CPF SA Shielding before RA is formed at age 55

You may have heard of the CPF SA shielding trick or SA shielding hack, something that a person nearing Age 55 may do. But what is this SA shielding that everyone is talking about?

Your CPF is generally a comprehensive social security savings plan whose main aim is to inculcate forced savings in working Singaporeans and set aside funds for their retirement years. Contributions by both employee and employer are allocated to his Ordinary Account (OA), Special Account (SA) and MediSave Account (MA).

Upon reaching Age 55, your Retirement Account (RA) is created with monies from your SA account, then OA account in that order of priority. The prevailing interest rate on your OA, SA, MA and RA are 2.5%, 4%, 4% and 4% respectively.

As SA and RA have the same interest rate at 4%, it is better for your RA to be made up of monies mostly from your OA (which is a lower interest bearing account), instead of SA (which earns 1.5% more). This is where the SA shield is put up or SA shielding trick comes into the picture, which is to block off use of the SA monies first to make up the new RA account.

The SA shielding trick involves the purchase of low-risk investment instrument prior to just age 55 (before RA account formed) and to liquidate it after turning age 55 or your 55th birthday (after RA account formed). You are therefore looking for one that is short tenor and capital guaranteed.

Under the CPF Investment Scheme (CPFIS), the first $20,000 and $40,000 from your OA and SA cannot be used for investment. This means that the first $40,000 of your SA monies cannot be shield with the SA shielding trick. Also, for any investment made with funds from your CPF OA or SA accounts, any gains, dividends or interests earned in your investments will be returned to your respective CPF OA or SA accounts. Monies from the investment after liquidation will flow back to the SA which continues to be a high interest bearing account of 4%.

What can you invest in using your CPF savings from SA?

TypeRemarks
Unit Trusts (UTs)Capital not guaranteed
Investment-linked insurance products (ILPs)Capital not guaranteed
AnnuitiesLump sum payment at the start for regular disbursements in the future
Endowment10 to 25 years tenor
Singapore Government Securities (SGS) Bonds2, 5, 10, 15, 20 or 30 years tenor
Treasury Bills (T-bills)6 months or 1 year tenor

From the above, the choice of using UTs, ILPs, annuities and endowment are out as they defeats the purpose of SA shielding. The main aim is to temporarily block off use of as much SA monies as possible in setting up the RA account, and for it to continue earning the higher interest-bearing of 4% (instead of 2.5% in OA) once liquidated. Capital therefore have to been protected and tenor as short as possible.

While SGS bonds also have a short tenor of 2 years, T-bills are more preferred due to the 6 months and 1 year shortest tenor.

It is important to reiterate here, the initiation of SA shielding must take place BEFORE your 55th birthday and bringing down or removal of SA shielding AFTER your 55th birthday. There is no point buying 6-months T-bills in your early 54th year if it matures before you turn 55. SA shield has failed!

SGS Bonds and T-bills are issued according to the MAS issuance calendar published around October the year before. My advice, look at the issuance calendar and do not wait till the last minute to put up your SA shield. Time does not turn back should you miss it. You have to see which dates are most appropriate for you depending on when is your 55th birthday.

How to purchase SGS Bonds and T-bills with CPFIS OA or SA monies? If you want to use funds from your CPFIS account to buy SGS or T-bills, you need to apply in person at your agent bank’s main branch.

In short, the following diagram shows what happens before and after SA shielding.

From 54th to exactly 55th birthdate

After 55th birthdate

This guide will be useful for those people who wish to carry out CPF SA shielding trick or SA shielding hack when they are nearing Age 55.

37 thoughts on “CPF SA Shielding before RA is formed at age 55

    1. Transferring monies from OA to SA does not change the order in which RA is formed. It is still monies taken from SA first then OA. The main purpose is to block the usage of SA monies to be used for forming the RA and for it to continue earning higher interest rates of 4% as compared to OA 2.5%.

