The Central Provident Fund Board (CPFB) has announced its decision to place a cap of 1 per cent a year on the wrap fee charged on unit trusts included in the Central Provident Fund Investment Scheme (CPFIS).

The planned cap, which will take effect from July this year, will encourage investors to invest more in products offered under the CPFIS by lowering the costs of investment.

Announcing the decision, the CPF Board said in statement, "The move is another measure taken by the CPF Board as part of its efforts to progressively lower the costs of investment and improve the quality of products offered under the CPFIS."

A wrap fee is an amount that is paid to financial advisers for services like advisory and brokerage. It is paid monthly or quarterly by deducting a fraction of the investment.

Currently, CPF members are charged a wrap fee of up to 1.5 per cent a year by their financial advisers.

Thus, the newly announced cap will allow an investor to $50 on an investment of $10,000 per year.

The move is expected to benefit some 30,000 investors. As of June 30 last year, there were around 100,000 CPFIS wrap accounts.