CPF SA Shielding hack - RIP (Obsolete)

[mynickname]

If you need money fast how does buying t-bill help solve that problem?

Think what he meant is he was looking for quick maturity

 

[reddevil0728]

@closeCPFIAopenCPFIA why So many of your posts are just a quote of someone’s post?

 

[reddevil0728]

Instead of 6 month, it reqiured less than 2 months.

So you want something with a 2 month maturity but with a higher yield than what you could have gotten had you not done anything

 

[closeCPFIAopenCPFIA]

If i was able to get BS22121?, less than 8 days.

 

[closeCPFIAopenCPFIA]

I remember 2 days before i reached 55, i was looking at my cpf balance online and noticed that RA was created 3 days before i reached 55.
And frs sum of 171k was transferred from sa to ra.
I tried to transfer from oa to sa to topup to frs in sa of 171k, it went through 2 days before i touched 55.
So try this if u are reaching 55 soon.

 

[a4973]

I remember 2 days before i reached 55, i was looking at my cpf balance and noticed that RA was created 3 days before i reached 55.
And frs sum of 171k was transferred from sa to ra.
I tried to transfer from oa to sa to topup to frs in sa of 171k, i went through 2 days before i touched 55.
So try this if u are reaching 55 soon.

So your this experience was not recent but back in 2018? Interesting your RA was created 2 days before your 55th birthday. For me 55 in 2019, the RA was literally created at midnight. 115+ pm I checked CPF app no RA no transfer, 12+ am I checked CPF app RA was created and funded via the SA then OA transfer.

 

[closeCPFIAopenCPFIA]

Yes. It was in 2018. 2019 my spouse was able to do it in march 2019

 

[dork32]

The Tbills good for OA but not SA shielding bcos the cutoff yield cannot hit the breakeven point of 4.67%. The value proposition then is to bite the bullet n go for one-two weeks of short term nikko or other funds. Any other good proposals for shielding at this time?

this is a very one sided and lousy analysis. Yes, you lose one additional month of interest if you shield with tbills. this makes the breakeven at 4.67%. yes 4.67% is the number that you should look at if you are using the 6 months tbills to invest your sa. but you are shielding, not investing.

but did you consider the best alternative for shielding? you shield using unit trust. you also lose 1 month of interest. there are no alternatives that allows you to lose less than that

hence a 4% coy is good enough for shielding using tbills.

you can do your own maths: compare shielding with 4.1% vs shielding using unit trust with 0 pain/loss.

of course this is based on the assumption that everything else remains constant eg the interest rates of the sa is constant throughout the 6 months.

 

[dork32]

The Tbills good for OA but not SA shielding bcos the cutoff yield cannot hit the breakeven point of 4.67%. The value proposition then is to bite the bullet n go for one-two weeks of short term nikko or other funds. Any other good proposals for shielding at this time?

the idea of getting in and out fast is because the longer your money is out of your sa, the more interest you lose. but what is the hurry of getting back if your shielding instrument is earning more than the 4% your lousy cpf is giving?

 

[vsvs24]

I needed money fast so bought from dbs with cpfoa through the secondary market.
I asked dbs to quote BS22121?, dbs replied no have.
I asked dbs to quote BS22122?, dbs replied not enough qty.
I asked dbs to quote BS22123?, dbs replied no have.
I asked dbs to quote BS22124?, dbs replied had sufficient qty. And quote 99.485 per 100 after their treasury dept replied few hours later
So if you u need to shield use cpf sa.

cpf oa was my atm until it dropped below 20k.

Thanks for the details. You went to the branch to ask for quotes or call up ?

