CPF SA Closure: Strategies to Share with Clients
As announced in Budget 2024, from 19 January 2025, the Special Account (SA) has been officially closed for all CPF members aged 55 and above.
Here’s what this change means:
SA savings would be transferred to Retirement Account (RA), up to individual cohort’s Full Retirement Sum (FRS) — the amount set at the time user turned 55.
These funds will continue earning the long-term interest rate of at least 4% p.a.
If FRS is already fully set aside (in cash or via a mix of property and cash), any remaining SA funds are now transferred to your Ordinary Account (OA).
These funds are withdrawable but will earn the lower OA interest rate of 2.5% p.a., instead of the 4% from SA — creating a key interest difference of 1.5% on user liquid funds.
To help CPF members continue benefiting from 4% returns, the government has also raised the FRS cap — from 3x to 4x of the Basic Retirement Sum (BRS).
This allows individual to set aside more into CPF LIFE for higher monthly payouts, but with one trade-off: funds committed to CPF LIFE are locked in and cannot be withdrawn, unlike OA balances.
Food for Thoughts
This marks one of the most significant changes to CPF in recent years and introduces an important decision point for CPF members turning 55:
Should individual lock in more funds for higher CPF LIFE payouts and guaranteed 4% returns?
Or retain flexibility with funds in OA, despite the lower 2.5% interest?
Here are some strategies you can explore to help your clients navigate and benefit from this CPF change,
1) Universal Life: A Strategic Option for CPF Excess with Strong Upside for Situations Planning
Today’s Universal Life policies are highly competitive, offering strong returns and protection features — making them an ideal option for individuals with excess CPF funds who are unsure how to optimise them post-SA closure.
One of the key advantages of Universal Life is its significant ROI potential through a guaranteed multiplier effect in the event of situations, depending on the entry age and cost of insurance.
For example, a 50-year-old individual could commit $2 million and receive $6 million in coverage — effectively locking in a 300% multiplier. This far exceeds CPF LIFE potential payout in the event of situations, which only pays out remaining balances upon death after monthly payouts (With only the principal amount returned, excluding any interest).
Let’s revisit the earlier example using a more conservative payout ratio of 1:2.5, accounting for the higher insurance costs that come with starting legacy planning at age 55 and above, when CPF withdrawals are permitted.
Assume a user is able to withdraw $200,000 from their CPF and isn’t dependent on CPF LIFE for retirement income. If this amount is redirected into a legacy planning tool (e.g., Universal Life), it could potentially provide a payout of $500,000 in the event of death or terminal illness.
In contrast, if the $200,000 remains in CPF:
If the person passes away before CPF LIFE payouts begin (e.g. at age 65), the principal of $200,000 will be returned, without interest.
If death occurs after payouts begin (e.g. at age 67), and eg $2,000/month was paid out over 2 years, the remaining balance might only be around $150,000.
So, while CPF offers steady interest, the total legacy payout is lower, especially once withdrawals begin. On the other hand, setting aside the same $200,000 for legacy planning could result in more than double the payout, offering greater peace of mind for your loved ones.
In addition, many plans offer:
A minimum guaranteed floor rate, protecting capital
Exposure to internationally recognised indices like the S&P 500 for upside growth
Liquidity options, allowing clients to surrender the policy after the charge period, potentially with gains
Universal Life provides a blend of legacy planning, wealth growth, and flexibility, making it a compelling alternative to leaving funds idle in the OA or committing fully to CPF LIFE.
Dividend Funds: A Flexible Alternative to CPF LIFE with Higher Potential Returns
Monthly dividend-paying funds are a strong alternative to CPF LIFE for clients seeking higher potential returns and greater flexibility. However, it's important to highlight the trade-off: while CPF LIFE offers a risk-free guaranteed 4% return, dividend funds are subject to market volatility.
That said, the risks can be managed with proper strategies, such as:
Diversifying across sectors and regions to reduce exposure to any single market
Dollar-cost averaging (DCA) to smooth out the effects of market fluctuations over time
As of 2025, dividend funds are offering yields of around 5–7%, making them an attractive option for clients looking for higher income potential.
Unlike CPF LIFE, these funds also offer flexibility to access the principal when needed — giving clients more control over their retirement planning while still aiming for growth.
Alongside the potential for higher returns, ILPs also come with built-in safety features — such as paying out the higher of the account value or 105% of total premiums in the event of death or terminal illness.
This provides added assurance to policyowners, making ILPs a viable tool for legacy planning as well.
All in all, there are multiple strategies available to help your clients navigate and make the most of this change effectively.
