CPF SA

[andyhtc]

Wish to give an update that I have successfully closed my CPF Investment account with DBS. The 3 share counters and 5 Tbills sitting in my CPFIS account has been transferred to my CDP account.

Process :

1. Submitted online form to CPF to close CPFIS on 17 Nov 2022.

2. Noticed the 5 tbills disappeared from my CPFIS account when I login to DBS IB on 20 Nov 2022. Called DBS and CPF regarding this on 21 Nov 2022. After some ******** from DBS CSO and a few calls, was informed that DBS has a system glitch so the tbills are no longer shown and DBS will send out the official letter to me that day.

3. Received letter by mail from DBS on 24 Nov 2022 on charges and to ask for my CDP number. Charges was for the 3 share counters only. Letter state that I have to authorise deduction from my DBS bank account for the charges if my CPFIS has insufficient funds.

4. Went to POSB branch on 25 Nov 2022 to ask about the missing tbills and to check if tbills are also subject to transfer fees as the form has only indicated transfer fees for the 3 shares shown in the system. The branch staff confirmed with the backend people that tbills is also subject to CDP transfer fees so I completed the form to state CDP number and authorize amended transfer fees of 8 X $10.70. Submitted the form to POSB branch on 25 Nov 2022 (Fri) about 5pm.

5. On 28 Nov 2022 (Mon), fees deducted from DBS bank account. Checked CDP and saw the movement of the shares and tbills in my CDP.

Conclusion :

1. I used all my OA (except $20,000 that cannot be used for investment) to buy tbills. With the transfer to my CDP, upon maturity they will be paid to my bank account linked to my CDP and at my disposal. So this hack to withdraw OA without touching SA works.

2. Try to leave some money behind in CPFIS if you are planning to close it. Because once CPF approved the closure, DBS seem to freeze the account. The form only allows me to indicate a bank account to deduct the charges from. There don't seem to be any leeway for them to draw from my OA for the transfer fees.

3. As usual, DBS cannot make it. Full of issues when dealing with tbills. When I called DBS hotline after I noticed the tbills disappeared from CPFIS, the CSO said it will be transferrred back to my CPF OA and ask me to call CPF. When I press further she ask me to go to the branch and ask. Caused me to panic as I thought they are liquidating the tbills. When I went to the branch after receiving the letter, took them 4 hrs to get the correct person to address the issue properly. The investment desk person only sent email and was pushed around to ask another unit. In the end, I was saved by the service ambassador who manages the queue as she knew exactly who to contact at the backend to address the issue.

What a hassle. Fees will change from time to time.

What will happen to your T-Bill when they mature?

 

[vsvs24]

How old are you?
Is this a hack to withdraw cpf money before 55?

Only for those 55 and above with FRS in RA.

Below 55 can't transfer to your CDP. But can change agent bank at a fee. If want to close for good need to liquidate all investment first.

 

[reddevil0728]

Wish to give an update that I have successfully closed my CPF Investment account with DBS. The 3 share counters and 5 Tbills sitting in my CPFIS account has been transferred to my CDP account.

Process :

1. Submitted online form to CPF to close CPFIS on 17 Nov 2022.

2. Noticed the 5 tbills disappeared from my CPFIS account when I login to DBS IB on 20 Nov 2022. Called DBS and CPF regarding this on 21 Nov 2022. After some ******** from DBS CSO and a few calls, was informed that DBS has a system glitch so the tbills are no longer shown and DBS will send out the official letter to me that day.

3. Received letter by mail from DBS on 24 Nov 2022 on charges and to ask for my CDP number. Charges was for the 3 share counters only. Letter state that I have to authorise deduction from my DBS bank account for the charges if my CPFIS has insufficient funds.

4. Went to POSB branch on 25 Nov 2022 to ask about the missing tbills and to check if tbills are also subject to transfer fees as the form has only indicated transfer fees for the 3 shares shown in the system. The branch staff confirmed with the backend people that tbills is also subject to CDP transfer fees so I completed the form to state CDP number and authorize amended transfer fees of 8 X $10.70. Submitted the form to POSB branch on 25 Nov 2022 (Fri) about 5pm.

