Agents Ofering Illegal CPF Cash Rebates Resurface

Source : The Straits Times, Mar 21, 2008

Ads which claim falsely to share commissions with investors make comeback - in a different guise.

BEFORE you commit your Central Provident Fund (CPF) savings to agents promising ‘maximum returns’ and ‘the best deal in town’, consider this: You might be falling foul of regulations.

To entice you to sign up, some agents are offering cash rebates, ranging from 1 to 1.5 per cent of your investment capital, which they say is taken from their own commission.

What this really means: When you use your CPF savings to invest, charges such as agent commissions are deducted from your CPF accounts.

So the cash rebate you are receiving from this deal essentially amounts to an early withdrawal and possible erosion of your CPF savings.

There is another problem as well. Receiving direct cash rebates from your CPF investments is forbidden under CPF Board regulations.

Instead, all gifts and rebates under the CPF Investment Scheme (CPFIS) should be converted to cash or bonus units and refunded to your Ordinary and Special accounts.

Such advertisements have appeared in the past, but agents are now relying on subtle shifts in language to fly under the radar.

When they first appeared several years ago, the ads screamed ‘instant cash’. This led to warnings against the agents.

Now, similar ads have resurfaced, this time using tags such as ‘best returns’ and ‘maximum potential’.

In response to queries, the CPF Board said that product providers under CPFIS are well aware of the rule.

Said a spokesman: ‘Agents who violate this rule would risk facing disciplinary action, from being issued with warning letters from the product providers to being suspended or even having their services terminated.’

Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, advised consumers to be cautious of the ‘generic nature’ of these ads - they often make vague claims, offer only mobile phone numbers and do not include company names.

Checks with several agents revealed how the scheme works. The minimum sum required for investment ranges from $2,000 to $10,000, and all the agents push investments in unit trusts.

When asked about the ‘high returns’, the agents said that by sharing their commissions with investors, they can give cash rebates of between 1 and 1.5 per cent of the investment capital.

When asked which companies they worked for, the agents replied that they were ‘middlemen’, ‘introducers’ or ‘brokers’ for companies such as Aviva, Prudential and AIA.

All refused to give their full names.

Mr Leong Sze Hian of the Society of Financial Service Professionals said the ads target those who are cash-strapped.

He said such people ‘must realise that when the focus is on getting cash rebates every month, their CPF savings may be eroded over time’.

Factory worker Mary (not her real name), 32, is one of those who succumbed to the lure of instant cash.

Needing money to pay for her parents’ nursing- home fees last November, she jumped at the chance of getting some extra cash. She signed documents that transferred $39,000 of her CPF savings into unit trust investments and got $200 cash in return.

Mary said she was unaware of the CPF Board regulation prohibiting rebates.

In any case, she said, she really needed the cash.

‘My thinking was, the CPF money was just being left there anyway and I’m not sure if I will live until I’m 60.’