 

[closeCPFIAopenCPFIA]

Went to the branch. no need to queue. have to wait for the quote price.
The queue is now shorter becos CPFIA t bill appication is now available online through dbs internet banking

 

[dork32]

Think what he meant is he was looking for quick maturity

i have said this. if my tbills is earning 4.2%. i am really not in a hurry to get it back to sa

 

[BBCWatcher]

The Tbills good for OA but not SA shielding bcos the cutoff yield cannot hit the breakeven point of 4.67%. The value proposition then is to bite the bullet n go for one-two weeks of short term nikko or other funds. Any other good proposals for shielding at this time?

this is a very one sided and lousy analysis. Yes, you lose one additional month of interest if you shield with tbills. this makes the breakeven at 4.67%. yes 4.67% is the number that you should look at if you are using the 6 months tbills to invest your sa. but you are shielding, not investing.

but did you consider the best alternative for shielding? you shield using unit trust. you also lose 1 month of interest. there are no alternatives that allows you to lose less than that

hence a 4% coy is good enough for shielding using tbills.

Actually a COY of 3.85% is good enough for "SA shielding" via a 6 month T-bill. I'm assuming a 7 month roundtrip and a SA interest rate of 4.00%. A COY of 3.85% equates to an EIR of (a tiny fraction higher than) 4.00%, matching SA but with the unavoidable 1 month SA interest loss.

And you could go lower than that depending on how much concern you have about possible capital loss with a short roundtrip in/out of a bond unit trust.

To shield, should buy T-bills that are going to mature soon from the secondary market through your CPFIA agent bank. Heard DBS has the most T bills. I have bought T-bill BS22114E @99.485 with OA from DBS early Dec 2022 and it matures and paid on 25th Jan 2023.

Interesting!! I believe you are the first to feedback Tbills secondary market experience. So may I know why you chose to buy via the secondary market route instead of auction? Did you earn more returns? Really keen to hear more about your total experience. Thanks.

I can't remember where I saw it, but I saw a blog article referring to this pathway. You'll have to find someone at DBS (or UOB or OCBC) who can contact their bond desk to get a private quotation on a T-bill or other Singapore Government Security that matures soon after your 55th birthday. Oversimplifying only slightly if the quotation is at or below par then it'll probably be perfectly fine for SA shielding purposes. This is something a bank investment salesperson might be especially motivated to do because there's probably an internal sales commission built into the price quotation from the bank's bond desk.

I still think the bond unit trust-based SA shielding method is preferable all around, and you should probably do that instead. But if you'd like to explore the bank bond desk-based SA shielding method you can try. Just don't wait until the last minute, and have your unit trust-based method ready to go.

 

[a4973]

Actually a COY of 3.85% is good enough for "SA shielding" via a 6 month T-bill. I'm assuming a 7 month roundtrip and a SA interest rate of 4.00%. A COY of 3.85% equates to an EIR of (a tiny fraction higher than) 4.00%, matching SA but with the unavoidable 1 month SA interest loss.

And you could go lower than that depending on how much concern you have about possible capital loss with a short roundtrip in/out of a bond unit trust.


I can't remember where I saw it, but I saw a blog article referring to this pathway. You'll have to find someone at DBS (or UOB or OCBC) who can contact their bond desk to get a private quotation on a T-bill or other Singapore Government Security that matures soon after your 55th birthday. Oversimplifying only slightly if the quotation is at or below par then it'll probably be perfectly fine for SA shielding purposes. This is something a bank investment salesperson might be especially motivated to do because there's probably an internal sales commission built into the price quotation from the bank's bond desk.

I still think the bond unit trust-based SA shielding method is preferable all around, and you should probably do that instead. But if you'd like to explore the bank bond desk-based SA shielding method you can try. Just don't wait until the last minute, and have your unit trust-based method ready to go.

Do you know if the agent bank is selling Tbills from their own holdings or they match a buyer with a seller? Thanks.

 

[BBCWatcher]

Do you know if the agent bank is selling Tbills from their own holdings or they match a buyer with a seller? Thanks.

I'm pretty sure it's the former, but "own holdings" could be broadly defined.

