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Impact of New CPF $20,000 Rule On Your Investments March 13, 2008
We explain how the new $20,000 restriction on your CPF accounts affects your transactions.
Author : Fundsupermart.com


Implications Behind New CPF $20,000 Rule On Your Investments

Impact Of New CPF $20,000 Rule On Your Investments


From 1 April 2008, CPF members will not be able to invest the first $20,000 in both their CPF Ordinary Account (OA) and Special Account (SA). This means that CPF members can only invest the amount they have in excess of $20,000 in both accounts. CPF investors are not required to liquidate any of their existing CPF investments before the change, but their future CPF investments may be affected in the following aspects due to the new restrictions.

New Purchase Orders

The new CPF purchase orders at Fundsupermart.com will be subject to these restrictions starting from Friday 28 March 2008. This is a few days earlier than 1 April because it takes 3 working days for the monies to be requested and deducted from CPF board for your fund purchase.

If you make a CPF investment and there are insufficient monies available to be withdrawn (because the first $20,000 is not allowed to be used for investing), then the purchase order will result in a failed trade. Please check your CPF balances before any CPF purchase and make sure that there are sufficient monies to pay for your investment.

Redemption Proceeds

Redemption proceeds that go back to the CPF board will be subject to the $20,000 restriction. In other words, if you sell and an amount of $20,000 is returned back to the CPF board, assuming your previous CPF balance was zero, you will no longer be able to invest this amount of $20,000.

The monies at the CPF agent bank are not affected by the new regulations. Typically, monies at the agent bank will be transferred to the CPF investment account two months after redemption.

Funds Switching

Fund switching for your CPF holdings under IA status will not be affected. (Check your "View Holdings Page" under the column "IA Status" to determine if your CPF holdings are under the IA status).

On the other hand, fund switching for CPF holdings under non-IA status is affected, and there is a risk that it may result in a failed trade: Such switching results in a sell trade where money goes back to the agent bank, and a buy trade which will take place in T+5 working days. As money is requested from your CPF account, if there is less than $20,000 in your CPF balance, this request will fail and the buy trade will not be processed.

Because of the possibility of failed trades from non-IA switching, investors are urged to change your non-IA holdings into IA holdings. If you would like to stay in the same fund, just carry out an intra-fund-house switch into the same fund and it will be converted to the IA status. Please note though that the cut-off time for this type of transaction is 3pm, 19 March 2008. Due to the time delay in requesting money from the CPF board, any switch trades for non-IA CPF holdings may result in failed trades after this date. Please also note that even when converting to the same fund, there is a few days of market risk to be borne as the switch buy trade will take place only on the T+5 working day.

We are working on a system enhancement that will eliminate failed trades arising from CPF-OA non-IA switching. We expect this enhancement to be up on 1 April 2008 and we will keep investors updated on this.

Regular Savings Plan (RSP)

Starting from this April onwards, RSP deductions will fail if your balances fall short of $20,000, and after 3 failed deductions, your RSP will be automatically terminated. Investors can re-apply RSP after you have built up CPF balances in excess of $20,000 in your CPF OA or SA.

To prevent the possibility of failed trades, the monthly deduction date for all RSP deductions (with cash, CPF OA, CPF SA and SRS) will be standardised at 3 working days before the 8th of every month.


We provide more in-depth details under our FAQ.


If you have any further queries, please do not hesitate to call up our client services hotline at 65572853 or email to clienthelp@fundsupermart.com.

DISCLAIMER: THE ABOVE SHOULD NOT BE CONSTRUED AS AN OFFER OR SOLICITATION FOR THE SUBSCRIPTION, PURCHASE OR SALES OF ANY FUND. NO INVESTMENT DECISION SHOULD BE TAKEN WITHOUT FIRST VIEWING THE FUND'S PROSPECTUS, WHICH IS AVAILABLE VIA AUTHORISED DISTRIBUTORS. INVESTORS MAY WISH TO SEEK ADVICE FROM A FINANCIAL ADVISER BEFORE MAKING A COMMITMENT TO INVEST IN UNITS OF THE FUNDS. IN THE EVENT AN INVESTOR CHOOSES NOT TO SEEK ADVICE FROM A FINANCIAL ADVISER, THE INVESTOR SHOULD CONSIDER WHETHER THE FUNDS ARE SUITABLE FOR HIM/HER.