CPFIS sales charge to be removed by Oct 2019: Josephine Teo
The sales charge has an unintended consequence that is detrimental to CPF members. It encourages financial advisors to sell products to earn more commissions which causes members to "churn" their investments, Mrs Teo said.
File photo of the CPF building. (Photo: TODAY)
SINGAPORE: The sales charge under the CPF Investment Scheme (CPFIS) will be removed to reduce the incentive of financial advisers to push products and to reduce the cost of investing for CPF members, announced Second Minister for Manpower Josephine Teo on Monday (Mar 5).
Speaking during her ministry's committee of supply debate, she said the removal of the sales charge will be done in two steps: From the current 3 per cent to 1.5 per cent by Oct 1, and to 0 per cent by Oct 1 2019.
"By removing sales charge, financial advisors no longer have an incentive to push products. This also reduces the cost of investing for CPFIS members and will better align the investment behavior to members who have time and knowledge," Mrs Teo said.
Additionally, the cap on annual wrap fees levied by financial advisers for the services they render will be lowered from 1 per cent to 0.4 per cent.
This will be done in two steps, from 1 per cent to 0.7 per cent from Oct 1 and further reduced to 0.4 per cent from Oct 1 next year.
"We are not opposed to wrap accounts as they are generally considered to bring convenience to investors. Again, the targeted members for CPFIS are not expected to rely on advisory services that are usually included in the wrap fees," Mrs Teo said.
A new Self-Awareness Questionnaire will also be made be available to all CPF members as part of the process of opening a CPFIS account from Oct 1.
It will help CPF members decide whether the CPFIS is suitable for them, by providing feedback on their level of basic financial knowledge.
It will also inform members of the options to grow their CPF savings, such as the CPF interest rates or the future Lifetime Retirement Investment Scheme.
Members who already have a CPFIS account are not required to take the questionnaire but strongly encouraged to do so, Mrs Teo added.……
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