The second phase of reductions to the CPF Investment Scheme (CPFIS) sales charge and wrap fees cap will be deferred by one year, to Oct 1, 2020.
This is in response to industry feedback that financial advisers require more time to adjust to the revised CPFIS fees structure, the Ministry of Manpower (MOM) said.
A portion of Singapore's around 20,000 financial advisers depend on selling investment-linked insurance policies and other products related to CPFIS. Under the second phase of fee reductions, the sales charges financial advisers would earn as commission from these products would be brought down to zero.
The reaction from the ground is very positive. My phone hasn't stopped ringing"
Currently, financial advisers are allowed to levy a sales charge of up to 1.5% for Investment-Linked Insurance Policies and unit trusts offered under CPFIS. This is down from the 3% charged before Oct 1 last year.
Leong Sow Hoe, president of Insurance and Financial Practitioners Association of Singapore (IFPAS), said: "The reaction from the ground is very positive. My phone hasn't stopped ringing."
He added that the deferment will allow affected financial advisers - namely, those who are more focused on CPFIS sales - to find other lines of business in the financial planning space. This will enable them to compensate for the loss in such products.
The removal of the sales charge - to take place on Oct 1 next year - reduces the cost of investing for CPFIS members and better aligns investment behaviour to members who have the time and knowledge to invest.
Investors are already able to buy unit trusts directly on online platforms for zero sales charge.
Financial advisers currently charge a wrap fee of up to 0.7% of assets under management (AUM) per annum for CPFIS members with wrap accounts. This is down from 1% prior to Oct 1 last year.
The lower CPFIS fee structure was one of the factors that led to lacklustre sales of single-premium plans last year.
Sales of single-premium products under CPFIS fell 62% to S$29m weighted premiums in Q4 2018 from the preceding quarter, said the Life Insurance Association Singapore last month.