Sep 26, 2014

    Get higher returns from CPF investments soon

    IT WILL soon be possible to get higher returns from investing your Central Provident Fund (CPF) money in approved funds, with a new move to lower the costs incurred.

    The CPF Board said yesterday that it will place a lower cap on the total expense ratio for unit trusts and investment-linked insurance products under the CPF Investment Scheme (CPFIS).

    Reductions of between 0.2 percentage point and 0.3 percentage point will be imposed, depending on the risk-profile of the CPFIS funds.

    The higher-risk ones like funds that invest in stocks will have a new cap of 1.75 per cent, down from 1.95 per cent.

    Funds that deal in a mixture of stocks and bonds, deemed to be of medium- and high-risk assets, will see a new cap of 1.55 per cent, from 1.75 per cent.

    Those that invest mostly in safer products like bonds, which are assessed to pose a low- to medium-level risk, will have a cap of 0.95 per cent, from 1.15 per cent.

    Funds that invest in money market products like Treasury bills or certificates of deposits, thought to be the safest investments, will be subject to a cap of 0.35 per cent, down from 0.65 per cent.

    This means for an investment of $10,000, a CPF member can save $20 or $30.

    The total expense ratio refers to the percentage of a fund's assets needed to pay for the operating costs of the fund. Examples of the cost include management fees, trustee fees and audit fees.

    The CPF Board said the cap was based on the median total expense ratio of approved funds and after industry consultation.

    The lower caps will kick in over two phases: New CPFIS funds must abide by the change with effect from Wednesday, while existing funds will have more time to comply - they have until Jan 1, 2016 to do so.

    Failure to comply with the new caps will mean the funds cannot take in new CPF monies.

    CPF members whose money is in funds that do not meet the new caps do not have to pull out of their investments. They will, however, have the option to switch to other funds for free within a stipulated period.