CPF Change: Special Account to Close For All Members Aged 55 and up in 2025

Budget 2024 was delivered on 15th February 2024 by our Finance Minister, Lawrence Wong, and among the things announced is the closure of Special Accounts (SA) for CPF members aged 55 and above. This will take place in 2025 and will apply to all CPF members aged 55 and above.

What happens to SA money?

Upon closure of the SA at age 55, the money is channeled to the CPF Member’s Retirement Account (RA) up to the cohort’s Full Retirement Sum (FRS). If there is any excess money, it will flow over to the CPF member’s Ordinary Account (OA). From here, there are 3 things the CPF member can choose to do:

  1. Leave funds in the OA
  2. Transfer funds to RA up to the Enhanced Retirement Scheme (ERS) amount
  3. Withdraw funds from the OA account

The closure of one’s SA is also retroactive and will happen to everyone at least 55 years old in 2025. The money is similarly handled as above.

If you are still working after 55, amounts that were going towards your SA will now go into your RA instead. If FRS is reached, the sums will then flow to your OA and can be withdrawn.

No more SA Shielding

In the grand scheme of things, the change sounds more drastic than it actually is. Things like CPF withdrawal age, CPF Life etc. are not changed. What this move does is to remove this thing called “SA shielding”.

For quite a while now, “SA shielding” has been a widely shared finhack of sorts that lets you use your CPF SA as a “4% p.a. bank account”. Currently, just before someone turns 55, they can opt to perform SA shielding in order to leave money above the FRS amount in their CPF SA. The gist of it is to temporarily park one’s SA money somewhere else shortly before turning 55 so that the funds are not routed to RA.

This allows funds to be retained in the CPF SA and let the CPF member essentially use the CPF SA as an account giving guaranteed 4% p.a. interest rate with the ability to withdraw anytime (provided they have reached FRS and age 55).

Since there will be no more SA for members aged 55 and above, funds above the FRS amount will be housed in one’s OA which gives 2.5% p.a. interest. It’s not quite the end of the world, but since 2.5% p.a. is a rather big drop from 4% p.a, there are quite a few people who are upset with this change.

This is what “policy risk” looks like

While this piece of news sent shockwaves across CPF-focused communities, I could barely muster up a small shrug for the news. Perhaps it’s because I don’t have the habit of topping up my CPF (aside from last year when I had a bit more income than I expected) as well as the fact that the possibility of SA shielding being removed was already being whispered around for a while now.

On the other hand, there are those who have topped up CPF expecting this to enjoy this in the future. It should be apparent now what “policy risk” is like, something I discussed in my video some time back about why I don’t like to top up my CPF:

To be perfectly clear, I like CPF. I also don’t expect CPF to make big, drastic changes for no rhyme or reason. What I do think is that we need to be aware that CPF can indeed change quite significantly depending on the priorities of the policymakers… or even who the policymakers are in future.

This is why I think it’s worth putting in more thought into where CPF fits into your retirement plans. Maybe it is also time for me to share more about how I’m handling my own CPF in a future piece, so stay subscribed if you are interested.

What do you think about this change?

Feeling nonchalant about the change, or does this scupper your retirement plans? Let us know in the comments or Telegram group!

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