cpf money similar to bond investment

Treating your CPF Special Account and Retirement Account as a Bond Investment

Most Singaporeans consider their money in CPF as untouchable for any purpose other than for paying their housing loan, student loan or medical bills (More on CPF Schemes here). There is one more way to view your CPF money, particularly the money in your Special Account (SA) and Retirement Account (RA). You can view them as part of your investment portfolio – particularly as part of your bond investments.

Special Account & Retirement Account as a Bond

SA and RA share several similar characteristics of a bond.

  1. Consistent and reliable interest payment
    Your money and interest in CPF are guaranteed by the Singapore Government, which is AAA credit-rated.
    There are only a few AAA credit-rated countries left in the world today.
  2. Pays interest
    SA & RA pays interest to you annually while a bond payment period varies.
  3. Long maturity
    You can consider SA & RA as a 40-year maturity bond.
    There are rarely any bonds that have such long maturity.

SA and RA are actually better than a bond in several ways to

  1. SA & RA pays a higher interest rate than a normal bond
    A normal AAA bond currently pays less than 2% in interest on average.
    Your SA & RA pays you a minimum 4% interest (excluding the extra 1% on your first $40,000).
  2. Payout is confirmed
    Interest payments are fully backed by the Singapore Government, one of the few remaining AAA credit-rated countries left in the world.
  3. Auto-Reinvest interests back into the Accounts
    You do not need to fret over what else to invest or where to find a higher-paying bond or investment.
    Your returns are automatically reinvested back into the 4%-paying bond.

Of course, there are no free lunches in this world. A higher interest-paying and safer investment definitely come with a drawback: You cannot rebalance or withdraw the money before the age of 55*.


But, if your investment portfolio’s purpose is to ensure that you get a steady stream of income when you reach old age, then the drawback of not being able to touch your money while you are young should not affect you too much.

A standard investment portfolio consists of mainly stocks and bonds. If you consider your CPF money as part of your ‘bond portfolio’, that leaves you with more money to invest in stocks and shares. Stocks have a history of providing better returns over the long-term, this means that you will be able to grow your investment portfolio faster than your peers who are not utilising their CPF as part of their bond portfolio!

*You can withdraw $5,000 at age 55 if you have not met the Full Retirement Sum or you can withdraw money in excess of the Full Retirement Sum if you have met the target.

Read also: CPF Schemes Singaporeans should be aware of