Over the years, the CPF Shielding Hack has become more popular. From a theoretical perspective, we employ the CPF Shielding Hack to block certain parts of our CPF balances from performing an automatic transfer or transaction.
There are at least three reasons why we may consider using the CPF Shielding Hacks.
#1 CPF SA Shielding Hack
We can block our Special Account (SA) balances from automatically flowing into our newly created Retirement Account at 55. Doing this, our Ordinary Account (OA) balances will flow into our Retirement Account (RA) instead. The benefit is that we can earn an extra 1.5% interest on our OA funds that flow into our RA (4.0% in RA, compared to 2.5% in OA). If our Special Account balances had flowed into our Retirement Account, there would be no difference in the interest we earn.
Read Also: CPF Shielding Hacks (Special Account & Ordinary Account): Do They Really Make Sense?
#2 CPF OA Shielding Hack
After performing the CPF Special Account Shielding Hack (above), we may also want to block our OA balances from flowing into our Retirement Account before turning 55. One reason for doing this may be that we do not want so much of our money flowing into the CPF LIFE scheme.
#3 Shielding Hack To Keep More Than $20,000 In Your OA When Buying A Home With An HDB Concesionary Loan
Regardless of our age, if we intend to use an HDB Concessionary Home Loan when buying our home, we can only keep up to $20,000 in our Ordinary Account. Any amounts above this will automatically be used to pay for the home. Using the CPF Shielding Hack maximises the amount that we can keep in our OA and allow u to take advantage of the full 80% Loan-to-Value (LTV) ratio.
Read Also: Taking A HDB Housing Loan: Should You Keep More Than $20,000 Or Let Your CPF OA Be Wiped Out
Using The CPF Shielding Hack Requires You To Invest Your CPF Savings
We need to invest our CPF savings (i.e. take it out of the CPF ecosystem) to shield it from the automatic transactions we want to avoid. This is done via the CPF Investment Scheme (CPF-IS). By employing the CPF Shielding Hack, automatic transactions in our CPF accounts will continue to occur – just without the bulk of our CPF savings being affected.
Of course, the intention of the CPF Shielding Hack is ultimately to bring back our funds into the CPF ecosystem relatively quickly. That’s why we need to look for very safe investments, with low barriers to divesting and small transaction costs. That’s why we can afford to make investments with poorer returns, as long as we do not incur hefty costs and retain the flexibility of bringing back our funds into the CPF ecosystem relatively quickly.
For a start, we can only invest anything above $40,000 in our Special Account and $20,000 in our Ordinary Account. For pre-retirees looking to employ the CPF Shielding Hack, at least $60,000 will still flow into our Retirement Account. For those using the Shielding Hack when buying a home, we need to calculate our downpayment accurately so we don’t mistakenly “shield” too much funds.
Read Also: 7 Types Of Investments You Can Make Using Your CPF OA Monies Via The CPFIS-OA
What Should You Invest In When Using The CPF Shielding Hack?
Via the CPF-IS scheme, we can invest in diverse types of investments. As mentioned, when employing the CPF Shielding Hack, we should be looking for safer investments.
Source: Screenshot taken from CPF website
Reviewing this list, the suitable investments that we can consider are Singapore Government Bonds (SGS) and Treasury Bills (T-bills). We can review the latest SGs and T-bills issues on the MAS website. While fixed deposits, statutory board bonds and bonds guaranteed by the Singapore government are good options, there are no products available.
Reviewing the other types of investments we can make via CPF-IS, we will quickly realise that even relatively safe unit trusts and ETFs can fluctuate a fair bit. From nearly 100 unit trusts that we can invest in (listed on the CPF website), we picked out those that are considered “Low to Medium Risk”. Looking at the results, we can see that there is at least an expense ratio between 0.41% to 0.95% that we will incur just investing into the unit trusts. Moreover, the fluctuations can be significant – with the biggest loss at nearly 16% within a 1-year period.
