From 1 July 2012, the CPF Board will subject the wrap fee charged for CPF Investment Scheme (CPFIS) investments to a maximum limit of 1% per annum.

The cap on wrap fees is intended to help members lower the costs of investing their CPF savings over the longer term. The move is another measure taken by the CPF Board as part of its efforts to progressively lower the costs of investment and improve the quality of products offered under the CPFIS since 2006. Past measures include the tightening of admission criteria for new funds and the setting of fee caps on sales charges and fund expense ratios

A wrap fee is a regular charge paid to financial advisers for providing bundled investment services, such as advisory, brokerage and administrative services. Also known as an ongoing fee, the wrap fee is typically levied monthly or quarterly by liquidating a small portion of the investment. Currently, CPF members who maintain wrap accounts for their CPFIS unit trust investments are charged a wrap fee of up to 1.5% per annum by their financial advisers.

The CPF Board urges members who wish to invest their CPF savings for potentially higher returns to do so prudently and to scrutinise the total cost of investment as high costs may potentially erode investment returns significantly over the long term.

Since 2006, the CPF Board has been undertaking measures to progressively lower the cost of investment and improve the quality of funds under the CPF Investment Scheme. The summary of the measures taken is as follows.

1 Feb 2006Tightening of admission criteria. New funds must:
(i) meet the revised benchmark set at the top 25 percentile of funds in the global peer group;
(ii) have expense ratio that is lower than the median of existing CPFIS funds in its risk category; and
(iii) preferably have track record of good performance for at least 3 years.
1 Jul 2007Sales charge for CPFIS-included funds must not exceed 3%.
1 Jan 2008Expense ratios for CPFIS-included funds must not exceed the median of existing CPF funds in its risk category:

Risk CategoriesExpense Ratios Criterion (%)
Higher risk1.95
Medium to High Risk1.75
Low to Medium Risk1.15
Lower Risk0.65
1 Jan 2011All existing funds must meet the stricter admission criteria before accepting new CPF monies.



About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
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