Is CPF’s new life-cycle investment scheme for everyone?
The portfolios’ returns will hinge on a long horizon and some hand-holding
[SINGAPORE] Life-cycle portfolios for the Central Provident Fund (CPF) have been a long time coming. Their roll-out in 2028 – as announced in the Budget 2026 statement on Thursday (Feb 12) – will set a milestone in the CPF Board’s efforts to give members “advice-embedded” options to enhance returns for retirement.
Members already have more than 700 choices in the CPF Investment Scheme (CPFIS), including unit trusts, insurance products, bonds and shares. But too many choices can cause paralysis, and even with CPF’s caps on expense ratios, not all funds are low-cost.
The scheme is, however, more than just another choice. It marshals available technology and resources to offer a simplified, low-cost and diversified option for those who want and need higher returns, but do not have the time or energy to research underlying funds, nor to actively rebalance their holdings.
Is the new scheme for everyone? Perhaps not, but those who have the capacity in terms of available funds and risk appetite, plus a long horizon, should consider it.
To date, the proportion of members with active CPFIS investments is in the minority – 28.1 per cent (458,000) under the CPFIS-OA and 22.1 per cent (217,000) under the CPFIS-SA.
The scheme is open to both Ordinary Account (OA) and Special Account (SA) savings, which begs the question: Should you invest when the risk-free hurdle rates are 2.5 and 4 per cent, respectively? The proposition is more clear-cut for OA savings than for SA ones.
The new scheme will work on a glide-path mechanism, where the risk exposure starts at a higher level for younger members and gradually de-risks towards lower-risk assets such as bonds as retirement approaches. Until now, the scheme has been referred to as the Lifetime Retirement Investment Scheme; the name may eventually change.
Conditions are optimal for a launch – not so much because recent market returns are strong, but because the prerequisites for simplified and low-cost portfolios with advisory built in are out there.
The CPFIS already has digital advisers in Endowus and, more recently, AutoWealth. Both offer portfolios populated by funds that do not charge trailer fees.
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Such funds can reduce the annual management fees by up to half compared to retail funds, a boon for returns. The technology for glide-path portfolios is also available.
Challenges for retirement savings
Retirement savings grapple with two major challenges – longevity or the risk that we outlive our savings; and inflation, which is the risk that the purchasing power of our savings is eroded through time. Both are untenable.
Leaving money in the OA risks not only inflation, but also a retirement shortfall due to a relatively low rate of return, albeit safe.
The SA offers a higher guaranteed rate, which may be better able to hedge for inflation, but is it sufficient? Members will need help to project their future retirement needs, taking into account assets outside CPF.
The long history of pension investing rests on a portfolio with a balanced strategic allocation into stocks, bonds and alternative assets. Hedge funds and private markets are not allowed in the CPFIS, but gold is.
The point is that investing in a strategic mix of stocks and bonds gives investors a fighting chance for a higher risk-adjusted rate of return. From the long history of finance, markets have marched upwards steadily.
JP Morgan Asset Management’s (JPMAM) data shows that the average bull market has lasted 70 months and generated 221 per cent in returns. In contrast, the average bear market has lasted 14 months with negative returns of 39 per cent.
The prospect of loss is scary, but a long horizon mitigates that. Referring again to long-run data compiled by JPMAM between 1989 and end-2025, the frequency of positive returns over a day is a coin toss – the market went up as often as it fell.
But as the time horizon lengthened, the frequency of positive returns increased. In fact, over 10 years, a diversified 60/40 portfolio (60 per cent equity, 40 per cent bonds) was up more often than an all-stock portfolio was over every rolling time frame – from one day to a decade.
This is where advice becomes all-important, because the pre-condition for achieving a positive outcome is to stay invested over the long term. This is harder than it sounds.
Market crises, which seem to occur more frequently in recent years, will shake investors’ confidence, regardless of age. If the scheme has no lock-in period, the temptation to sell and revert to cash will be high at times. Members will need hand-holding in such periods.
Disciplined and regular investments over time help to mitigate timing risk, and reap the benefits of compounding.
Weighing risk alternatives for OA and SA
Who, then, should invest in the new scheme? Chuin Ting Weber, the chief executive and chief investment officer of MoneyOwl, believes it “should not be the foundational solution for retirement security, and it is not for everyone”.
While it does advance a “middle-ground, signposted, DIY-investing model” and will likely set a benchmark in low costs, it is “neither risk-free nor guaranteed to beat the OA and SA rates”, she said.
For the foundational layer of retirement assets, she would stick to the “safe-compounding machine” of the OA and SA rates.
“When it comes to retirement savings, investors look for safety, sufficiency and flexibility, but we cannot have all three. For a safe retirement income floor, we should prioritise safety and sufficiency.”
She added: “Higher returns and flexibility are for those who have excess balances for a second layer of retirement assets to fund additional, non-essential needs.”
Samuel Rhee, co-founder and CIO of Endowus, said the firm is keen to participate in any consultation and implementation. “We feel that it is critically important to build advice into the framework that is hyper-personalised to members’ circumstances and their retirement goals.
“We believe it is possible to achieve a higher retirement sum for all CPF members by starting early and investing in the right way.”
For Endowus, which has been the digital adviser for CPFIS since 2019, assets under advisory for CPF and the Supplementary Retirement Scheme have reached S$3.5 billion.
Rhee said the SA’s 4 per cent rate is attractive, but investing in a passive index fund can yield 7 to 9 per cent over a long period, “and we know that investing early and over the long term reduces the risk and the volatility of outcomes”.
Christopher Tan, CEO of Providend, said a CPF member who is unwilling to take short-term volatility risk and loses sleep in bad markets would not be suitable for the scheme.
“I would suggest that members invest only using OA and not SA funds, because a 4 per cent risk-free rate is hard to beat. It does not make sense to take so much equity risk to get a return that’s 2 to 3 per cent higher than the SA.”
AutoWealth CEO and CIO Ow Tai Zhi said that tailored advice will be critical, and possible with “comprehensive yet simplified user profiling”.
“A glide path that is purely based on age without considering the user’s retirement goal (or lifestyle), income, net worth, risk appetite, risk-return preference and horizon based on the user’s unique situation – he may wish to retire at 50) – may be counterproductive in terms of suitability,” he said.
AutoWealth, which has started rolling out solutions for the CPFIS, is keen to participate in the scheme.
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MDDI (P) 046/10/2024. Published by SPH Media Limited, Co. Regn. No. 202120748H. Copyright © 2026 SPH Media Limited. All rights reserved.
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