HOW THE SCHEME WORKS
Participation in the new life-cycle investment scheme will be voluntary, like the CPFIS.
The CPF Board will work with two to three commercial product providers to offer curated options to simplify decision-making for investors.
“This is essentially a life-cycle investment approach, with a predefined glide path to retirement,” said Mr Wong.
“In other words, members take on more risk, with greater exposure to equities when they are younger, and their investments are automatically rebalanced towards safer assets as they approach retirement.”
The assets will be liquidated in phases by the target date, for example, when the investor turns 65 and becomes eligible for CPF payouts.
This is to calibrate the investment risk that CPF members are exposed to at different stages of life and mitigate the risk of exiting during a downturn.
Upon liquidation, the investment sale proceeds will be transferred to the CPF member’s Retirement Account up to the full retirement sum. Any remaining proceeds will be transferred to the Ordinary Account.
The funds in the Retirement Account can then be used to join the CPF Life annuity scheme when the member decides to start receiving monthly payouts, and can help boost the payouts.
All-in fees for the scheme, including total expense ratio fees, wrap fees and distribution costs, will be capped to keep costs low for investors.
From March, the CPF Board will engage the industry on the product specifications and invite expressions of interest. It will work with independent investment consultants to evaluate applications.
Selected providers are expected to be announced in the first half of 2027, and this will be followed by the scheme’s launch in the first half of 2028.
In response to CNA’s queries, the CPF Board said there will be no age limit for joining the scheme.
But those who are farther away from retirement are more likely to benefit from the higher potential returns of equity exposure in their younger years and their ability to ride out market cycles, it said.
On expected returns, the providers will be required to provide details that include illustrative returns matching the products’ risk profiles.
“In general, potential returns on investments should be commensurate with the risk of the underlying assets,” said the CPF Board.
Asked how low adoption may affect the scheme, the board said investors can benefit from economies of scale as the CPF savings invested under this new scheme can tap on existing commercial underlying funds.
As for whether investors can opt out before the full investment term, the CPF Board said they are encouraged to stay invested for the longer term to benefit from the scheme.