Ultimate Guide to CPF Interest Rates: Latest Rates, Calculation Methodology & Additional CPF Interest Explained

21 Sep 2023 Update: Special and MediSave Accounts Interest Rate to Increase to 4.04% In Q4

Breaking news.

The Central Provident Fund (CPF) board has just announced that:

With the Special and MediSave Account (SMA) pegged rate exceeding the floor rate of 4%, savings in the SMA will earn 4.04% in the fourth quarter of 2023. This is due to the increase in the 12-month average yield of 10-year Singapore Government Securities (10YSGS), which the SMA interest rate is pegged to.

 

The Ordinary Account (OA) interest rate will remain unchanged at 2.5% for the same period, as the pegged OA rate remains below the floor rate of 2.5%. The Government is watching the interest rate environment closely to ensure that the CPF interest rate pegs remain relevant in the prevailing operating environment while taking into consideration the longer-term outlook.

As such, the Housing and Development Board (HDB) Concessionary Interest rate, which is pegged at 0.1% above the OA interest rate, will remain unchanged at 2.6% per annum (p.a.) for Q4 2023.

As for the Retirement Account (RA), the 4.00% p.a. interest rate will remain unchanged till 31 December 2023, as announced on 29 November 2022.

Also, to help CPF members grow their savings, the Government has extended the current 4% interest rate floor on Special, MediSave and Retirement Account monies to 31 December 2024.

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

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TL;DR: CPF Interest Rates From 1 October 2023 to 31 December 2023 — What Are the Changes to CPF in 2023

Here are the upcoming changes to the CPF interest rates:

Source: CPF

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• Interest Rate for CPF Ordinary Account and HDB Mortgage Rate From 1 October 2023 to 31 December 2023
• Interest Rate for Special and MediSave Accounts From 1 October 2023 to 31 December 2023
• Interest Rate for Retirement Account From 1 October 2023 to 31 December 2023
• How Are The CPF Interest Rates Calculated?
• How Can I Maximise My CPF Money: Additional CPF Interest and CPF Contribution Rate Explained

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CPF OA Interest Rate and HDB Mortgage Rate From 1 October 2023 to 31 December 2023

Since the OA interest rate will be maintained at 2.50% p.a. from 1 October 2023 to 31 December 2023.

If you’re a home-owner, all you need to know is that the Concessionary Interest Rate for an HDB Mortgage Loan, which is pegged at 0.10% above the OA interest rate, remains unchanged at 2.60% p.a. for the same time period in Q4.

Want the lowdown of all things property?

You might want to check out the property group on Seedly to learn more about home loans and more.

MediSave and Special Account CPF Interest Rate From 1 October 2023 to 31 December 2023

The Special and MediSave Accounts (SMA) interest rate will be increased to 4.04% p.a. from 1 October 2023 to 31 December 2023.

CPF Interest Rate History

This increase is history in the making as this is the first time the CPF SMA account interest rate has been increased since the floor rate of 4.0% p.a. was first established in 2008.

Also, you might be wondering. How much more will you get with the increased interest?

Let me show it with an example.

For context, CPF has stated that:

CPF interest is computed monthly. It is credited to your respective accounts by 1 January of the following year and compounded annually.

CPF balances used for interest computation are affected by the transactions in your account. For instance, contributions (including refunds) received this month start earning interest next month. Withdrawals/deductions in this month will not earn interest from this month onwards.

This means that at the end of the year, you will get interest on the average weighted balance in your CPF account for the whole year.

Let’s say you have $100,000 in your CPF Special Account (SA) and have maintained this amount for the whole year without any withdrawals.

CPF Interest Rate at 4.0% p.a. for 2023

For example, let’s say that CPF interest for the SA remains the same at 4.0% p.a. for 2023; you will have $4,000 in interest credited to you on 1 January 2024, which means you will have $104,000 in your CPF account after 1 January 2024.

