We have seen countless local personal finance websites such as Seedly, MoneySmart and DollarsAndSense advocating CPF and how to maximize its returns to prepare for retirement.
It would often mentioned about how we should take advantage of the ‘risk-free’ 2.5% return in the Ordinary Account (OA) and 4% in the Special Account (SA). Even more so, the first S$60,000 in our CPF would get an additional 1%.
However, the one big question that often bugged me as a Singaporean Muslim was:
How do we know if the interest gain in CPF is considered Halal?
At the end of the day, we do know that the CPF board labelled the gains as ‘interest’ and that simply means riba, isn’t it?
If our Singaporean Muslims are ‘condemned’ to avoid CPF gains throughout their lives which meant for their basic needs (retirement, in this case), how are we going to ensure our fellow Muslims are able to overcome this ever-increasing cost of living and inflation?
I, for one, knew this should not be be a limitation as a Singaporean Muslim, hence clarification was needed.
The good news is – Interest Gains in CPF are categorized as hibah (gifts)
On 13 May 2003, the MUIS Fatwa Committee has released a ruling regarding the CPF interest. It says:
After deliberating on the issue, the Legal (Fatwa) Committee ruled that the interest paid by CPF Board to CPF member’s account is not riba and it is not a gain from a loan, deb, or pawn transaction. Instead, it is a form of gift with no conditions.”
To clarify on the above matter, I’ve personally enquired MUIS via email mid-2018 to confirm that the ruling still stands today.
Here’s the official MUIS’s response from an email screenshot:
So what’s next?
With this answer, I hope it brings you more confidence and drive in maximizing the growth of your CPF monies today.
We at Smartmamat here understand that everyone has their own opinions on the CPF system today, but we will leave that discussion for another time.
Meantime, with this peace of mind, let’s start learning and making measured steps in ensuring our retirement needs are met, one of which is via CPF.
We’ll talk more about this in the next few articles, insya’Allah.