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Written Answer By Mrs Josephine Teo Minister For Manpower To Pq On Impact Of Covid-19 Pandemic On Cpf Members' Investment Portfolios

Employment practices

NOTICE PAPER NO. 111 OF 2020 FOR THE SITTING ON 2 NOVEMBER 2020 QUESTION NO. 169 FOR WRITTEN ANSWER

MP: Mr Don Wee

To ask the Minister for Manpower (a) what has been the impact of the COVID-19 pandemic on CPF members' investment portfolios so far; and (b) whether the Ministry will review the list of investment products under the CPF Investment Scheme for better protection of CPF members.

Answer

  1. The primary purpose of CPF is to help members save for retirement. Members can earn risk-free interest of up to 6% per annum on their CPF balances. Members who are prepared to take some risks to earn potentially higher returns may do so through the CPF Investment Scheme (CPFIS). 

  2. The CPFIS provides members with the flexibility to diversify their investments to enhance their retirement nest egg. At the same time, as members' retirement monies are involved, safeguards have been put in place. 

  3. First, while members can choose from a list of diverse investment options, higher-risk products such as hedge funds are excluded. This list of CPFIS products is reviewed on an ongoing basis to ensure that it remains relevant to members' needs. 

  4. Second, investment-related fees, which erode returns, are kept low for CPFIS funds. In fact, since the start of this month, CPFIS sales charges have been removed and the cap on CPFIS wrap fees has been reduced to 0.4% per annum. 

  5. Nevertheless, these safeguards do not guarantee that investments will do well. The COVID-19 pandemic is a reminder of the risks that come with investing. The resulting global market volatilities are reflected in the average quarterly performance of CPFIS-included unit trusts and investment-linked insurance products, which saw a drop of 12.96% in Q1 2020 before rebounding by 11.58% in Q2 2020. Investors, including those participating in CPFIS, may be better or worse off, depending on their timing and selection of investments during this period. 

  6. Ultimately, the CPFIS is for members who have the knowledge and time to invest and are prepared to take the risks. The CPFIS Self-Awareness Questionnaire introduced in 2018 will continue to help prospective CPFIS participants gauge their readiness to invest their CPF monies.