So a few really smart CPF hackers discovered this CPF lifehack that you can read about here.
Apparently, authorities will populate your CPF Retirement Account with your CPF Special Account first before drawing upon your CPF Ordinary Account. If you allow the default action to take place, then you can lose out on thousands every year because you can't boost your CPF-OA's 2.5% to 4%. So some guy suggested that you buy third party products with CPF-SA just before your CPF-RA is set up (at age 55) and then sell these securities off to return the money to your CPF-SA after your CPF-RA is set up. This ensures that the bulk of your CPF-OA will be pushed into your CPF-RA and the CPF-OA monies will work hard for you from age 55 to age 65.
The difference in returns is non-trivial, suppose the Enhanced Retirement Sum when you retire is $280,000, hacking the difference of 1.5% interest will net you about $4,200 every year.
Personally, I'm all for CPF shielding. I suspect that I may not need to do so because my CPF-OA is kept small by my mortgage, but this is a serious penalty for folks who do not understand or fail to perform this manoeuvre just before age 55.
What I'm upset about is that authorities actually allow the hack to even take place.
To execute the hack, I am forced to buy third party products, earning them a little bit of kopi money through fund expenses and commissions, otherwise, I may have to sacrifice an extra $4,200 every year in free interest from the government.
To me, the fact that this hack exists is a failure of policymaking.
The finance industry gets to earn something every time this hack takes place and thousands of uneducated citizens may not be able to execute this hack in the first place because they don't really understand our CPF system. The pushes the importance of having a financial education even more.
As a voter and citizen, we should not remain silent about this.
The CPF board should simply ask the citizen whether he would prefer the CPF-OA to be used to top up into the CPF-RA first with the status quo as the default option.
Give us a choice in the form of an online survey at age 55 instead of greasing the palms of the private sector (or some commissioned FA who would happily sell this hack to retiring customers. )
I think the problem is that very few citizens are aware of CPF shielding hack, why it exists, and why it's a consequential hack for us.
As of this moment, it falls to financial bloggers and CPF ambassadors to provide feedback to CPF board employees and tell them that this is an issue that should be addressed ASAP.
CPF board probably would not want to talk to a troublemaker like me, but if you are a CPF ally, please let it be known that Singaporeans are getting smarter and are less tolerant of weaknesses in our social security system.