have say 90k to shield from SA account before 55yo birthday say 1 Oct 2023, does it mean I go to the bank to buy the 6 month T-bills with maturity on 25 Oct 2023 and opt for non-competitive 135k (invest higher to aim for auction allocation of 90k)? Suppose unfortunately get low allocated portion of less than 90k say 50k, then buy 6-month T-bills with maturity on 25 Nov 2023 for the remaining 40k using the same method of aim high?

thanks

 

[reddevil0728]

If I have say 90k to shield from SA account before 55yo birthday say 1 Oct 2023, does it mean I go to the bank to buy the 6 month T-bills with maturity on 25 Oct 2023 and opt for non-competitive 135k (invest higher to aim for auction allocation of 90k)? Suppose unfortunately get low allocated portion of less than 90k say 50k, then buy 6-month T-bills with maturity on 25 Nov 2023 for the remaining 40k using the same method of aim high?

thanks

1. You can just apply for the t-bill that gets issued before your birthday and matures after your birthday. and there are many options
2. technically it is safer to put a comp bid of as low as 0.01% because that means you get (almost) 100% chance of 100% allocation vs non comp where it is subject to quota.
3. see above

 

[henrylbh]

If I have say 90k to shield from SA account before 55yo birthday say 1 Oct 2023, does it mean I go to the bank to buy the 6 month T-bills with maturity on 25 Oct 2023 and opt for non-competitive 135k (invest higher to aim for auction allocation of 90k)? Suppose unfortunately get low allocated portion of less than 90k say 50k, then buy 6-month T-bills with maturity on 25 Nov 2023 for the remaining 40k using the same method of aim high?

thanks

You put in 135k SA in non-comp when eligible amount is 90k? Have you find out what would happen if you get full allocation and and the cut-off amount is more than 90k and how much can you stomach if the COY is lower than SA rate?

 

[reddevil0728]

You put in 135k SA in non-comp when eligible amount is 90k? Have you find out what would happen if you get full allocation and and the cut-off amount is more than 90k and how much can you stomach if the COY is lower than SA rate?

Don’t think allowed to apply more than what’s available and the entire application might just render invalid

tbh if it’s for purpose of shielding, some may forgot “known” loss of interest vs using bond fund method where can kena capital loss

 

[dork32]

Don’t think allowed to apply more than what’s available and the entire application might just render invalid

tbh if it’s for purpose of shielding, some may forgot “known” loss of interest vs using bond fund method where can kena capital loss

yes, you are allowed to bid any number. just write whatever you want on the form. bank dont check

bond fund method also got loss of interest.

 

[reddevil0728]

yes, you are allowed to bid any number. just write whatever you want on the form. bank dont check

But what happens if not enough? Will it render the entire application invalid?

 

[dork32]

But what happens if not enough? Will it render the entire application invalid?

then kena pay penalty

 

[reddevil0728]

then kena pay penalty

But will get allocate the amount you have? Just pay penalty?

 

[idwish]

Am I right to say that all the cpf sa shielding is assuming that you meet the FRS and decided not to withdraw all the balance in cash after deducting FRS and want to retain the money in SA?

 

[reddevil0728]

Am I right to say that all the cpf sa shielding is assuming that you meet the FRS and decided not to withdraw all the balance in cash after deducting FRS and want to retain the money in SA?

it's more like you don't want them to transfer SA into RA that earns the same interest. but rather to force them to transfer OA first. so that OA amount that got transferred now starts to earn higher interest

while you maintain SA that can be withdraw anything should it be above FRS.. or BRS if pledge property

 

[idwish]

Sorry..I am confused.
Assuming I have 100K OA, 198800 SA and when I reached 55 yo
SA198800 would have gone to RA and I can withdraw the 100K from OA
vs using shielding of say $100K SA
100K OA+98,800 SA to RA and I still withdraw the same amount of 100K at 55yo.
So why do I need to go thru the shielding as end of the day I still get the same amount of cash?

 

[Value.Matrix]

Sorry..I am confused.
Assuming I have 100K OA, 198800 SA and when I reached 55 yo
SA198800 would have gone to RA and I can withdraw the 100K from OA
vs using shielding of say $100K SA
100K OA+98,800 SA to RA and I still withdraw the same amount of 100K at 55yo.
So why do I need to go thru the shielding as end of the day I still get the same amount of cash?

You want a fixed deposit of 4% SA which you can withdraw anytime While earning 4%.

Or you want OA of 2.5% which you can withdraw anytime.

Of course if you want to withdraw immediately, why bother doing shielding.