| Selected Funds | Risk Class | CPF-IS OA/SA? | Expense Ratio | 1-Year Performance (as at Q2 2022) |
| Eastspring Investments Unit Trusts – Singapore Select Bond Fund Class A | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.63% | -7.79% |
| Legg Mason Western Asset Global Bond Trust (Class A (SGD) Accumulating) | Low to Medium Risk – Broadly Diversified | CPFIS-OA & SA | 0.95% | -11.04% |
| LionGlobal Short Duration Bond Fund Class A (SGD) (Dist) | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.59% | -3.30% |
| LionGlobal TEAM – Singapore Fixed Income Investment (Class A) | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.67% | -6.92% |
| Manulife Singapore Bond Fund (Class A) | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.91% | -9.71% |
| Nikko AM Shenton Short Term Bond Fund (S$) Class | Low to Medium Risk – Broadly Diversified | CPFIS-OA & SA | 0.41% | -1.67% |
| PineBridge International Funds – Singapore Bond Fund | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.85% | -8.04% |
| Schroder Asian Investment Grade Credit Class A SGD | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.89% | -8.75% |
| Schroder Global Quality Bond Class SGD Hedged F Acc | Low to Medium Risk – Broadly Diversified | CPFIS-OA & SA | 0.69% | -15.95% |
| Schroder Singapore Fixed Income Fund Class A | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.69% | -9.10% |
| United SGD Fund – Class A (ACC) SGD | Low to Medium Risk – Broadly Diversified | CPFIS-OA & SA | 0.68% | -2.35% |
| United Singapore Bond Fund Class A SGD Acc | Low to Medium Risk – Narrowly Focused | CPFIS-OA & SA | 0.76% | -7.45% |
Source: CPF website
Likewise, ILPs, annuities and endowment policies can see their value fluctuate, on top of having higher costs and potentially limited divestment concerns.
For shares, property funds, corporate bonds, and gold investments, we can already see that CPF itself has placed restrictions on how much of our investible savings we can use to buy them. Apart from the fact that we would not be able to apply our CPF Shielding Hack properly given these limits, they are also fairly riskier investments.
Read Also: Treasury Bills (T-bills): What Are They And How You Can Buy Them
What You Need To Know When Investing In SGS & T-Bills When Doing The CPF Shielding Hack
Remember, since we are trying to do the CPF Shielding Hack just before a very specific period, we need to have a correct strategy.
For starters, even though there is a very specific period that we want to use the CPF Shielding Hack, we should never leave it to the last moment. Instead, we should think about making the investments we need several months before our deadline. On top of facing unnecessary added stress, leaving it to the last minute can also surface problems that we cannot solve in time.
First, there are 6-month T-bills and 1-year T-bills that we can invest in. Since our intention is to see our funds go back to our CPF accounts, the shorter the duration, the better. We can also sell both T-bills and Singapore Government Securities (SGS) before their maturity, but this may open us up to some losses and added transaction costs.
On the MAS website, it also looks like the 6-month T-bills are issued on a bi-weekly basis. So, we don’t have to worry too much about missing an issue. The 1-year T-bills have a lower frequent issue schedule.
Source: MAS website
If we want to invest our CPF Ordinary Account savings in T-bills, we will need to open a CPF Invest Account with one of the three CPF-IS Agent Banks (DBS/POSB, OCBC or UOB). There is no need to open any such accounts if we want to invest our Special Account savings in T-bills. In both instances, it looks like we have to submit an application in person at the branch of a CPF-IS bond dealer (also DBS/POSB, OCBC or UOB).
While the minimum bid amount is $1,000, we should be more concerned with whether we get a full allotment. This is also why it is better to deploy the strategy a few months earlier than the deadline we need to meet.
For example, in the most recent Auction Result in September, we can see that the total amount allotted was $4.0 billion. However, the total application amount was $9.7 billion – more than double. Furthermore, only approximately 8% of the competitive applications we allotted, while 100% of the non-competitive applications were allotted.
Source: MAS website
As an added bonus, the current 6-month T-bills are yielding very close to the Special Account floor rate of 4.0% and higher than the Ordinary Account floor rate of 2.5%. Hence, we are not losing out too much by holding the T-bills for the entire 6-month period.
In the past, it may have made more sense to calculate the difference in yield if we held the T-bill vs selling it after the period we required and choose to sell the T-bills right after our Retirement Account is opened by the CPF Board or funds are used for our home purchase.
We can also invest in SGS, which are similar government securities with longer-dated maturity periods. Looking at current issue schedule, we may have to apply for much longer-dated SGS bonds as the issue frequency is not disclosed.
Source: MAS website
The obvious concern is that we actually want to return our funds back into our CPF accounts. So, we likely need to sell the SGS that we buy at some point – which means longer-dated SGS may not be the most ideal investments for our CPF Shielding Hacks.
Of course, we can also sell these bonds, but may incur higher transaction costs. This is why the T-bills may make the greatest sense when we want to employ the CPF Shielding Hack.
Read Also: CPF Shielding Hacks (Special Account & Ordinary Account): Do They Really Make Sense?
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