The CPF system forms the foundation of Singapore’s retirement planning process.
It includes the accumulation of funds from years of hard work, and these funds can then be used for our golden years.
In particular, the CPF Ordinary Account (OA) can be used for various purposes such as education, housing and investments.
The current interest rate on CPF OA balances is 3.5% for the first S$20,000 and 2.5% for amounts above S$20,000.
What you might not realize is that you can open a CPF Investment Account (IA), which is linked to their CPF OA, and invest the funds in their OA.
While a risk-free rate of 3.5% per annum is by no means shabby, it’s probably enough to keep pace with inflation over the long term.
Singapore recently reported that core inflation hit 2.4%, its highest level in over nine years.
Continued supply chain disruptions could keep inflation elevated for some time.
In order to grow your retirement funds, it is necessary to invest them in companies whose growth and dividend yields exceed this risk-free rate.
Here are two actions investors can consider for their CPF IA accounts.
1. Mapletree Commercial Trust
Mapletree Commercial Trust (SGX: N21U), or MCT, is a Singapore-based REIT that invests in income-generating properties used for office and/or retail purposes.
Its portfolio consists of five properties – VivoCity, Mapletree Business City I and II, PSA Building, Mapletree Anson and Bank of America Merrill Lynch Harbourfront.
These properties have a total net leasable area of five million square feet and a value of approximately S$8.8 billion.
MCT reported a 5.3% year-over-year increase in its distribution per unit (DPU) for the first half of fiscal 2021/2022 (1H2022) to S$0.0439.
Gross income and net property income also recorded year-on-year increases of 11.5% and 10.7%, respectively.
VivoCity, MCT’s only mall, introduced new tenants to provide shoppers with a greater variety of shopping choices.
The mall recently introduced new stores such as Puma, Tai Cheong Bakery and House of Samsonite.
Based on the 1H2022 annualized DPU of 8.78 Singapore cents, the REIT’s forward dividend yield is approximately 4.8%.
MCT announced a 4.2 billion Singapore dollar merger with Mapletree North Asia Commercial Trust (MNACT) (SGX: RW0U) to become Singapore’s fifth industrial REIT.
The deal is pending approval at an extraordinary general meeting to be held by MCT in mid-April.
2. Frasers Centrepoint Trust
Frasers Centrepoint Trust (SGX: J69U), or FCT, is a REIT that owns suburban retail properties in Singapore.
Its portfolio consists of nine shopping centers and one office building valued at approximately S$6.1 billion as of September 30, 2021.
Some of these malls include Causeway Point, Changi City Point, White Sands, and Hougang Mall.
FCT’s shopping centers are located primarily in suburban areas and have a large and diverse tenant base.
In addition, FCT also holds a 31.15% interest in Hektar REIT (KLSE: 5121), which is listed in Bursa Malaysia.
FCT has an excellent track record of growing its DPU every year since its IPO, with the exception of FY2020 (FY2020) when the REIT had to provide rent relief to its tenants due to the COVID-19 pandemic.
Still, the REIT more than made up for that in fiscal 2021 when it reported a DPU of S$0.12085, its highest since its IPO.
The REIT pays semi-annual distributions and its units offer a rolling dividend yield of 5.3%.
The REIT’s shopping centers are located in suburban areas, which means footfall and tenant sales are expected to remain strong.
This attribute makes FCT a very attractive investment to own in its IA CPF.
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Disclaimer: Royston Yang does not hold any shares in any of the companies mentioned.
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