Understanding CPF
3 Important Facts About Your CPF Ordinary Account (OA)
Hi there, in this article I will share 3 things about CPF Ordinary Account (CPFOA). I will not go into details but I will share with you things that might be useful in utilizing your CPFOA
1. With regards to your housing matters, what can you pay with your CPFOA?
Well, most of you know that you can use your CPFOA to pay for the down payment and monthly loan repayment of your house. You can actually pay it for other things as well.
Stamp duties and legal fees are also payable via CPFOA. It is also possible to pay your Home Protection Scheme (HPS) with your CPFOA.
HPS is actually mortgage-reducing insurance that protects members and their families against losing their HDB flat in the event of death, terminal illness or total permanent disability. Well, that is from the CPF website.
In layman’s terms, it is an insurance that will pay of your loan if any of the owners passes on. But the amount of coverage will depend on the percentage of which you wanted to be covered for. Hence it is important to check your HPS coverage especially if you are financing your house with your CPF monies.
2. Investing your CPFOA
For starters, you need to have a minimum amount of $20,000 in your CPFOA in order for you to invest. So for example, if you have a CPFOA balance of $20,050, you can only invest $50.
You also need to open a CPF Investment Scheme account with DBS, OCBC or UOB in order for you to invest.
There are a lot of financial instruments that you can invest in hence it is important to know where you want to invest and why. It is recommended to do your homework prior to deciding on where to invest or you can consult with a financial professional.
Well not everyone is fortunate enough to have an excess amount of money for them to invest hence your CPFOA monies is actually another form of asset that you can utilize when you want to invest and earn better returns compared to the 2.5% per annum that your already getting.
3. Insurance? Yes, you already have one without your realizing.
It is called Dependent Protection Scheme (DPS); it is a Term Insurance that will cover you until you turn 60. It pays a benefit of $46,000 to your dependents upon your death or when you suffer from Total & Permanent Disability or Terminal Illness.
You will only have this insurance policy once you have started contributing to your CPF and when you are at least 21. Well, it is good that you are given an insurance policy from the moment you start working nevertheless it does only cover you up to a certain period only.
Furthermore, the sum assured is only $46,000, which may only cover your dependents for at least a year or two. As time goes on, the cost of living is only going to rise. Hence, that sum assured will not be enough for your family members to survive after you pass on.
A lot of people might not know of the existence of DPS hence it is important to know what exactly you are paying for. Yes, you are paying premiums for your DPS. Premiums are deducted annually from your CPFOA. Don’t worry, its not a big sum nevertheless, you should know where your money goes even if its if your CPF monies.
That comes to the end of 3 Important Facts About CPF Ordinary Account (OA). Hope that this is beneficial for you and do share it with your family friends. Till next time.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
