Top 4 CPF myths debunked

Edited on 8 September 2015-CPF monies are your money and this is a fact. You can use CPF monies for housing, healthcare and investments. There are guidelines for their usage.

cbd worker 06

Edited on 8 September 2015-CPF monies are your money and this is a fact. You can use CPF monies for housing, healthcare and investments. There are guidelines for their usage.

Blogs such as The Heart Truths have made allegations about our CPF monies that are inaccurate or outright false. These are some of the myths they have perpetrated and the facts:

Myth 1: Singaporeans have the least adequate pension funds.


Screen shot from 'The Heart Truths'

This is not true. 

Your CPF money is your nest egg upon retirement. The uniqueness of our system is that you can also use your CPF monies to pay for housing. Many Singaporeans have indeed done so and some have fully paid for their homes by the time they retire. The homes that we own are part of our retirement assets too, allowing us to save on rent while providing us with the option to sell our homes when we need to. 

When international studies on pension systems make comparisons across countries, they often ignore this fact. They paint an incomplete picture of what members have in their accounts. They do not take into account the fact that Singaporeans also have used their CPF monies to pay for their homes.  

For a more complete picture about our retirement funds adequacy, read our Factually article on this here. In fact, more recent studies published by OECD and Mercer in 2013 reflect higher income replacement rates and adequacy levels, even without considering property ownership. 

Myth 2: When I use my CPF money to pay for my HDB flat, I have to pay CPF Board (CPFB) back the accrued interest if I ever sell my HDB flat. Essentially, I am paying “extra interest” for nothing. 

Many Singaporeans know that we can use our own CPF monies ( which is our savings) to pay for a HDB flat as this can serve as another form of asset for retirement needs. 

However, when we use CPF monies to buy a home, we are borrowing money from our own nest egg, which is meant for other retirement needs as well. 

Hence, it is only right that if we were to sell our home, we should return what we have borrowed (i.e. the principal amount) plus the interest we would have earned had the money not been taken out from our CPF account (accrued interest). This amount is returned to our own CPF accounts for our future retirement needs. 

Accrued interest needs to be refunded to our CPF accounts upon the sale of our home as long as the sales proceeds is sufficient to pay back the principal and interest.


Myth 3: Singaporeans get very low interest rates for our CPF savings. Moreover, we are paying an "implicit tax" as the returns on CPF monies invested by Temasek Holdings and GIC are not given back to Singaporeans.  

Our CPF funds are invested in risk-free Special Singapore Government Securities (SSGSs). The returns on SSGSs are pegged to the returns of other bonds in the market with similar risks. There is no connection between GIC's rate of return and the interest paid on our CPF accounts. GIC invests our foreign reserves in stocks, bonds, real estate and other assets that carry higher risks than SSGSs. The value of SSGS is assured, as they are guranteed by one of the few remaining triple-A credit-rated governments in the world. With our CPF funds being invested in SSGSs, we can be absolutely certain our funds will be there when we need them. 

CPF interest rates are guaranteed and risk-free. The interest is paid whether or not the Government’s investments backing its liabilities to CPF, including investments managed by GIC, do well or not. So if GIC's investments actually lose money, as they did during the Global Financial Crisis of 2008-09, CPF members will still get the 2.5% interest on our funds in the Ordinary Account. 

Finally, apart from the CPF system, it should be remembered that we Singaporeans benefit from GIC’s and Temasek’s returns though these are not linked to the returns we get on our CPF funds. GIC's and Temasek's returns supplement the annual Budget through their  Net Investment Returns Contribution (NIRC), which amounted to $8.1 billion this fiscal year. This money allows our Government to make further investments for our future, such as in education, R&D, healthcare and improving our physical environment. 

Aside from the return on our Ordinary Account, Singaporeans enjoy higher interest rates on their other CPF accounts- 4% on our Special, Medisave and Retirement Accounts, and an additional 1% on their first $60,000 in all our accounts: 



Source: CPFB's website


Myth 4: The Retirement Sums are adjusted to prevent us from using our CPF money.

This is not true. The retirement sums are adjusted on an annual basis for each cohort. This is necessary because the retirement income needed in real terms for someone who turns 55 in 2015 will not be the same as what would be needed for someone who turns 55 in 2025. $100 today would be worth less than $100 in 10 years’ time.

Considering that the price of your favourite kopi or kaya toast would keep increasing due to inflation, it helps to set aside a sustainable nest egg. 

The retirement sums exist to ensure that our nest egg is spread out comfortably to last us not just for one or two years after retirement, but throughout our golden years. When planning for retirement, we should think about how much we need in order to retire the way we want to, and set aside the money for it. This is what the retirement sums are for.

Recognising that people have varying retirement needs, the Government is introducing some flexibility while keeping your retirement adequacy in mind. From 2016, you can choose from three different payout options that best suit your needs, and set aside the corresponding retirement sum – the Basic Retirement Sum, Full Retirement Sum or Enhanced Retirement Sum.

Your monthly payout* for life from 65
Retirement Account savings required at 55

If you own a property and choose to pledge your property.

$660 - $720

Basic Retirement Sum (BRS)


If you do not own a property or choose not to pledge your property.

$1,220 - $1,320

Full Retirement Sum (FRS)


The FRS is 2 x BRS.

If you wish to put more savings in CPF LIFE.​

$1,770 - $1,920

Enhanced Retirement Sum (ERS)#


The ERS is 3 x BRS.


Source: CPF Board Website


The adjustments will not affect the retirement sums of people who have already turned 55. If you will be turning 55 from 2016 to 2020, here are your estimated CPF LIFE monthly payouts from the Basic Retirement Sums:

cpf life

Source: MOM website on COS

For more information, check out this graphic on how CPF works:



 Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission".


More From Factually

Unless otherwise indicated, the articles here are generally accurate as of their publication dates. Please visit the relevant Goverment agency website for the latest updates.