CPF Board moves to lower investment costs for CPFIS funds

Funds must follow the new total expense ratio.

The CPF Board yesterday revealed that it will be reducing the limits on the Total Expense Ratio (TER) for unit trusts and investment-linked insurance products under the CPF Investment Scheme.

TER refers to the ongoing costs of operating a fund, expressed as a percentage of the fund's average net asset value. The costs may include investment management fees, trustee fees, and audit fees.

Funds that do not comply with the new TER caps will not be allowed to take in new CPF monies.

CPF members who have already invested in funds which do not meet the new TER caps, will not be required to redeem their investments. However, if they wish to switch from these funds to other CPFIS funds, they can do so free of charge within a stipulated time.

Members will be notified of their options by insurers and fund management companies, who will facilitate the switching.

According to the Life Insurance Association of Singapore, the adjustments would mean that funds will need to be even more cost-efficient. Across the board, we may see a shorter list of funds based on the adjusted criteria set for unit trusts and investment-linked insurance products under the CPFIS.

The new TER caps can be found here.