 

[reddevil0728]

Went to the branch. no need to queue. have to wait for the quote price.
The queue is now shorter becos CPFIA t bill appication is now available online through dbs mobile app

whether need to queue or not is quite subjective right. unless you are saying don't even need to press button can ask those ppl at the front of house?

i thought only digibank online not via mobile app?

 

[dork32]

Actually a COY of 3.85% is good enough for "SA shielding" via a 6 month T-bill. I'm assuming a 7 month roundtrip and a SA interest rate of 4.00%. A COY of 3.85% equates to an EIR of (a tiny fraction higher than) 4.00%, matching SA but with the unavoidable 1 month SA interest loss.

And you could go lower than that depending on how much concern you have about possible capital loss with a short roundtrip in/out of a bond unit trust.

i not ocd. i am ok to use 4%.

Noticed i used 0 profit/loss. this is the most neutral position. I could have said you make a profit and the breakeven becomes higher.

 

[BBCWatcher]

i not ocd. i am ok to use 4%.

It's just math. T-bill COYs aren't EIRs. (I typed up the COY↔EIR formulas in the T-bill thread.) But the relevant COY is 3.85% for these purposes (shielding). At or above 3.85% and you're doing no worse (or better) than the unit trust-based shielding method assuming the unit trust-based method involves a 1 month loss of SA interest.

If your 55th birthday falls near (or at) the beginning or end of the calendar month such that the unit trust-based SA shielding method results in a loss of 2 months of SA interest then your T-bill COY "hurdle rate" falls because there's always a 6 month T-bill spanning your 55th birthday that has a 7 month rountrip. Let's see if I can figure out that "hurdle rate"... I guess the unit trust method would yield 10/12ths of 4% (10 months in SA, 2 months out), so that's 3.33% EIR. A 3.33% EIR translates to a COY of 3.23%, so there you go.

I'm ignoring the "lumpiness" of T-bills ($1,000 face value increments) since I assume you could always mop up leftovers using the unit trust-based method as long as you remember to leave enough SA dollars to meet the unit trust investment minimum.

There's a big difference right now between 3.85% and 4.00% COY in the 6 month T-bill market. The most recent 6 month T-bill had a COY of exactly 4.00%, meaning you would've only been partially filled at that bid. A 3.85% bid would've been fully allocated. This isn't OCD; this is rather important. At least right now. Of course 3.23% COY would get filled even if market rates come down a bit more.

Noticed i used 0 profit/loss. this is the most neutral position. I could have said you make a profit and the breakeven becomes higher.

These benchmark 3.85% and 3.23% COY "hurdle rates" are in comparison to the unit trust-based shielding with no share price movement in the unit trust. You could go a little lower on those COY bids if you're concerned about share price movement risks. But I don't think you'd go higher since you're already doing at least as well as you could expect from bond unit trust-based shielding.

 

[henrylbh]

To shield, should buy T-bills that are going to mature soon from the secondary market through your CPFIA agent bank. Heard DBS has the most T bills. I have bought T-bill BS22114E @99.485 with OA from DBS early Dec 2022 and it matures and paid on 25th Jan 2023.

May I know what is the transaction cost including agent bank charges (excluding OA interest forgone), if any, in buying T-bill BS22114E @99.485 with OA from DBS early Dec 2022 and it matures and paid on 25th Jan 2023?

Also, why shield OA instead of SA, unless you are shielding both?

 

[closeCPFIAopenCPFIA]

May I know what is the transaction cost including agent bank charges (excluding OA interest forgone), if any, in buying T-bill BS22114E @99.485 with OA from DBS early Dec 2022 and it matures and paid on 25th Jan 2023?

Also, why shield OA instead of SA, unless you are shielding both?

I was not shielding. I was using my cpf OA as atm. I did not want to touch my sa.
DBS charged 2.5*1.07 for the fee. I calculated the eir was about 3.09% for 2 months (60days). This method could be applied to cpf sa shielding.
After settlement, i closed my cpfia and the T bill was transferred to my cdp with 10.70 fee. Then i reapplied cpfia with ocbc .