SINGAPORE — A significant legislative change was made on October 14, 2023, as the Central Provident Fund (CPF) announced the closure of Special Accounts (SA) for individuals aged 55 and above, effective from January 2024. This decision is part of the Central Provident Fund (Amendment) Bill that was recently passed in parliament.

The Details of the Changes

As of mid-January next year, all members over 55 will receive notifications via hard copy, email, or SMS informing them of the closure of their SAs. Any remaining funds in these accounts will automatically be transferred to the Retirement Account (RA) to continue earning higher interest—currently at 4.14% per annum—while the CPF Ordinary Account (OA) offers only 2.5%.

This shift is intended to "right-site" CPF savings, ensuring that funds aimed at long-term retirement goals are allocated appropriately to benefit from increased interest rates. Minister for Manpower, Tan See Leng, stated, “Only CPF savings committed towards long-term retirement needs should earn the higher long-term interest rate.”

Home Protection Scheme (HPS) Changes

Another crucial component of the amendment affects the Home Protection Scheme (HPS), which safeguards CPF members and their families from losing their HDB flats in the event of death, terminal illness, or permanent disability. Previously, around 1.3% of applicants were denied coverage due to pre-existing health conditions. However, starting in mid-2025, the HPS will include those with less severe conditions, enabling approximately 100 new members yearly to access this vital insurance.

Nonetheless, applicants with severe pre-existing conditions, such as cancer, will not be eligible for the scheme. This is aimed at maintaining the sustainability of the HPS, which could potentially inflate premiums for all members if claims are too high.

Understanding the Impacts

For many individuals aged 55 and older, the transition to the RA is designed to ensure higher returns through continued participation in the CPF system. Out of the CPF members who fall within this age bracket, over 99% are expected to transfer their SA savings successfully into the RA, enabling them to secure their financial future with a reliable interest rate.

Yet, some concerns were raised regarding how the changes could affect those who cannot transfer their savings or who rely on the OA's lower interest return. “At least some who would have been hurt by this change in policy,” noted MP Jamus Lim (WP-Sengkang), as he questioned the wider implications for those unable to optimize their savings.

On the contrary, Minister Tan emphasized that the current landscape of investments also provides opportunities for wealth growth outside of CPF, offering members alternatives.

Challenges of HPS Premiums

The issue of higher premiums, particularly for those with health risks, was also brought to light. MP Yip Hong Weng (PAP-Yio Chu Kang) expressed apprehension over this added financial burden for vulnerable members. However, Minister Tan replied that the adjustments are essential for the continued sustainability of the scheme, which would ultimately prevent a universal hike in premiums to cross-subsidize claims from higher-risk individuals.

Conclusion

These amendments mark a watershed moment for CPF members aged 55 and above in Singapore, encouraging informed decisions about long-term financial planning and the utilization of CPF funds. As the changes take effect, stakeholders are urged to stay informed and consider the available options for optimizing their retirement savings while ensuring adequate protection against unforeseen circumstances.

Stay tuned for more updates on CPF enhancements that could shape your financial future!