Two Truths and One Lie about CPF

A management associate at the CPF Board debunks common misconceptions.

If you’re a young working adult, one thing is for sure: There was once a time when you knew nothing about the Central Provident Fund (CPF). Or perhaps you still don’t know much about this mysterious CPF.

Similarly, when I first entered the workforce, I had no prior experience interacting with the CPF Board.

When I was offered my monthly salary, I was so excited to spend it. I planned my purchases right down to the dollar, and eagerly anticipated my first salary entering my bank account. 

However, when the long-awaited day finally came, I realised that I had received 20 per cent less than I was meant to! I recall wondering if my employer had made a mistake.

Turns out, I was the suaku (ignorant person) who did not know anything about CPF.

As CPF is a highly contentious topic, you have likely heard about it from your friends and family. However, chances are, some things that you have heard may not be true. 

As for me, I just started my second job as a management associate in CPF Board, and I’ve learnt so much about CPF since. As an ex-suaku myself, I hope that this article will give you an overview of CPF and debunk any misconceptions that you may have about it.

Let’s start by playing a familiar game: Two Truths and One Lie. I will provide you with three statements about CPF, and among these three statements, you can try to identify which two statements are true and which statement is fake.

  1. CPF is only for the old.
  2. CPF is used in our daily lives.
  3. CPF monies are safe and give risk-free returns.

Read till the end to find out if your understanding of CPF is right.

Statement 1: CPF is only for the old

CPF is commonly associated with preparing people for retirement, which gives us the impression that CPF is only for the old. PHOTO CREDIT: CENTRAL PROVIDENT FUND BOARD


CPF is actually for every single of us, regardless of age. In fact, it plays a key role for youths. 

While we are still young, we have a longer runway to retirement. This means that our contributions to CPF – both mandatory and voluntary top-ups – would earn compound interest for an extended period of time.

If you are unfamiliar with the concept of compound interest, here is a quick rule of thumb to visualise its impact: The Rule of 72.


The Rule of 72 is a simple shortcut to determine how long an investment will take to double. 


To give you a clearer picture, I would use a CPF example to illustrate my point: You can earn up to 4 per cent for your CPF savings. This would mean that your CPF savings would double in 72/4 = 18 years.

CPF works even better for youth, as this longer runway to retirement gives us more time for our CPF contributions to grow.

In essence, CPF does prepare you for your old age, but it is definitely not just for the old. 


CPF is for everyone – whether you are young or old. PHOTO CREDIT: CENTRAL PROVIDENT FUND BOARD

Statement 2: CPF is used in our daily lives

You might have heard that CPF locks up members’ monies and does not allow them to withdraw this money until retirement. Initially, I thought so as well.

I later realised that CPF transactions are just so seamless that we do not notice CPF being used in our daily lives.


CPF can be used for a multitude of things. PHOTO CREDIT: CENTRAL PROVIDENT FUND BOARD


Before reaching 55, every CPF member has three accounts: An ordinary account, primarily used for housing; a special account, primarily used for retirement savings; and a MediSave account, primarily used to pay for healthcare expenses and insurance premiums

When my fiancée and I chose to purchase a resale flat, which costs significantly more than a Build-To-Order flat, we were worried about the huge expenditure we were about to face. 

If we chose to take a bank loan, we would have to fork out 25 per cent of the purchase price as the down payment. However, we did not have enough cash on hand to cover that cost. We even considered pushing back our wedding to save for the house first. 

Thankfully, we realised that we could use CPF to pay up to 20 per cent of the 25 per cent purchase price, and only needed to fork out cash for the remaining 5 per cent. Subsequently, we could also use our monthly CPF contributions to pay for our monthly housing loans.

Therefore, it is definitely a myth when people say that CPF locks up your money, as it can be used in daily life expenses.

Statement 3: CPF monies are safe and give risk-free returns

The safety of CPF monies has always been a contentious subject, especially during these uncertain times, when the Government is drawing down on reserves and giving us handouts. 

Some even fear that drawing down on reserves will have a negative impact on our CPF monies, but the truth is that our CPF monies are very safe.

Our CPF monies are actually invested in securities that are issued and guaranteed by the Singapore Government. Our Government is one of the few remaining triple-A-credit-rated governments in the world, making it one of the safest possible investments to hold. 

So, fret not – our CPF monies are safe even during such uncertain times.


International credit rating agencies have given the Singapore Government the strongest credit rating. PHOTO CREDIT: CENTRAL PROVIDENT FUND BOARD


In addition to our mandatory employee contributions, I started exploring self top-ups. 

Previously, I had left my savings in a bank account, which had a decent interest rate if you fulfilled a few criteria. However, when COVID-19 hit, the bank slashed their interest rates to about 1 per cent. 

When I compared the bank’s interest rates with CPF’s interest rates, which range above 2.5 percent, it was clear that I should leave some additional money in CPF – especially since that money would be for my retirement anyway. 

Don’t get me wrong – I didn’t put all my money into CPF as I still believe in having liquidity on hand. But in today’s climate, it’s important to hedge against uncertainties. Since CPF is giving relatively high risk-free returns, I made some top-ups.

You might be thinking “CPF Board must have paid him a lot to say this” or “He is just another Government mouthpiece”, but I’m actually just like you: A youth trying to make sense of adulthood. 

Entering the workforce is a difficult transition with a steep learning curve. I just hope that these things that I have shared can give you a little overview of CPF, and help to debunk certain misconceptions that you might have had. 

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