CPF Interest Rates: Minimum 4% on Special, MediSave, and Retirement Accounts Extended Till 2021
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CPF Interest Rates: Minimum 4% on Special, MediSave, and Retirement Accounts Extended Till 2021

profileKenneth Fong
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Latest Update: Minimum CPF Interest Rates to Remain Unchanged

Breaking news!

Since 1 January 2008, the Government had committed to providing a 4% interest floor rate for Special, Medisave, and Retirement Account (SMRA) CPF monies for two-year periods each time.

And they’ve been extending it ever since due to global economic conditions.

As well as the fact that interest rates have been exceptionally low.

The current rate floor was due to expire on 31 December 2020.

But since our economy is so cui now…

CPF has announced that the 4% interest rate floor for SMRA has been extended until 31 December 2021.

“Why not 2 more years like always,” you ask?

I’m guessing the Government isn’t too optimistic about the global pandemic situation and wants to adopt a see-how approach.

Now, I know what you’re thinking…

SpongeBob Asking So Uh That's It
Source: SpongeBob SquarePants | Giphy

No.

Here’s why this announcement — following CPF’s quarterly interest rate review — is important.

CPF Interest Rates from 1 October to 31 December 2020

There are no changes to the current CPF interest rates.

 Ordinary AccountSpecial and MediSave AccountsRetirement Account
Interest Rate Floor2.5%4%4%

Interest Rate for CPF Ordinary Account and HDB Mortgage Rate from 1 October to 31 December 2020

The OA interest rate will be maintained at 2.5% per annum.

For home-owners, take note that the Concessionary Interest Rate for HDB Mortgage Loan, which is pegged at 0.1% above the OA interest.

Remains unchanged at 2.6% per annum.

Want to take advantage of the low-interest rate environment we’re in?

You might wanna check out the SeedlyCommunity to find out more about home loans!

SeedlyCommunity Home Loans
Source: SeedlyCommunity

Interest Rate for Special and MediSave Accounts from 1 October to 31 December 2020

The SMA interest rate will be maintained at 4% per annum.

This will be further extended until 31 December 2021.

Interest Rate for Retirement Account from 1 October to 31 December 2020

The RA interest rate will be maintained at 4% per annum.

This will be further extended until 31 December 2021.


TL;DR: How Are The CPF Interest Rates Calculated?

If you’re wondering how the people at Central Provident Fund (CPF) decide on the interest rates…

No, they don’t just pluck a number from the sky.

Mr Krabs Saying Here's Your Budget
Source: SpongeBob SquarePants | Giphy

And no… they don’t throw darts at a piece of paper to randomly choose a number either.

There’s a science to it.

CPF AccountCurrent Interest Rate
(% per annum)
Reviewed?Type of Interest RateInterest Rate determined byInterest Rate
(% per annum)
Ordinary Account2.50QuarterlyFloorLegislated minimum2.50
Market3-month average banks' interest rate0.57
Special Account4.00QuarterlyFloorCurrent interest rate floor4.00
Market12-month average yield of 10YSGS + 1%1.43
Medisave Account4.00QuarterlyFloorCurrent interest rate floor4.00
Market12-month average yield of 10YSGS + 1%1.43
Retirement Account4.00YearlyFloorCurrent interest rate floor4.00
MarketWeighted average interest of SSGS3.05

Ordinary Account (OA) Interest Rate

Your OA balances earn a legislated minimum interest of 2.5% per annum.

Or the 3-month average of major local banks’ interest rates.

 12-Month Deposit Rate
(% per annum)
Savings Rate
(% per annum)
Average
(% per annum)
BankDBS

Balances of $20,000 to < $50,000
OCBC

Balances > $20,000 to $50,000
UOB

Balances < $50,000
DBS

Balances > $10,000 to $100,000 (AUTO-SAVE Account)
OCBC

Balances ≤ $100,000 (EASI-SAVE Account)
UOB

Balances > $15,000 to $100,000 (UNIPLUS Account)
Using the 80FD:20SD formula
31 May 20201.15000.25000.70000.05000.05000.05000.5700
30 Jun 20200.5700
31 Jul 20200.5700

Whichever is higher.

Average banks' interest rate
(May to Jul 2020)
0.57%
CPF OA interest rate
(Oct to Dec 2020)
2.50%
(legislated minimum)
Fee to cover cost of loan administration0.10%
HDB mortgage rate
(Oct to Dec 2020)
2.60%

Since the most recent 3-month average yields an interest rate of 0.57% per annum.

Which is lower than the legislated minimum of 2.5% per annum.

We’ll all receive the 2.5% per annum instead.

This is reviewed quarterly.

Special and MediSave Account (SA and MA) Interest Rate

Your SA and MA balances earn the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%.

Or the current rate floor of 4%, whichever is the higher.

SMA Floor Rates vs Computed Rates (For 10 Yr SGS)
Source: Monetary Authority of Singapore
Average yield of 10YSGS
(Aug 2019 to Jul 2020)
1.43%
Plus 1%1.00%
CPF SMA interest rate
(Oct to Dec 2020)
2.43%
CPF SMA interest rate floor
(Oct to Dec 2020)
4.00%
(current rate floor)

Since 1.43% + 1.00% = 2.43%, which is lower than the current floor interest rate of 4%.

We’ll receive 4% per annum instead.

This is also reviewed quarterly.

Retirement Account (RA) Interest Rate

Your new RA monies credited in 2020 are invested in Special Singapore Government Securities (SSGS) which earns a fixed coupon equal to either the 12-month average yield of 10YSGS plus 1% computed for the year.

Or the current rate floor of 4%, whichever is the higher.

Since the average yield of the 10YSGS plus 1% from November 2018 to October 2019 is 3.05% per annum.

The new SSGS issued in 2020 will pay a fixed coupon of 4% instead.

The interest credited to the RA is based on the weighted average interest rate of your entire portfolio of these SSGS, and adjusted annually in Jaunary to take into account the coupon rates payable by the new SSGS issued.

Oh, and unlike the OA and SMA interest rates, this is reviewed annually.


What About Additional CPF Interest?

The CPF is a social security system that helps Singaporeans set aside savings for retirement.

So if you put money into it for your future, you best believe that the Government is going to want to help you attain your retirement faster.

Mr Krabs Looking At Money
Source: SpongeBob SquarePants | Giphy

“How do they do that,” you ask?

By giving you additional CPF interest depending on your age!

Additional CPF Interest For CPF Members Below 55

If you are below 55 years old, you will be paid an extra 1% on the first $60,000 of your combined balances — with up to $20,000 from your Ordinary Account.

This means that you will earn 3.5% a year on your Ordinary Account monies.

And up to 5% on your Special and Medisave Account monies in the last quarter of 2020.

Additional CPF Interest For CPF Members Above 55

If you are above 55 years old, you will earn an extra 2% on the first $30,000 of your combined balances — with up to $20,000 from your Ordinary Account.

And an extra 1% on the next $30,000.

That works out to be up to 6% interest per year on your retirement balances.

The extra interest earned on your Ordinary Account will go into your Special or Retirement Account.

If you’re above 55 and are also participating in the CPF LIFE scheme.

The extra interest will still be earned on your combined balances, which includes the savings used for CPF LIFE.

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About Kenneth Fong
Owner of a 4-room HDB BTO and married to a financial clutz. Probably the closest to an adult you can find on the Seedly team.
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