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Exploit the CPF-RA for a lump sum payout? (And HardwareZone Money Mind on how to hack the CPF-SA?)

Wednesday, August 30, 2017

Need your advise, my SA is able to meet the MS (FRS), was thinking of opting for the enhanced option (ERS) for CPF life at 55 which is next year. 

There after, at age 65 think of pledging my HDB for the 85K to get back the money. In that way, i am able to earn the 4% interest for the $85K for 10 years, your kind advise please thanks.

You have to decide at 55 if you want BRS, FRS or ERS. You cannot change your mind at age 65.


In a way i am not, but getting back the money of $85K at 65 after pledging. thanks.

The transfer to the CPF-RA is irreversible. So, think carefully what you want.

The money in the CPF-RA will fund CPF Life which will give you a monthly income for life. You won't be allowed a lump sum withdrawal from the CPF-RA.

But spoken to CPF on this and they said its possible to get the $85K with pledging? thanks.

Yes, at age 55, if you opt for BRS, you can take out all the money in excess. This is probably what they meant.

"On your 55th birthday, we will create a Retirement Account for you. Savings from your Special Account and Ordinary Account, up to the Full Retirement Sum, will be transferred to your Retirement Account to form your retirement sum which will provide you with monthly payouts. For higher monthly payouts, you may also top up your Retirement Account up to the Enhanced Retirement Sum." (Source: CPF)

"Top-ups under the RSTU Scheme are irreversible and irrevocable." (Source: CPF)


From my Facebook wall.

Kelvin Tan:
What do you think of this plan as a form of hack, which might make sense if you have most of the FRS sum in your OA.

-At age 54, before your birthday, invest all your SA, after leaving aside 40k, into a government T-bill.

-Let your RA formed largely out of your OA.

-Redeem T bills and have the money return back to your SA.


Unfortunately, I don't think it works that way. At 55 years old, once we have put aside the FRS or BRS in our CPF-RA, (if) we will have to close our CPFIS-OA and CPFIS-SA (if any), we can continue to hold these investments in our name directly or if we choose to liquidate our investments, the money will be paid to us directly and won't go back into our CPF accounts.


Lee Keh Yi: 
CPF FAQ says: 
"You can continue to invest even after age 55, as long as you have set aside the Full Retirement Sum or Basic Retirement Sum with sufficient property charge/pledge in the Retirement Account."
CPFIS is not auto-close at 55. 

Another FAQ says 
"You may apply to close your CPF Investment Account and transfer your shares to your own Central Depository account after you have reached 55 years old and have set aside the Full Retirement Sum or the Basic Retirement Sum with sufficient property pledge in the Retirement Account." 

Note -> *may*, not *must*

Ah, I see. 
But if the CPFIS account is closed, the investment is held directly under our name or if liquidated, the money is paid to us and does not go into our CPF accounts.

Lee Keh Yi: 
The "hack" that Kevin described was discussed on HWZ Money Mind forum. 

The conclusion was that it would probably work: 

there is nothing in *current* CPF regulations that stops it from working. 

Some of the participants in the discussion will reach 55 within a year. 

If they try it out and report back like they said they would, we'll know for sure :)

I read from the CPF After 55 booklet that if we terminate the CPFIS and liquidate the investments, the money will be paid to us directly. 

I doubt it goes to our CPF accounts. 

It is on page 15. 

Quite clear on this unless I have misread again.

Lee Keh Yi:
the "hack" is intended to make CPF draw the RA-FRS from our OA rather than our SA at 55 (by investing the max SA that we can). 

After RA-FRS is formed (ie 55yo), liquidate the SA investment and return the funds to SA. 

Thereafter we can enjoy the 4% interest from SA. 

All this should work, provided we are able to meet FRS via OA

Yes, I understand the strategy. 

Well, nothing beats actual field test especially when others are going to be the lab mice. ;p

Lee Keh Yi:
HWZ money mind had examined this very closely, looking for pitfalls in the theory, but we couldn't find anything in the *current* CPF regulations that stops it. 

Yup, it remains a theory, until someone tries it, crosses the 55 mark and can either confirm or refute the theory with their own experience ;)

I am always ready to learn from someone else's experience. 

It is less troublesome and sometimes less painful. :p

Related post:


AK71 said...

Blog updated to add:
HardwareZone Money Mind on how to hack the CPF-SA?

Spur said...

Such hacks have been discussed since the 2000s when govt decided to ramp up the Minimum Sum. But those discussions were for options when people cannot meet the Minimum/Retirement Sums. In such cases, they will need to maintain their investments/insurance endowments till after their Drawdown Age, if they want to take out in lump sums or at discretion. If they liquidate their investments etc before Drawdown Age, the monies may/will go back to OA & SA, where high chance for CPF to move to RA to make up the shortfall. Certainly will if they try to apply for withdrawal! :)

Don't ask me if it works though ... lost touch with those people!! Haha!!

