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Things Singaporean: SRS, CPF-OA and CPF-SA.

Thursday, December 24, 2009

As long as a person is paying income tax, he should start a SRS account and contribute to it yearly so that he pays less income tax (or none at all). For me, it's that simple.

What is done with the money in the SRS account is another question. For me, I've always put the money in single premium endowment policies, shortest tenure being 8 years and the longest being 20 years. They have guaranteed returns of 3% p.a. to 4% p.a. The returns are not fantastic but I like how everything is stable and guaranteed (with insurance coverage thrown in). Beats FDs anyway.

I didn't start using money in my CPF and SRS accounts for investments until after Oct 08. Over the years, I stuck to my believe that if everything else fails, I would still have my CPF and SRS intact for my retirement.

However, after Oct 08, I changed my mind. Things were just too cheap and tantalising. I used my CPF OA to buy shares in F&N, SPH and Suntec REIT. All liquidated and now I'm purely in SPH.

I even utilised 10% of my CPF SA to buy units in a Singapore equities/bond unit trust in December 08 (since I cannot use SA to buy shares) and that made 9% in just 6 months, 4.5x more than if I were to leave it in the SA. If I did not liquidate the unit trust, I would have made a lot more. Well, it was a new experience and my SA money is sacred to me.

My CPF SA is now my opportunity fund. If the STI sinks to support, I'm pouring my SA into the same unit trust. I fully agree with Buffet, Faber and Rogers that the worst thing to be in now is cash and I fully believe that the recovery is genuine and things will only get better in the next two years. CPF OA, SA and SRS are all cash. Must put them to work.


Anonymous said...

Now that you have mentioned K-Green Trust (KGT) in another post and using CPF $ for better returns.

I am exploring this option. Currently, facing some paper loss on the UT that I had been smoked into believing as good LT investment. Am toying with the idea of biting that loss and reuse the $ for something with better & higher returns. After all, I have to wait another 25 years before touching that $$$.

The only problem is that I am unable to really wait for the rights letter, if any, to arrive and then send bank draft with the application as I am often travelling for work.

Hence the good AIMS rights issue, i almost could not participate as I was out of town.

Is there something good to recommend here ?


AK71 said...

Hi SnOOpy168,

I crunched some numbers last night on KGT. I don't think one should use CPF-OA to invest in KGT. It would be trading in a guaranteed 2.5% returns for something that could be less. Personally, I am using SRS money for investment in KGT. So, it's not too bad for me.

K-Green Trust: A bad investment?

I have so far only used my CPF-OA (under CPF-IS) money to buy shares in SPH before, nothing else. These have been sold for capital gains. So, I am 100% "cash" again.

I am pretty conservative with my CPF funds since the returns are guaranteed. Any investments using CPF funds should be really solid. Otherwise, I rather not touch the money.

My current strategy for my CPF funds? Wait for a good price to re-enter SPH. ;)

Anonymous said...

This nest eggs of ours and 'better use / returns" on the funds will be a challenge, given the restrictions.

Perhaps I should wait out a BE on my UT and then cash out and let compounding take effect while I wait.

For the readers' info : Unit Trust bought with CPF$ , must be sold via written & signed instructions at the bank. Not via internet banking (except for BUY orders). Sianz.


AK71 said...

Hi SnOOpy168,

Thanks for sharing. Sounds like too much work. :(

I bought into a UT with my CPF-SA money before from Fund Supermart. This was when the STI was 1700+ last year. Liquidated for a 9% gain in 6 months. Everything was done online. Quite easy. :)

Anonymous said...

You lucky. From UOBAM's site, out of the 3 CPF-paid UT, only 1 i can click SELL. The others, no such option.

Ok. I am thinking of something like Starhub @ 7% yield and capital appreciation in the long run. So far, it has no rights issue for us (or I didn't know) and is well know for it's high payout.

REITs like AA is more tempting on ROI but I just don't want to face the running around bank & post office for any rights and excess issues.


AK71 said...

Hi SnOOpy168,

I believe I still have investments in three UOB Unit Trusts but I don't bother looking at them anymore although they still send me regular statements. ;p

As for investing in Starhub, you might want to ask Drizzt about it. He is the blogmaster of Investment Moats and Starhub is his largest investment. :)

Anonymous said...


Can you advise on what is the type of investment that can be done using SRS?

Also, is SRS more like a necessity for older group of ppl?

1. Young couple they might need alot of cash for flat and marriage.
2. The assumption is based on the fact that older grp of ppl have a relatively higher taxable income.


AK71 said...

Hi Jay,

Here is a link to more information on SRS provided by M.O.F.:

SRS Booklet

Contributions to SRS could be used to buy single premium endowment policies which I did prior to 2009. The returns are similar to CPF OA and SA.

SRS money could also be used for investments in the stock market which I did last year and this year.

I won't say that SRS is meant for older people or people who have higher income. I would say that anyone who pays income tax should consider starting an SRS account and contributing to it.

Contributions to SRS is non-taxable just like contributions to CPF. So, if we contribute $5k yearly, for example. We do not pay tax on this $5k contributed. This could be quite significant depending on our tax bracket.

Of course, it really depends on our financial health and commitments. In certain instances, contributions to SRS could be suspended. After all, contributions are voluntary. The example you gave of a young person who is planning to buy a flat is a good one. :)

mathew tung said...

You cannot use CPF for K Green. It is a marginable stock but not approved. I don't know why KGT came into the picture here!

AK71 said...

Hi Matthew,

I have units of K-Green Trust in my SRS account. I don't know if we can use our CPF-OA money to invest in the same. Thanks for sharing. :)

Jimmy L said...

may i know which singapore equities unit trust did you buy that time? i am eyeing on First Bridge Fund if ever there's any 'Leman bro 2008' event again :)

AK71 said...

Hi Jimmy,

Memory is a bit patchy by now but it was one by OCBC. It was called Lion something and it was primarily investing in Singapore equities.

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