Closure of CPF Special Account in 2025: What It Means and 7 Investment Alternatives

This post was originally posted on Planner Bee.

The Central Provident Fund (CPF) Special Account (SA) in Singapore has long been a popular option for individuals seeking a reliable, risk-free way to grow their retirement savings. With its attractive interest rates and low risk, the CPF SA has been a cornerstone of financial planning for many. However, with the recent announcement of the closure of the CPF Special Account for those age 55 and above, many are left wondering about alternative investment options to replace this secure savings vehicle.

In this article, we explore the implications of the CPF Special Account’s closure for those age 55 and above from the second half of 2025, along with viable investment alternatives to help you continue building a strong financial future.

What is the CPF Special Account?

The CPF Special Account is part of Singapore’s retirement savings system. It is designed to help individuals build their retirement nest egg by offering a high, risk-free interest rate (up to 4% per annum). The Singapore government protects funds in the CPF SA, making it one of the safest ways to grow your retirement savings.

Impact of the CPF Special Account closure

Starting from the second half of January 2025, the Special Account (SA) for members aged 55 and above will be closed. Savings in the SA will be transferred to the Retirement Account (RA) up to the Full Retirement Sum (FRS), continuing to earn long-term interest.Any remaining withdrawable SA savings will be moved to the Ordinary Account (OA) and will earn the short-term interest rate.

The closure means those affected will no longer have access to this high-interest, low-risk savings option. This change necessitates finding alternative ways to achieve similar or better growth on your retirement funds, without taking on unnecessary risk.

Here are some considerations following the CPF Special Account closure:

• Loss of a reliable and risk-free interest source
• The need to find alternatives that offer competitive returns without compromising safety
• A chance to diversify your portfolio and explore other investment opportunities

Investment alternatives to replace the CPF Special Account

1. Singapore Savings Bonds (SSBs)

Singapore Savings Bonds are a government-backed investment offering flexible investment terms with principal protection. SSBs provide a step-up interest structure, meaning the longer you hold them, the higher your effective return.

Here’s all you need to know about Singapore Savings Bonds.

Advantages:

• Safe, government-backed investment
• No risk of losing your principal
• Offers a good balance of liquidity with the ability to redeem anytime

Disadvantages:

• Interest rates may be lower than the CPF Special Account’s historical rates
• Returns depend on the interest rate environment

Ideal for: Those seeking a low-risk, government-guaranteed investment similar to the safety of the CPF Special Account.

2. Endowment plans

Endowment plans are savings and insurance products offered by insurance companies. These plans provide a guaranteed return component, along with potential bonuses, and are generally held for a fixed term.

Find out more reasons you should get an endowment plan.

Advantages:

• Guaranteed returns with potential bonuses
• Combines savings with life insurance coverage
• Predictable, steady growth for retirement planning

Disadvantages:

• Less flexibility—typically requires committing funds for a fixed period
• Early withdrawals can result in penalties

Ideal for: Individuals who value stability and are comfortable with a longer-term investment horizon.

3. Fixed deposits with high-interest rates

Fixed deposits (FDs) involve depositing money with a bank for a fixed period, earning a guaranteed interest rate. While some banks offer promotional rates that are relatively attractive, returns may not match CPF SA levels.

Advantages:

• Safe and predictable returns
• Simple and easy to understand
• Shorter lock-in periods compared to endowment plans

Disadvantages:

• Lower returns compared to CPF SA
• Penalties for early withdrawal

Ideal for: Those who prefer short-term, low-risk investments with guaranteed returns.

4. Robo-Advisors and ETFs (Exchange-Traded Funds)

Robo-advisors offer automated investment services using a diversified portfolio of ETFs. They provide exposure to a range of assets like stocks, bonds, and commodities, tailored to your risk tolerance and goals.

Advantages:

• Diversified and cost-effective
• Flexible—can start with small amounts and withdraw easily
• Higher potential returns than CPF SA, especially over the long term

Disadvantages:

• Returns are not guaranteed and subject to market fluctuations
• Slightly higher risk compared to CPF SA

Ideal for: Investors seeking higher returns with moderate risk tolerance and a hands-off approach.

5. Real Estate Investment Trusts (REITs)

REITs are investment vehicles that pool funds to invest in income-generating real estate properties. They provide an opportunity to earn dividends from rental income and potential capital appreciation.

Advantages:

• Potential for higher returns compared to traditional savings
• Regular dividend payouts provide a steady income stream
• Liquid—REITs can be bought and sold on the stock exchange

Disadvantages:

• Market risk and price volatility
• Returns are not guaranteed and can fluctuate with real estate market conditions

Ideal for: Investors looking for higher yields and willing to take on some market risk for potential rewards.

6. Blue-chip stocks or dividend stocks

Investing in blue-chip or dividend-paying stocks can provide stable income and capital growth over time. Companies with a strong track record of paying dividends offer a steady income stream, similar to the CPF Special Account’s interest.

Advantages:

• Potentially higher returns than CPF SA
• Provides regular dividend income
• Opportunity for capital appreciation over the long term

Disadvantages:

• Risk of capital loss if the stock market performs poorly
• Dividends are not guaranteed and can fluctuate

Ideal for: Those comfortable with taking on moderate risk in exchange for higher returns and dividend income.

7. Supplementary Retirement Scheme (SRS)

The Supplementary Retirement Scheme (SRS) is a voluntary savings program designed to complement the CPF. Contributions to SRS are eligible for tax relief, and the funds can be used to invest in a variety of instruments, such as stocks, bonds, ETFs, and unit trusts.

Advantages:

• Provides tax benefits, reducing taxable income
• Flexibility to invest in a wide range of financial products
• Withdrawals can be made at a lower tax rate after retirement age

Disadvantages:

• Funds are locked in until the statutory retirement age, with penalties for early withdrawal
• Investment returns are not guaranteed and depend on the chosen products

Ideal for: Individuals seeking tax relief and flexibility in managing their retirement investments through diverse assets. Additionally, did you know that you can set up your SRS account with just a spare $1?

Key considerations when choosing an alternative

1. Risk tolerance

Assess your risk tolerance carefully. If you’re conservative, consider safer options like Singapore Savings Bonds or fixed deposits. If you can handle more risk, explore robo-advisors, ETFs, or dividend stocks.

2. Investment horizon

Your investment time frame is crucial. If you’re investing for the long term, options like REITs, ETFs, SRS or blue-chip stocks can provide better growth. For shorter terms, fixed deposits or endowment plans may be more suitable.

3. Liquidity needs

Consider whether you need easy access to your funds. Options like SSBs, ETFs, and robo-advisors offer higher liquidity, whereas endowment plans and fixed deposits may lock your money for longer periods.

4. Potential returns

While CPF SA offered a high guaranteed return, you might need to balance your expectations. Safer options might not yield as much, so you may need to diversify your portfolio to achieve a comparable return.

Building a new financial strategy without the CPF Special Account

The closure of the CPF Special Account means adapting to a new financial landscape. It’s an opportunity to review your financial goals, reassess your risk appetite, and explore new avenues to grow your retirement funds. Whether you prefer the safety of government-backed bonds or the growth potential of the stock market, it’s essential to find a replacement that aligns with your objectives.

Consider speaking to a financial advisor to help navigate the various investment options and create a diversified portfolio that suits your needs. Remember, a well-thought-out strategy will ensure that your financial future remains secure, even without the reliable CPF Special Account.

Read more: Should I Use CPF To Pay My Mortgage?