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    1. OA and SA monies will be transferred to RA on 55th birthday to form Full Retirement Sum (FRS) amount first. The rest from SA/OA can be withdrawn in cash any point in time after which.

      Basic Retirement Sum (BRS) if property is pledged.

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  1. Ahhhh always talk about OA an SA, most of us dont have much in the OA after paid for housing only limited people with high pay have it. So not suitable for most of us.

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    1. Personally, I didn’t choose to wipe out my OA for housing because interest rate was 1.18% at that time. Even now, my interest rate is 1.98%, therefore putting the OA to better use.

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      1. A big difference in using OA to pay off housing payment vs using bank loan is that the interest accrued in your OA will go back to your OA when you sell off the property. Whatever interest payment incurred in the bank loan goes to bank and ‘lost’ forever.

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      2. One assumption you may have to exert is that when you sell your property, the price sold is more than the loan plus accrued interest. If not, you have to top up the difference in cash to your CPF account.

        Secondly, I treat my OA monies as my very own monies, thus I would rather let it compound it at 2.5% (IF I still have it in OA) and borrow from the bank at current 1.98%. The thing now is that I had consistently done OA to SA transfer on a monthly basis. There is zero dollar lying in my OA and every dollar is in my SA account compounding at 4% per annum.

        4% earned interest versus 1.98% loan.

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    1. Assuming RA is formed with FRS amount or BRS with property pledges, the excess in the SA is now residing in a higher interest-bearing account (4% p.a.) which can be withdrawn any time after age 55.

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      1. Yes while both SA and RA accounts have the same interest rates, they defer on the following aspect.

        RA monies will be used to pay for your CPF LIFE annuity premiums for your monthly LIFE payouts for the rest of your life. For Standard and Escalating plans, ALL of your RA monies is spent to purchase the CPF LIFE annuity. Any interest earned thereafter goes into the Lifelong fund pooled together with all the other CPF members who are on this annuity scheme. In short the interests do not belong to you but the pool.

        SA monies and interests earned stays in your SA account. You can withdraw monies from your SA account any time after age 55 as long as you have fulfilled the FRS requirement or BRS with property pledge requirement.

        Would it be clearer?

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  2. Will this be workable – move SA funds to UT one month prior to 55 and then thereafter move it back to SA a month or more after RA has been set up. Understand that there could be a ‘loss’ but my thoughts is that any ‘loss’ would most likely be covered by the higher interest rate. It will be better than having RA ‘wipe off’ and leaving most of the monies in OA and earning 1.5% less of interest.

    Your expert advise…

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    1. Some people prefer the fastest time (more liquid), others the lowest cost. There is no downside to T-bills or SGS Bonds when held to maturity. UTs may face downside during the period of holding, so potential losses plus management / admin fees have to be accounted for as well. The market is uncertain and we can only guess.

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    1. For retail investors, Individual investors can approach DBS, OCBC and UOB respectively at these 3 branches,

      DBS: 12 Marina Boulevard Level 3
      UOB: 80 Raffles Place
      OCBC: 65 Chulia Street

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  3. Hi, my question is, exactly how much of our SA AND OA can we set aside for shielding after the minimum $40k and $20k? Is there any rules CPF impose? Do we need the balance to meet FRS or BRS requirement? If never meet can CPF take the monies after liquidation of investments after 55 to make up for the shortfall in RA? Thanks in advance.

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    1. There is no limit to how much OA you want to shield. There is a upper limit for SA, which is the prevailing FRS amount or max amount you may have in your SA before 55 minus $40,000. However do note, the point of doing SA shielding is so that money shielded in SA remains in a higher interest bearing account which can be drawn down anytime. You can only draw down (in cash) if you actually meet FRS or BRS with property pledge in your RA. Meaning only excess above FRS or BRS can be drawn out. If this is not met, monies in SA cannot be drawn out at all, meaning “stuck”.

      Automatic creation of RA, and drawing from SA/OA accounts to make up your RA is ONLY done once at age 55. Any other transfers after 55 or creation of RA has to be initiated by members aka manual transfer. Hope it answers.