5. On 28 Nov 2022 (Mon), fees deducted from DBS bank account. Checked CDP and saw the movement of the shares and tbills in my CDP.

Conclusion :

1. I used all my OA (except $20,000 that cannot be used for investment) to buy tbills. With the transfer to my CDP, upon maturity they will be paid to my bank account linked to my CDP and at my disposal. So this hack to withdraw OA without touching SA works.

2. Try to leave some money behind in CPFIS if you are planning to close it. Because once CPF approved the closure, DBS seem to freeze the account. The form only allows me to indicate a bank account to deduct the charges from. There don't seem to be any leeway for them to draw from my OA for the transfer fees.

3. As usual, DBS cannot make it. Full of issues when dealing with tbills. When I called DBS hotline after I noticed the tbills disappeared from CPFIS, the CSO said it will be transferrred back to my CPF OA and ask me to call CPF. When I press further she ask me to go to the branch and ask. Caused me to panic as I thought they are liquidating the tbills. When I went to the branch after receiving the letter, took them 4 hrs to get the correct person to address the issue properly. The investment desk person only sent email and was pushed around to ask another unit. In the end, I was saved by the service ambassador who manages the queue as she knew exactly who to contact at the backend to address the issue.

tbh not surprised they may not know. because not common.

How old are you?
Is this a hack to withdraw cpf money before 55?

for after 55

 

[Okenba]

Wish to give an update that I have successfully closed my CPF Investment account with DBS. The 3 share counters and 5 Tbills sitting in my CPFIS account has been transferred to my CDP account.

Appreciate the update, but not sure of use case.

This is when we want to withdraw from OA instead of SA first.
It seems too unwieldy to do this on a regular basis?
So should only do so when there is a sizable amount in OA.
At which point, we should receive OA-20k?

Alternatively, one could shield SA and withdraw OA+40k (from SA)?

 

[vsvs24]

What a hassle. Fees will change from time to time.

What will happen to your T-Bill when they mature?

I am counting on interest still being higher than 2.5% when they mature from Apr 2023. Will place them in longer tenures when there are signs that interest will be cut. While I place them out, currently I have RHB and HSBC EGA the 2 highest interest yielding accounts. Have also secured 3.8% in esaver till Jun 2023.

Not just about fees. There's more flexibility with cash and more choice eg FD using cash vs FD using CPF. Plan to look at longer term SGS bonds. Big disadvantage if use CPF due to loss of interest and also SGS bonds requires 115% upfront payment.

I am not working. When interest goes below 2.5%, I can do housing refund. Can VC to 3 accounts at max $37,740 yearly. This will boost my SA too. So in a way, doing this is preserving my SA (which I shielded) as long as I can. Otherwise there will come a time when I need to draw down for living expenses and it has to come from SA first then OA.

My unhappiness with DBS is just a push for me to take action. Without the fire probably will lay back and do nothing even though I know about the hack.

 

[andyhtc]

I am counting on interest still being higher than 2.5% when they mature from Apr 2023. Will place them in longer tenures when there are signs that interest will be cut. While I place them out, currently I have RHB and HSBC EGA the 2 highest interest yielding accounts. Have also secured 3.8% in esaver till Jun 2023.

Not just about fees. There's more flexibility with cash and more choice eg FD using cash vs FD using CPF. Plan to look at longer term SGS bonds. Big disadvantage if use CPF due to loss of interest and also SGS bonds requires 115% upfront payment.

I am not working. When interest goes below 2.5%, I can do housing refund. Can VC to 3 accounts at max $37,740 yearly. This will boost my SA too. So in a way, doing this is preserving my SA (which I shielded) as long as I can. Otherwise there will come a time when I need to draw down for living expenses and it has to come from SA first then OA.

My unhappiness with DBS is just a push for me to take action. Without the fire probably will lay back and do nothing even though I know about the hack.

Government security is a very recent phenomenon due to the decade-long low-interest rate environment.