In those days, more popular for people to work in cahoots with insurance agents/investment advisors for twisting & kick-backs to "monetize" their CPF funds (often to the detriment of their longer term retirement).

Laurence said...

With decades of tweaking and plugging loopholes in the CPF Scheme by generations of scholars, I'm more inclined to believe that the stuff mentioned above will not work.

Also, remember that the 1st 20k in CPFOA and the first 40k in CPFSA cannot be invested, so those 60k would definitely go into the CPFRA.

Also, no one can be certain that the amount withdrawn from the CPFSA to invest would result in more profits. It might even translate to losses based on the list below:

Professionally Managed Products refer to:
· Fixed Deposits
· Insurance Policies*
· Unit Trusts*
· Singapore Government Bonds
· Singapore Government Treasury Bills
· Statutory Board Bonds
· Bonds Guaranteed by Singapore Government
· Fund Management Accounts (you cannot invest your Special Account savings in this)
· Exchange Traded Funds*
(* Please refer to the Frequently Asked Questions on CPF Investment Scheme for the risk classification tables for unit trusts, investment-linked insurance products and exchange-traded funds which Special Account savings can be invested in.)

Lastly, I'm more inclined to believe that once your CPFRA has been filled at Age 55, any CPFSA investment returns after Age 55 (those money originally from the CPFSA) will flow into the CPFOA or CPFMA or both.

Above is just my view, so don't take it as the gospel truth.

Laurence said...

AK is now the unofficial Ambassador-at-Large for CPF. Lol.

AK71 said...

Hi Spur,

The only winners then were the insurance agents and investment advisers. ;p

AK71 said...

Hi Laurence,

I certainly hope not. I dislike work and I dislike unpaid work even more. -.-"

AK71 said...

Steve Tan Yeok Lim says...
I heard from others that it is possible to buy some financial product using the CPF-SA just before you turn 55.

The RA would then be drawn from the CPF -OA account.

Sell the financial product after you turn 55 and the money would be return to the CPF-SA.

So you are getting the 4 % interest.

AK says...
A little bird told me...

AK71 said...

Siew Mun Kwan says...
Will this work? I will turn 55 in 2 years time

Charles Koh says...
I heard of at least 2 persons did this and 1 person I know.
So it works.
I hope it still works 18 years later. Lol

AK says...
The more people talk about this, the more people do this, the more this loophole could be plugged. :p

AK71 said...

Raymond Ng says...
The financial product guarantee capital?

Siew Mun Kwan says...
Just buy sgs
This method is workable?

AK says...
Just hope that they don't plug this loophole soon. ;)
Also, to be rational, we have to see what is the prevailing interest rate and what are the alternative tools available when we turn 55. :)

AK71 said...

Kelvin Tan says...
They should just give people a choice whether or not to use their OA first, or use their SA first, to form the FRS.
Then it makes such a scheme redundant. 🤔

Charles Koh says...
Think they know la. But how many ppl can exploit this.
Basically need frs in OA and SA.

AK says...
Then, you shouldn't worry about 18 years later ;)

AK71 said...

Sau Yee Fong says...

Email to CPFB:
Suppose I have set aside the Full Retirement Sum in my RA, after selling off the investment under CPFIS-SA, the monies will be returned to my SA ?

Yes, upon the liquidation, your sales proceeds will be credited into your CPF Special Account directly (for CPFIS-SA).

AK says...
The CPF After 55 booklet which I relied on suggested that the money will be paid to us and not go back to the SA.

After all, if we have met the FRS at age 55, we are allowed to withdraw all remaining CPF money except for the BHS in the MA.

As always, good to hear from the horse's mouth. :)

AK71 said...

Kelvin Tan says...
Nowadays, the advice is to the SA shield trick at 54, I am still waiting for someone to do it, and to share how to. Of course, putting it to ERS will be much more straightforward.

Kkel Viin says...
may i ask what is sa shield trick?

Kelvin Tan says...
Use your SA beyond the min 40k amount to buy a low risk investment at 54.
Let your RA be formed mainly thru the OA and that min amount.
Sell off that investment and have the funds return to SA.
Your SA becomes a high interest bearing savings account.

Kkel Viin says...
AK, will you be doing the sa shield trick?

AK says...
Eh. The only shield I know now is the one my Paladin is using in Neverwinter ;p
On a serious note, it sounds like a loophole to me and I don't know if it is going to be plugged by the time I turn 55. :p

AK71 said...

Sau Yee Fong says...
On a serious note, this trick benefits the middle or high income group who did not spend a lot of their CPF OA in properties. I think with properties being a favourite investment tool with Singaporeans, not many will have a large OA to benefit from this trick. As long as the number of people who perform this trick is not large,in my opinion, the risk of CPFB plugging the loophole would be small. So, let's hope Singaporeans continue to love properties. 😁

AK71 said...

Kelvin Chin says...
Can choose whether to CPFIS from our OA or SA?

AK says...
We can invest using SA money too but very limited choices.

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