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      1. Assuming i initiated the SA shielding successfully. So at 55 years old, my OA will be drawn down to form RA.

        However if OA is not enough to achieve FRS, and i have no property available to pledge for BRS, will CPF board wait for my investment in SA to mature then top up to FRS?

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      2. The automatic transfer from SA/OA to RA only takes place once in your life – at age 55. Any other transfers that happen after which can only initiated by yourself or manual initiation.

        I have to add on, there is no point shielding SA if you do not have enough to make up RA to FRS or at least BRS with property pledge. Only excess above FRS or BRS in your RA, can it be withdrawn from your SA/OA. In other words, without this minimum sum in your RA, the monies in your SA are non-withdrawable.

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      3. So RA has to meet FRS in order for me to withdraw any sum up to the full sum of SA from 55 onwards.

        If not SA money will be stuck in SA?! That would be a nightmare…

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      4. Yes correct, only excess above FRS or BRS in your RA can be withdrawn from your SA/OA. In other words, without this minimum sum in your RA, the monies in your SA are non-withdrawable.

        However upon liquidation of your SA/OA investments, as long as you are able to manually initiate a transfer the difference in amount from SA/OA to RA to hit FRS or BRS, you will be able to withdraw the excess monies in your SA/OA.

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  4. Can’t you just let CPF take the money from the SA account to top up the RA account at 55 and then do a manual transfer of funds from the OA account to SA account if you wish to?

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  5. Two questions:

    (1) Is it possible to shield BOTH my CPF OA (after setting aside the minimum $20K) and SA (after setting aside the minimum $40K), and top up my RA using CASH? E.g. if FRS is $181K in 2020 when I am due to reach 55, I can shield both my OA and SA and top up to FRS using $181K – $60K = $141K in cash?

    (2) How do I go about buying T-bills using my CPF OA and SA? From what I read, these are the following steps?

    a. Open CPFIS account with DBS, OCBC or UOB.
    b. Proceed to main branch of bank where you open CPFIS account to purchase T-bills?

    Is it really so simple? Anything else I need to take note of?

    Thanks!

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    1. Sorry, I meant top up $181K – $60K = $121K in cash. To explain, if I have excess cash, then I would prefer to use cash to meet my FRS rather than my OA or SA right, since cash in FD earns a lower rate? Any loopholes in my thinking? Thanks again.

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      1. Yes, you can shield both OA and SA all the way up to (amount minus $60K) or in your example $121K. The creation of RA by drawing from SA, then OA takes place automatically only once when you age 55.

        For retail investors, Individual investors can approach DBS, OCBC and UOB respectively at these 3 branches for using CPFIS,

        DBS: 12 Marina Boulevard Level 3
        UOB: 80 Raffles Place
        OCBC: 65 Chulia Street

        The other thing to take note of is that there are staff who are unsure of how to proceed with CPFIS funds. Be patient or request for a more experienced one who knows what he or she is doing.

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      2. Thanks! I was wondering why everyone only spoke about shielding the SA (and use OA funds to meet FRS) and not both SA and OA (and use cash instead to meet FRS – or for that matter, to meet both FRS and ERS for those who have the excess cash). I assume we can only do the cash top-up after RA is created.

        I reread Lorna’s article – she had invested in Nikko Shenton Short Term Bond Fund using FSMone. Sounds like quite a stable fund to park my OA/SA monies in perhaps 2 weeks before turning 55, and then quickly returning funds back to CPF after RA created and I have topped up to FRS/ERS using cash. 6 months for T-bills sounds a bit too long for me personally.

        Lastly, besides creating my CPFIS account, do I need to create a CDP account to invest my OA funds in T-bills or the Nikko fund? Thanks again for your useful comments and blog!

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      3. With cash, there is a higher probability to beat OA 2.5%. It is harder to find a low risk yet higher than 4% interest that the SA has. This is perhaps why people shield SA instead of OA.

        You need a CDP if you are investing your OA funds. Not required if you are using SA funds for investment.

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