CPF special accounts to close for members aged 55 and above, changes to home protection scheme announced

On 14 October 2024, Singapore's Parliament passed the Central Provident Fund (Amendment) Bill, which will bring significant changes to CPF schemes. One of the major changes is the closure of CPF Special Accounts (SA) for members aged 55 and older from January 2025. This change, announced earlier during Budget 2024 in February, has been a subject of public debate, particularly due to its impact on retirement savings.

Changes to CPF Special Accounts and Retirement Accounts

Starting January 2025, members aged 55 and older will see their Special Accounts closed, and any funds remaining in the SA will be transferred to their Retirement Account (RA). The RA and SA currently offer the same annual interest rate of 4.14 per cent. However, if members’ RA funds exceed the Full Retirement Sum, excess funds will be moved to their Ordinary Account (OA), which only earns 2.5 per cent interest annually. Dr Tan See Leng, Singapore’s Minister for Manpower, explained that the aim of this change is to better "right-site" CPF savings, ensuring that only funds allocated for long-term retirement earn the higher interest rate. The option remains for CPF members to voluntarily transfer OA funds to their RA up to the Enhanced Retirement Sum (ERS) starting in 2025. The ERS will be raised from three times the Basic Retirement Sum to four times the amount beginning in January 2025. Dr Tan emphasised that more than 99 per cent of CPF members over the age of 55 will be able to transfer their SA funds to their RA. While this will allow most members to continue benefiting from the higher interest rates, those who wish to maintain access to their savings for withdrawal purposes can keep their funds in the OA, albeit at the lower interest rate.

Concerns raised in Parliament

During the parliamentary debate, some Members of Parliament (MPs) raised concerns over the impact of these changes. Associate Professor Jamus LimWorkers' Party MP for Sengkang GRC  highlighted that a small group of CPF members—around one per cent, or about 8,400 people—will be unable to transfer all their SA funds to their RA due to caps imposed by the Enhanced Retirement Sum. These individuals, often higher-income earners, would be left with funds earning lower interest in their OA. Dr Tan acknowledged this but stressed that these individuals still have other options for growing their financial assets, such as through commercial investments outside the CPF system.

Expansion of the Home Protection Scheme

In addition to changes to the CPF accounts, the CPF Amendment Bill also introduced updates to the Home Protection Scheme (HPS). The HPS is an insurance plan that safeguards CPF members and their families from losing their Housing and Development Board (HDB) flats in the event of death, terminal illness, or total permanent disability. From mid-2025, the HPS will expand its coverage to include individuals with pre-existing health conditions that are not considered severe, such as some forms of heart disease or strokes. This change is expected to benefit approximately 100 members annually. However, premiums for these members will be higher due to their increased likelihood of making insurance claims, a common practice in the insurance industry. While these changes will allow broader access to HPS coverage, there will still be limitations for those with more severe medical conditions, such as ongoing cancer treatment. Such individuals will continue to be excluded from the scheme in order to maintain its sustainability.

Premium fairness

MP Yip Hong Weng, People's Action Party MP for Yio Chu Kang SMC, voiced concerns regarding the higher premiums for those with pre-existing conditions, arguing that these members may feel penalised for their health status. Mr Yip questioned whether premium loading based solely on health risks was fair. In response, Dr Tan clarified that premium loading is necessary to maintain the sustainability of the HPS without imposing undue financial burden on other members. Without premium adjustments based on health risks, premiums for all members, including those from lower-income groups, could rise, which would not be equitable, said the minister. Dr Tan also noted that, despite the premium loading for those with higher health risks, the HPS remains one of the most affordable insurance schemes in Singapore. This approach, he argued, ensures fairness across the board while maintaining the financial sustainability of the scheme.