Singapore: Investor Enhancements under the CPF Investment Scheme

The investor enhancements Ms. Teo has announced are:

Removal of the sales charge

Presently, a sales charge of up to 3% of the trade amount per transaction may be imposed for investment-linked insurance policies and unit trusts offered under the CPF Investment Scheme (CPFIS). It will first be reduced from 3% to 1.5% in October 2018 and subsequently removed in October 2019.

The reduction and subsequent removal of the sales charge is intended to discourage financial advisors from pushing products to CPFIS investors. It will also reduce the cost of investing for CPFIS investors and better align the investment behaviour to members who have time and knowledge.

Lowering of wrap fees (fees for a bundle of investment services offered)

Presently, an annual wrap fee of up to 1% on total market value of unit trusts held in a wrap account may be charged per year. It will first be lowered from 1% to 0.7% in October 2018 and then to 0.4% in October 2019.

Self-Awareness Questionnaire (SAQ)

CPF members will be required to complete a SAQ as part of the CPFIS account opening process from 1 October 2018. The SAQ which will provide COF members with feedback on their level of basic financial knowledge, is intended to assist CPF members to determine if the CPFIS is suitable for them. It will also inform CPF members about other options to grow their savings such as the CPF interest rates or the future Lifetime Retirement Investment Scheme (LRIS). Though the SAQ is required for new applicants, existing CPF members are encouraged to complete the SAQ.

The enhancements mentioned above are positive announcements as any reduction in fees associated with investing into CPFIS funds should translate to greater returns for investors. This effect will be even more pronounced over the long run. The removal of the sales charge will align the interest of the financial advisor with that of the CPF members. The financial adviser will not be incentivised to push products which carry a greater sales charge to CPF members where such products may not be entirely suitable for them. The SAQ should also assist CPF members to better understand their own level of financial literacy and highlight “risk-free” or “lower-risk” options such as leaving their funds in the CPF account or considering the LRIS which is in the pipeline.

If you have any questions or would like to find out more, please contact our funds partner in Singapore, Jek-Aun Long.