I don't think many staff know about the procedures and ancient mechanisms built inside.

The banks did not even bother to automate the T-Bill process fully and this results in many labour-intensive and error-prone work.

 

[BBCWatcher]

Big disadvantage if use CPF due to loss of interest and also SGS bonds requires 115% upfront payment.

I don’t think that there’s any 115% requirement with new issue SGSes.

 

[vsvs24]

I don’t think that there’s any 115% requirement with new issue SGSes.

But if you look at the 2023 calender, most are re-open.

 

[jywy2005]

If T-bills can hit 5% next year, time to place SA funds there. I intend to do SA shielding before I hit 55 yo.

Btw, how much must I leave in SA account before I can invest in T-bills? TIA.

 

[BBCWatcher]

Btw, how much must I leave in SA account before I can invest in T-bills?

$40,000 usually. Exception: if grants, cash top ups, and accrued interest on the grants/top ups exceed $40,000 then that’s the minimum figure. The CPF Board provides this figure to you via your online account.

 

[reddevil0728]

But if you look at the 2023 calender, most are re-open.

But if following Tbill logic with CPF, technically they shouldn’t deduct the 115% up front no they just deduct the net

If T-bills can hit 5% next year, time to place SA funds there. I intend to do SA shielding before I hit 55 yo.

Btw, how much must I leave in SA account before I can invest in T-bills? TIA.

Actually even if no hit 5% is a worthy vehicle to consider for shielding

 

[BBCWatcher]

But if following Tbill logic with CPF, technically they shouldn’t deduct the 115% up front no they just deduct the net

It’s only the reopened SGSes with >1 year tenor that have the 115% requirement. And do they, really? Yes, you might need enough investible funds in your CPF account to cover the 115% when you place the bid. But when the transaction is actually processed isn’t the exact amount deducted? I’ve never tried it, so I don’t know, but that’s how T-bills work with CPF dollars. Unlike cash the bank doesn’t pull 100% from your CPF account then refund the discount. There’s only one transaction for the exact amount.

Actually even if no hit 5% is a worthy vehicle to consider for shielding

Currently, weirdly. I figure any 6 month T-bill with issuance and maturity dates broadly somewhere in the middle of the month is attractive enough for “shielding” with a 4.25% bid. Much below a 4.25% cut-off yield you’re probably better off with the bond unit trust-based approach.

This assumes the 4% floor rate for SA also remains the actual rate. For 1Q2023 that’s true (already announced), and for 2Q2023 it’s looking very likely. For 3Q2023 and beyond I’m less certain. If the SA interest rate rises above 4% then the T-bill cut-off yield you’re willing to accept for shielding should be correspondingly higher.

 

[vsvs24]

But if following Tbill logic with CPF, technically they shouldn’t deduct the 115% up front no they just deduct the net

Not sure. But some people said the bank staff asked to see their OA balance.

 

[BBCWatcher]

Not sure. But some people said the bank staff asked to see their OA balance.

Could be, but here's how that'd work if so. Let's suppose you have a $40,000 Ordinary Account balance, so $20,000 is investible. You want to buy a reopened 5 year Singapore Government Security, let's suppose. The 115% coverage requirement means you can buy $17,000 (face value) of that bond (20,000 ÷ 1.15, rounded down to the nearest thousand). The residual you can still invest in any new issue SGS (including any T-bill) if you wish.

Of course there are myriad other investment vehicles available for CPF OA dollars. Government bonds aren't necessarily the best investment choices.

 

[reddevil0728]

It’s only the reopened SGSes with >1 year tenor that have the 115% requirement. And do they, really? Yes, you might need enough investible funds in your CPF account to cover the 115% when you place the bid. But when the transaction is actually processed isn’t the exact amount deducted? I’ve never tried it, so I don’t know, but that’s how T-bills work with CPF dollars. Unlike cash the bank doesn’t pull 100% from your CPF account then refund the discount. There’s only one transaction for the exact amount.

context matters suggest looking at context

Currently, weirdly. I figure any 6 month T-bill with issuance and maturity dates broadly somewhere in the middle of the month is attractive enough for “shielding” with a 4.25% bid. Much below a 4.25% cut-off yield you’re probably better off with the bond unit trust-based approach.

