Asked by Anonymous
Asked on 05 Aug 2019
Newly turned PR, want to buy a condo instead of renting it forever. I've about $250k hard-earned cash in the bank earning very low interests. Term deposit will give less than 2%. Is there a place I can park my $250k (for deposit) with low risk, better returns for me to earn a bit more, and not locked in for a long time? I heard CPF gives 4% interest. I'm new to CPF, so can I put all my savings in CPF and use it as a deposit when needed? Thanks.
Top Contributor (Nov)
There are several options to park your cash, amongst which Singapore Savings Bonds (SSB)is one of them. However do note that there is a individual limit of $200K for SSB, and you'll need to open a CDP account first, and then ballot for the SSB tranche. Even so, you might not get the full allocation, so you will likely have to spread it over two or three tranches. Rates vary from month to month, but any early surrender will still result in the interest being paid.
High deposit FDs are another option, but as you have pointed out, the returns are around less than 2% and any early termination results in the accumulated interest forfeited.
Any contributions made to CPF will be spread across the 3 accounts: CPF OA, SA, MA, which earn 2.5%, 4%, 4% interest annually, respectively. Do note that the maximum you can contribute to CPF every year is the annual limit which is $37740, and seperately, you may top up CPF SA to the prevailing Full Retirement Sum (will confer tax reliefs for you up to $7000)
CPF monies cannot be withdrawn at will, till at least age 55, but you can use CPF OA money for property. So don't treat CPF as a deposit account.
There are many areas which you can park your funds.
For Low risk,
Fixed Deposits, Singapore Savings Bonds, Citibank Maxigain Account and other higher interest savings account
For slightly higher risk, money market funds, bond funds, which they have some liquidity.
CPF is a 1 way in, so would advise against (both posters earlier have given their reasons and why).
Top Contributor (Nov)
There are 2 CPF schemes. CPF Ordinary account and CPF Special account
The 4% interest rate you mentioned is for CPF Special account and can only be used for retirement needs. Any cash transferred in will not be allowed to be withdrawn for any purpose except for retirement needs.
CPF OA however gives 2.5% interest and can be used for housing needs. You can check out more info on using CPF to pay for private property
However, do take note that whatever cash you transfer into CPF OA or CPF SA, is a ONE WAY trip. You cannot withdraw in cash once the transfer is made.
You might want to look into singapore savings bonds as a way to park the cash.