The ‘Christmas’ of the year’s financial highlights
Nine themes that impact most of us, ranging from housing to CPF and insurance
AS WE bid farewell to 2024, here’s a rundown on the financial highlights of this year using the letters that make up “Christmas”, as it is just round the corner
C – Central Provident Fund (CPF)
The announcement on the closure of the Special Account (SA) took the wind out of some CPF members, particularly those aged 55 and above who managed to retain substantial balances in their SA to earn the attractive annual interest of at least 4 per cent per annum (pa). I was one of them.
Come the second half of January 2025, those aged 55 and above will say goodbye to their SA which will be closed then. For those who have not yet turned 55 – for example, turning 55 in June 2025 – the Retirement Account (RA) will be created (as per usual), and SA will be closed, on their birthday. Monies from their SA will flow to their RA up to the Full Retirement Sum. Any excess will be channelled to the Ordinary Account (OA). It is timely to consider how you can work your CPF monies harder and potentially achieve returns higher than the OA’s 2.5 per cent return.
From January 2025, the Enhanced Retirement Sum will be further “enhanced” to four times the Basic Retirement Sum or S$426,000. This gives room for members like me who wish to top up their RA for higher payouts.
And if you have not done so, do consider topping up your CPF account or that of your loved ones – before the end of this month – to potentially enjoy tax relief in Year of Assessment 2025.
H – HDB
Home planning requires more study than ever, with the new HDB framework that classifies Build-To-Order (BTO) flats as Prime, Plus or Standard. Prime flats will be in the choicest locations, followed by Plus and Standard.
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However, Prime and Plus flats will be subject to tighter conditions such as a minimum occupation period (MOP) of 10 years, resale proceeds’ clawback, restrictions on renting out the entire flat, and that resale buyers must meet the BTO monthly household income ceiling. This is because the aim of the framework is to ensure fairness in the system for all and maintain affordability of the flats.
Growing wealth through home ownership was simpler and faster when I bought my five-room executive HDB flat in 1988 and sold it for a neat profit seven years later. In between, I managed to flip a condo unit. That became a war chest for my next wave of investments.
Prospective BTO homeowners are encouraged to do their sums and manage their expectations. Making gains from owning Prime and Plus flats is still possible despite the restrictions, should they wish to sell after the MOP. If not, they are assured of a home in a choice location.
R – Retirement
In 2026, Singapore is projected to reach the status of a superaged society – when 21 per cent of the population is aged 65 and above.
For a smooth transition, proactive measures across healthcare, workforce, social services, and urban planning will be crucial. Emphasising inclusivity, support, and innovation will help ensure that the ageing population can thrive and contribute meaningfully to society.
Last year, the average life expectancy of Singapore residents at birth was age 83. This is a vast improvement compared to our grandparents’ generation. It is therefore prudent not to underestimate the number of years in retirement, and have adequate buffer to avoid the dire situation of outliving our financial resources.
It is no wonder that retirement surveys usually indicate that the top three concerns are rising costs of living, healthcare costs and having an insufficient nest egg.
Thus, there is increased emphasis and awareness on building retirement savings and the importance of financial literacy to ensure that older adults can achieve a comfortable standard of living in their golden years.
I – Investment
The lesson that was reinforced in the last few years is that winning asset classes shift over time, and hence the importance of diversification and staying invested.
The high interest rate environment was instrumental in drawing out conservative retail investors who were sitting on cash positions to invest in safe products, such as Treasury bills and Singapore Savings Bonds, that generated attractive returns then. Hopefully this investing experience will raise their awareness on the need for investing and galvanise them to continue doing so.
With more impending US Fed cuts, it’s time to review and re-allocate your monies – particularly those that are meant for the long-term – into other asset classes for potentially higher returns.
S – Scams
Looking at the past three years, scammers made record wins in 2022 when victims lost a staggering S$660.7 million across 31,728 cases. This was higher than the S$633 million (23,933 cases) lost to scams in 2021. In 2023, S$652 million were ripped off victims. But when we look at the case count, it was at a record 46,563.
During the first six months of this year, S$385.6 million was already lost to such fraud, which may result in another record year of losses.
The top five scams last year in terms of loss amount were investment scams, job scams, government officials’ impersonation scams, Internet love scams and malware scams.
The scams that made it to the top five based on case count were job scams, e-commerce scams, fake friend call scams, phishing scams and investment scams.
T – Treasury bills (T-bills)
Once the darling of retail investors, T-bills are slowly losing their lustre in a falling interest rate environment.
What a contrast it was in the last couple of years, when many investors poured their savings into tranches of the sure-win and risk-free T-bills when their yields climbed along with the US rate hikes back then. While savings accounts were at a measly 0.05 per cent pa, T-bills yields hit a 30-year high of 4.4 per cent in December 2022 and had hovered above the 3 per cent level.
The cut-off yield for the six-month T-bill auctioned soon after the Fed cut in September fell to a two-year low of 2.97 per cent, before climbing to 3.08 per cent for the auction in late November.
With billions worth of six-month T-bills maturing from now to next year, it is no wonder that financial institutions and investment product providers are gearing up to provide a home for these monies.
It will be a win-win situation if they can educate retail investors on the need to diversify to suitable long-term investment opportunities that can offer more bang for their buck.
M – Medical insurance
Healthcare costs are heading north with Singapore residents facing the double whammy of rising premiums from our national healthcare insurance scheme MediShield Life and the private medical Integrated Shield Plans (IPs) and riders.
From April 2025, Singaporeans and permanent residents can expect significant enhancements to MediShield Life. They will help to better manage large hospital bills and selected costly outpatient treatments, such as kidney dialysis and cancer chemotherapy. The changes also aim to make innovative types of care more accessible. The impact of rising premiums will be mitigated by subsidies and a premium support package.
For IP customers, do note that following the end of the premium freeze on IP premiums at end-August this year, nearly all IP insurers have raised their premiums for IPs and riders.
A – Assurance Package
The Assurance Package (AP) comprises cash, rebates, top-ups and CDC vouchers to help lower- and middle-income Singaporeans and households cushion the GST increase.
This month, eligible adult Singaporeans would have received various monies meant to alleviate cost-of-living pressures, offset healthcare expenses and build up retirement savings.
First off is a cash distribution ranging between S$200 and S$600 as part of the enhanced Assurance Package (AP) announced in Budget 2024. The sum is dependent on assessable income and the number of properties owned.
The second type of benefit is a one-time MediSave top-up of S$1,250 or S$2,000 under the Majulah Package – the Medisave Bonus. The third benefit is a one-time Retirement Savings Bonus – also under the Majulah Package – of S$1,000 or S$1,500 top-ups to the CPF accounts, depending on the amount of retirement savings in these accounts.
Eligible recipients will be notified via SMS this month after their benefits have been credited. To check your eligibility, log in with your Singpass at govbenefits.gov.sg website.
S – Simplifying financial planning
The call to better money management was boosted when the government launched the Basic Financial Planning Guide in January this year. Developed by the government and industry associations including the banks, the easy-to-use guide aims to provide a consolidated view on the diverse needs of financial planning at various life stages (from fresh entrant to the workforce and working adult with kids to pre-retirees and retirees).
The holistic guide offers recommended levels of emergency cash, protection levels, investment, retirement, and estate planning considerations. It includes national schemes (such as CPF, MediShield Life and CareShield Life), low-cost protection and diversified investment product options, and actionable Rules of Thumb for consumers to self-assess, identify, and close their money gaps.
Start planning now to better navigate your financial journey!
The writer is head of financial planning literacy at DBS Bank, and author of bestsellers Money Smart and Retire Smart
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