This assumes the 4% floor rate for SA also remains the actual rate. For 1Q2023 that’s true (already announced), and for 2Q2023 it’s looking very likely. For 3Q2023 and beyond I’m less certain. If the SA interest rate rises above 4% then the T-bill cut-off yield you’re willing to accept for shielding should be correspondingly higher.

even if the yield is not attractive. the fact that it is capital guaranteed vs bond unit trust approach might already be attractive to some

Not sure. But some people said the bank staff asked to see their OA balance.

then is a bank procedure thing. not all like that anyway

 

[reddevil0728]

Could be, but here's how that'd work if so. Let's suppose you have a $40,000 Ordinary Account balance, so $20,000 is investible. You want to buy a reopened 5 year Singapore Government Security, let's suppose. The 115% coverage requirement means you can buy $17,000 (face value) of that bond (20,000 ÷ 1.15, rounded down to the nearest thousand). The residual you can still invest in any new issue SGS (including any T-bill) if you wish.

Of course there are myriad other investment vehicles available for CPF OA dollars. Government bonds aren't necessarily the best investment choices.

don't get how does that solve bank staff asking to see the balance hence not able to fully maximise the application for a specific tranche though?

whether is it best investment choices or not is not relevant in the equation of making it work

 

[dork32]

Currently, weirdly. I figure any 6 month T-bill with issuance and maturity dates broadly somewhere in the middle of the month is attractive enough for “shielding” with a 4.25% bid. Much below a 4.25% cut-off yield you’re probably better off with the bond unit trust-based approach.

can explain why 4.25?

 

[BBCWatcher]

can explain why 4.25?

The gist is that the cut-off yield (bid) is not quite the same thing as the effective yield. So IF you're aiming for a 4.33% minimum effective yield on the T-bill used for "SA shielding" then a cut-off yield bid of ~4.25% should get the job done. The reason for a ~4.33% objective is that you're going to lose 7 months of SA interest with a typical 6 month T-bill (8 months in a few cases, but let's ignore those), so ~4.33% would make you whole again. (Monthly interest on a 4% annualized interest rate is about 0.33%, hence about 4.33%.)

At a cut-off yield of 4.25% a 6 month $1,000 T-bill would have a price of $978.75. ($1,000, minus half of $42.50.) Then you compute the effective yield on $978.75 paid up front/$1,000 returned/paid back later. And that's about 4.34% annualized, so there you go. (Close enough.)

Yes, it's a little "weird" how T-bill auctions work, but so it goes.

Maybe the 4.33% minimum effective yield objective is "too much." If you want to relax that assumption you can, and then you recompute the cut-off yield bid. For example, if you're content with 4.0% (i.e. don't mind some SA interest loss for shielding) then your cut-off yield bid can be in the high 3.XX% range.

I don't think there are any fees involved in using SA dollars to chase T-bills, so there don't seem to be any fee adjustments required.

 

[dork32]

if you lose 7 months cpf interest for 6 months tbills, then the yield should be 4.66%

 

[BBCWatcher]

if you lose 7 months cpf interest for 6 months tbills, then the yield should be 4.66%

For every $1,000 of SA you get about $3.33 per month of interest. 7 months is about $23.33. So yes, you need about 4.66% EIR on a 6 month T-bill to recover all of that.

But "SA shielding" using any/every other method requires that you lose at least 1 month of SA interest. So you're benchmarking this against the bond unit trust method (for example). And 4.33%, or about half a month of SA interest loss, is still a really, really great deal in comparison. There's nothing particularly "magical" about a 4.33% EIR except that it's roughly the halfway mark between 4.00% and 4.66% EIRs.

If you're willing to tolerate the full month of interest loss (as you would with bond unit trust-based shielding methods) then your 6 month T-bill is typically acceptable at ~4.00% EIR.