From 1 July 2012, the CPF Board will subject the wrap fee charged for CPF Investment Scheme (CPFIS) investments to a maximum limit of 1% per annum.
The cap on wrap fees is intended to help members lower the costs of investing their CPF savings over the longer term. The move is another measure taken by the CPF Board as part of its efforts to progressively lower the costs of investment and improve the quality of products offered under the CPFIS since 2006. Past measures include the tightening of admission criteria for new funds and the setting of fee caps on sales charges and fund expense ratios
A wrap fee is a regular charge paid to financial advisers for providing bundled investment services, such as advisory, brokerage and administrative services. Also known as an ongoing fee, the wrap fee is typically levied monthly or quarterly by liquidating a small portion of the investment. Currently, CPF members who maintain wrap accounts for their CPFIS unit trust investments are charged a wrap fee of up to 1.5% per annum by their financial advisers.
The CPF Board urges members who wish to invest their CPF savings for potentially higher returns to do so prudently and to scrutinise the total cost of investment as high costs may potentially erode investment returns significantly over the long term.
Since 2006, the CPF Board has been undertaking measures to progressively lower the cost of investment and improve the quality of funds under the CPF Investment Scheme. The summary of the measures taken are as follows.
|1 Feb 2006
||Tightening of admission criteria. New funds must:
(i) meet the revised benchmark set at the top 25 percentile of funds in the global peer group;
(ii) have expense ratio that is lower than the median of existing CPFIS funds in its risk category; and
(iii) preferably have track record of good performance for at least 3 years.
|1 Jul 2007
||Sales charge for CPFIS-included funds must not exceed 3%.
|1 Jan 2008
||Expense ratios for CPFIS-included funds must not exceed the median of existing CPF funds in its risk category:
||Expense Ratios Criterion (%)
|Medium to High Risk
|Low to Medium Risk
|1 Jan 2011
||All existing funds must meet the stricter admission criteria before accepting new CPF monies.
More information can be found from CPF Website.
Many people have invested their CPF via CPF Investment Scheme. They have invested through insurance companies, banks, or online fund providers. However, few people realize that besides fund management fees, agent bank charges can rack up a significant amount and reduce your investment return substantially.
The reason is that each fund house whose funds you purchased will individually and separately request monies from your CPF agent bank.
Currently in Singapore, you can only open CPF investment account with three local banks, namely, DBS, UOB and OCBC. The banks will typically charge for the following transactions:
- Per Buy Transaction – up to $25 per fund
- Per Sell Transaction – up to $25 per fund
- Per Fund Switch (This involves a sell transaction followed by a bank transaction – up to $25 per fund
- Quarterly service charge – $2 per fund
While the individual charges appear small, the total charges can erode your returns significantly, and worse still, they will continue even if you are losing money.
The good news is, we are able to provide you with CPFIS Registered Investment Administrator (IA) Platform. There are only 3 IAs approved by CPF. They are:
- iFAST Financial Pte Ltd
- Navigator Investment Services Ltd
- Phillip Securities Pte Ltd
Take iFast for example, by using our platform, the bank charges are reduced to
- Per Buy Transaction – $2.50 regardless of number of units and number of funds
- Per Sell Transaction – $2.50 regardless of number of units and number of funds
- Per Fund Switch – No agent bank charges incurred
- Quarterly service charge – $2 regardless of number of units
- Furthermore, you enjoy consolidated statement and Faster completion time – CPF transactions are cut by 50%
Below is an example of the cost you can save, you can simply transfer your existing portfolio to us with no cost and enjoy the savings. Contact us if you would like to find out more
From 1 July 2010, the first $40,000 of members’ Special Account balances will no longer be allowed to be used for investments. Given the higher risk-free interest rate on the Special Account, it is better to be more conservative than to subject these savings to the uncertainty of CPFIS returns.
There is no change to the requirement for members to set aside $20,000 in the Ordinary Account before they can invest their Ordinary Account monies.
Source: CPF Website
CPF Board has advised all insurers to send a letter to all customers who has a Recurring Single Premium (RSP) policy purchased under the CPF Investment Scheme – Ordinary Account (CPFIS-OA), to remind them about the possibility of a penalty charge, should it fail the minimum investment amount criteria set by CPF Board. A sample content of the letter is as follows: (It is important to take note, especially the penalty. )
You have a Recurring Single Premium policy (RSP) purchased under the CPF Investment Scheme – Ordinary Account (CPFIS-OA), whereby the monthly/quarterly/semi-annual/annual contribution to the RSP is $X (to be filled in by company).
CPF Board has announced that from 1 April 2008, you will not be able to invest the first $20,000 in your Ordinary Account (OA). To invest under CPFIS-OA, you will have to set aside $20,000 in your OA before the remaining savings in your OA can be used for investments. (This restriction is in place because of the extra 1% interest that you will earn on the first $60,000 of your combined CPF accounts from 1 January 2008.) However, this restriction does not apply to balances in your Investment Account (IA) with your agent bank.
Please check your OA and IA balance and consider whether you have sufficient funds for not only the next RSP deduction, but also for future RSP deductions. In particular, if your RSP contribution exceeds your IA balance, and if your OA balance is below $20,000, the application for withdrawal of funds from your CPFIS agent bank will be rejected and your agent bank, at its discretion, will charge you $5.35.