What is a CPF Special Account?
Similar to the USA, people in Singapore are also entitled to social security. So even if you are not a permanent resident in Singapore but have recently joined a firm in Singapore, you will still have a special CPF account. Wondering what CPF Special Account is?
Well, the full form of CPF is the Central Provident Fund. It is an investment scheme where employees have to invest if they work or stay in Singapore mandatorily.
This scheme allows people to accumulate or save a certain percentage of their funds that can be withdrawn and utilized after they retire. It works as social security for people living in Singapore. This fund can be used to repay bills, pay medical expenses etc.
What is a CPF Special Account used for?
The CPF account is split into different sections according to the purpose it would be used for. For example, The OA account, commonly called the ordinary account, can be used for housing. The MA Account or the Medisave Account is dedicated to paying medical expenses. The RA account is for people who have recently retired. Similarly, the CPF Special Account is For Old Age. It has its advantages and disadvantages. But, despite a few limitations, people in Singapore prefer having a Special CPF Account to investing in stocks and shares.
Special CPF Account- CONS
Before we get into the benefits of special CPF accounts, let us throw some light on the consequences of having a Special CPF Account.
- The amount saved under Special CPF Accounts cannot be withdrawn before attaining the age of retirement, i.e., 55. This means that people cannot liquidate their Special CPF account before reaching a specific age defined in the rules.
- Even though smaller CPF Accounts that carry a sum of less than $40,000 can be invested in investment schemes, people are not allowed to spend their savings in high-risk financial institutions.
- Funds from the Special CPF Account cannot be invested in shares, property funds, Gold, or corporate funds.
- You do not get any tax benefits when you invest your money in Special CPF Accounts.
Special CPF Accounts- Pros
- Higher interest rates
- This account is not affected by inflation. People investing in this account can get an interest of flat 4 to 5%.
- Guaranteed returns are post-retirement.
- Even if a person goes bankrupt, their CPF money is not touched.
Conclusion
If you ask us what special CPF accounts are, we’ll tell you that it’s a central provident fund account meant for older adults. The Singaporean government opened it to ensure the financial security of older adults.