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.
Salam Khairul. Thank you for writing up this post. It has been quite informative however I would like to check if you are able to share MUIS’ ruling dated 13 May 2003 as mentioned by your good self in the post above. I have been unable to find it at the MUIS website itself or via Google.
Your advice would be much appreciated.
Wsalam Syukri, thanks for the question. Besides the email from MUIS response above-mentioned, I’ve also reached out to MUIS to provide a website link or a documentation where this ruling can be further read upon. Will update here again. Thank you.
Hello, may I kindly ask if MUIS got back to you regarding the 2003 documentation?
Hi Siti, not yet. I saw there is a eBook version of the compilation of fatwas in Singapore.
https://muisfatwa.pressbooks.com/ but CPF is not mentioned there. I’ve pinged MUIS again.
Assalamualaikum brother, post 55 years old, I plan to take out any annual interest on CPF? Where can I send my money to ? One of my plan is to send to animal shelter. Any suggestion?
Waalaikumsalam Kamariah, if you plan to donate the hibah earned through your CPF, I would imagine donating it as zakat will be a good start too.
Assalamualaikum brother, I’m glad you shared that email which you sent to MUIS, because my wife and I enquired the same thing last year with them. However, their reply raised some issues I’m still concerned about. From my understanding, hibah implies that the act of giving is purely discretionary and voluntary, and not under any compulsion due to prearranged or contractual reasons.
The thing is, when I decided to transfer my share of HDB ownership to my wife prior to selling it (not because of divorce BTW), I was asked to return the amount I had used to pay for the flat all these years from my CPF account back to that account, WITH INTEREST (the interest accrued had I not touched my CPF to pay for the flat).
I had to “pay” or “return” the interest to myself, to my own account.
The question is, if CPF is a just simple retirement vehicle, and the interest is purely a gift (or hibah), why was I compelled to “pay” back to my account? It seems to me that the account must be increased at a predetermined rate, without room for discussion or discretion. How is that interest a “gift”?
Hoping anyone here can share their thoughts on this. Many thanks.
Would you have any suggestions on how we can invest and grow our CPF? What financial instruments are available for the Muslim Singaporean?
Waalaikumsalam Farhan, that’s a great question. Would definitely have this as an article on its own to answer this. But a short answer, I understand we can only invest our CPF in SGX-listed stocks, which in this case we can use the FTSE ST Singapore Shariah Index quarterly report to quickly identify which are the Shariah-compliant ones.
Just read the comments. Hopefully the video below from the Office of Mufti can help answer some of your burning questions on CPF interest.
And Allah knows best.
Assalamu Alaikkum, can anyone translate the youtube video in English, please?
Islam is simple, why can’t just. MUIS suggest to CPF for muslim account to have option to select no interest. Its win win for them anyway.
They can keep that interest money. Since in Singapore CPF is under their law. We Muslim just don’t wish to cosume the interest. They can use it to build the economy like the video above.
Please let us Muslim decide. Feels like someone forcing pork in my throat..
Hi, I believe it is not as simple as it sounds. If there’s zero return in your CPF after a 30-35 years of lockup, it defeats the purpose of CPF, which is to save for retirement as the amount will be eroded by inflation over time. Since that is the case, even there is an option for it, I doubt people will want to take it up. With little to zero demand, there won’t be a strong reason to put resources behind it and we may just go back to square one.
I think we can give brother Anonymous’s suggestion a chance, at least for the Muslims who feel uncomfortable with what they still think is riba (though I profess they’re likely the minority at best) . Let our brothers and sisters decide. Let it not be said that we didn’t try at least, with our humble knowledge and efforts, to consider everyone’s differing opinions. Before we use interest as a means to counter inflation, let’s google for the main cause of inflation and find out if it’s a “natural” economic phenomenon.
I watched the link as suggested (https://www.youtube.com/watch?v=WJaVAwOxu6g) . The ustad appeared to mount a spirited defence of the idea that CPF interest is not riba. What I get from the video, in essence, is that the taxes collected and funds pooled in CPF essentially originates from the citizens anyway. It asserts that we’re only getting the returns from what we have contributed (“duit aku jugak”). There are some scenarios that I hope our esteemed scholars of Islam can shed some light on:
1) My friend lives with his parents-in-law in a small flat that’s fully paid for. He has no title to the flat, so he’s not liable to pay property tax. He doesn’t own a vehicle, so he pays no road tax or COE . He never paid income taxes as his annual gross incomes are subminimum. But he has made regular CPF contributions his entire working life. So, when he finally gets to withdraw his CPF (not reduced in any way by HDB purchases or equity investments), it could be a significant sum, including interest. How is the interest substantially “his” money, that he has “earned”?
2) The CPF fund pays a “guaranteed” fixed return. If CPF is collectively owned by the citizens to build the economy, what happens when the economy goes downhill? If CPF is a pure investment vehicle, are we prepared to forgo the interest or even suffer a loss in our principal amounts? The Quran clearly states that trade is not like riba. In normal businesses, you can suffer losses to your capital, and the returns are never predetermined. With riba, the amount MUST increase, without fail, at a fixed rate. No exceptions. So, is contributing to CPF a “business” investment, or something else?
3) If CPF is something we citizens collectively “own” to elevate our national economy, why do I have to pay interest to have a roof over my head? CPF and HDB are joined at the hip. Aren’t the resources to build public housing the result of pooled funds (cpf, taxes, etc) in the nation’s coffers? Why are we performing mathematical gymnastics to pay interest for things we collectively “own”? As long as I dutifully contribute to the principal payments for a flat, why add the interest?
4) If the interest we’re getting from CPF was our money to begin with (“duit kita jugak”), I’m assuming the money paid in taxes and contributed to CPF circulates mainly within Singapore’s domestic economy. CPF monies are invested in Special Singapore Government Securities (SGSS) bonds. The money from the sale of these bonds is managed by GIC. However, I’m concerned with the following reports: https://report.gic.com.sg/
It appears the money is also used to purchase foreign bonds as “safe” investments. Note the high percentage of money in bonds. Past news articles indicate that Singapore is heavily invested in U.S. government bonds (among others) that yield interest. . Are we putting our money in the hands of such countries to advance their foreign policy agendas? It appears we are also reaping extra returns from the actions of such countries. On top of getting back “our” money (“duit kita”) we are also getting the fruits of other people’s labours and geopolitical adventures (“duit orang”). Is it really in our best interest as Muslims to keep getting all this interest?
I am not an economics expert, and we would do well to take reference from the Quran and Sunnah. Let’s find out what alternatives Islam has to offer, before we dismiss its guidance as “tales of the ancients”. Let’s take our conversations beyond such words as “impractical”, “obsolete”, “extreme”, or “no longer relevant”, and open our minds to the knowledge from the scriptures. The Prophet (pbuh) never said interest should feature in the workings of any economy, and we’re just trying to distance ourselves from riba as far as our baby steps allow. If the opt-out feature can be introduced for organ donations, why not CPF interest? In no way we’re forcing any ideology on anyone.
Allah knows best. All my mistakes are mine.
Keep up the good work, brother, in keeping this dialogue alive and well.
Alhumdulillah, Agree with this brother just because Muslim population is only ~16% in Singapore and out of which may be 50% do not want to pay heed to the warning on interest , Singaporean muslim population cannot mend their ways and say CPF interest is Hiba and can accept the fatwa seems still dubious as is not clearly published in the fatwa book even if it does definitely this will raise eyebrows.
While it my be complicated to amend the CPF system but declaring 4% return as Hiba is questionable, OPT out feature is something CPF can seriously consider and MUIS should help to clarify on policies instead of advocating it as Hiba