CPF Interest Rate at 4.0% in Q1 to Q2, 4.01% p.a. for Q3, 4.04% in Q4

Since CPF interest for the SA is increasing to 4.04% p.a. in Q4 2023, this means that the blended interest rate for the entire year would be 4.0125% [(4.0% + 4.0% + 4.01% + 4.04%)/4].

This means you’ll get just $4,012.50 in interest credited to you on 1 January 2024, which means you will have $104,012.50 in your CPF SA after 1 January 2024.

In other words, you’ll get $12.50 more with the increase.

Retirement Account Interest From 1 January 2023 to 31 December 2023

The RA interest rate will be maintained at 4.00% p.a. from 1 January 2023 to 31 December 2023, as announced on 29 November 2022.

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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.

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

There’s a science to it.

If you’re wondering why the CPF interest rates took so long to go up when interest rates of Singapore Savings Bonds and Fixed Deposits have shot up, CPF’s official response was that the Government has extended the 4% floor rate on SMRA interest:

CPF interest rates have been pegged to market instruments of comparable risk and duration to ensure that members receive fair and reasonable returns. While the recent rise in interest rates have led to an increase in the pegged SMRA rates, they remain below the floor rate of 4%. To help members grow their savings consistently, the Government will be extending the 4% floor rate on SMRA interest. The SMRA rates will continue to be reviewed regularly and CPF members will earn the higher of the floor or pegged rate.

To understand how the floor rates have an impact on CPF monies, we need to zoom in on how the monies are calculated in each account.

Ordinary Account (OA) Interest Rate

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

OR the three-month average of major local banks’ interest rates, whichever is higher.

Since the most recent 3-month average yields a pitiful interest rate of 0.66% p.a.

Which is lower than the legislated minimum of 2.5% p.a.

We’ll all receive the 2.5% p.a. instead.

This is reviewed every quarter.

Special and MediSave Account 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% p.a., whichever is the higher.

Since the average yield of the 10YSGS plus 1% from August 2022 to July 2023 is 4.04% p.a., which is higher than the current floor interest rate of 4.00% p.a.

This is why we’ll receive a higher interest rate of 4.04% p.a. for Q4 2023.

This is also reviewed quarterly.

CPF Special Account Ceiling 2023

And if you were wondering, there is no cap on the amount you can have in your CPF SA.

The yearly amount you can top-up to your CPF accounts is capped by the CPF Annual Limit, which is currently at $37,740.

CPF RA Interest Rate

Your RA interest rate is a little more cheem.

The interest rate is based on the weighted average interest rate of your entire invested portfolio – which is invested in Special Singapore Government Securities (SSGS).

This rate is then adjusted annually in January to take into account the coupon rates payable by the new SSGS issued each year.

Your new RA monies that are credited in 2023 will earn the 12-month average yield of 10YSGS plus 1% (3.47% p.a. for the period from November 2021 to October 2022) computed for the year.

OR the current floor interest rate, whichever is higher.

Since 3.47% p.a. is lower than the current floor interest rate of 4.00% p.a.

We’ll receive the floor interest rate of 4.00% p.a. instead.

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How Can I Maximise My CPF Money: Additional CPF Interest and CPF Contribution Rate Explained

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 at these CPF contribution rates:

“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% p.a. on the first $60,000 of your combined balances — with up to $20,000 from your OA.

This means that you will earn up to 3.5% p.a. a year on your OA monies.

And up to 5% p.a. on your SMA monies.

Additional CPF Interest For CPF Members Above 55

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

And an extra 1% p.a. on the next $30,000.

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

The extra interest earned on your OA will go into your SA or RA.

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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Related Articles:

• The Ultimate Guide to Central Provident Fund (CPF): Interest Rates, Contributions And More
• CPF Investment Scheme (CPFIS): Should You Invest Your CPF Money?
• I’m A Singaporean Millennial: How Much CPF Do I Need To Retire?