Suppose that a person already reached the FRS in CPF SA account and will continue to work for next 20 yrs, what are other ways to grow the SA account other than employment contributions?

I heard about SA shield. Can this be done in this scenario? ie. I will periodically reduce the SA to purchase either SSB or UT for the first 10 years to bring the FRS down and top up CPF SA via OA transfer or RSTU. At the 10th yr, I will sell off all investment (fingers crossed it is making a profit) and the money will return to SA account and I will be able to enjoy the compounding effect for next 10 yrs which will double the base balance. Is this a workable idea?

Discussion (9)

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Elijah Lee

24 May 2020

Senior Financial Services Manager at Phillip Securities (Jurong East)

Hi anon,

Before 55, the maximum you can top up to SA is up to the current Full Retirement Sum (FRS) less SA savings and net SA savings withdrawn under CPF Investment Scheme for investments that have not been completely disposed of.

The portion in bold is very important. Basically if you have already reached FRS, you can choose to invest your SA monies, but it doesn't free up 'space' for you to top up again (regardless of RSTU or OA to SA transfer). So the only way to increase the SA balance once you reach FRS is via mandatory work contributions. I hate to be the bearer of bad news but your strategy isn't allowed based on current CPF rules.

(You can still invest your SA and if you make more than 4% and sell it off, you would have been able to increase your SA balance. But bear in mind you will be taking on risk)

SA shield is something that is only done a month or so before age 55.

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Wrong Sean

24 May 2020

I think you meant SGS. SSBs can only be bought through cash or SRS. And even if you could, the rates for SGS/SSBs are lower than the SA 4%. Over 10 years, you will lose the difference in interest compounded.

And the FRS will change over time to account for inflation etc and is declared every year.

Unless you can find UTs with guaranteed capital and also at least an annual return rate of more than 6%, I suggest you leave the money in your SA. If your employment contributions can cover the increase in the FRS every year, good for you. It becomes automatic to FRS.

You can use the money in OA to invest. This method probably is easier as you can use a wider range of instruments under CPFIS-OA. The probability of making a return might be the same but at least your opportunity cost is lower (4% vs 2.5%).

The CPF SA shield is used as a short term method to make the bulk of your RA account funds come from the OA. So that after the RA is formed, the SA funds liquidated from your investments will continue to earn the higher interest rate of 4%.

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