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

profileKenneth Fong
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20 February 2021 Update: Minimum CPF Interest Rates to Remain Unchanged

Breaking news!

On Friday (19 Feb 2021), Central Provident Fund (CPF) announced that the interest rates for the CPF Ordinary Accounts (OA) and Special and MediSave Accounts (SMA) will be maintained until 30 Jun 2021.

Whereas the 4% per annum (p.a.) interest rates for the Retirement Accounts (RA) will remain unchanged until 31 Dec 2021.

Since 1 Jan 2008, the Government had committed to providing a 4% p.a. interest floor rate for Special, MediSave, and Retirement Account (SMRA) Central Provident Fund (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.

But since our economy is so cui now…

The current interest floor rate for the CPF OA, Special Account (OA) and MediSave Account (MA) were due to expire on 31 Mar 2021 while the interest floor rate for the CPF RA was due to expire on 31 Dec 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…

Source: SpongeBob SquarePants | Giphy

No.

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

CPF Interest Rates from 1 April 2021 to 30 June 2021

There are no changes to the current CPF interest rates.

 Ordinary Account (Until 30 Jun 2021)Special and MediSave Accounts (Until 30 Jun 2021)Retirement Account (Until 31 Dec 2021)
Interest Rate Floor2.5% p.a.4% p.a.4% p.a.

Interest Rate for CPF Ordinary Account and HDB Mortgage Rate from 1 April 2021 to 30 June 2021

The OA interest rate will be maintained at 2.5% p.a. from now to 30 June 2021.

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% p.a.

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

You might wanna check out the Seedly community to find out more about home loans and get input on topics like whether you should consider refinancing!

Source: SeedlyCommunity

Interest Rate for Special and MediSave Accounts from 1 April 2021 to 30 June 2021

The SMA interest rate will be maintained at 4% p.a.

This will be maintained from now to 30 June 2021.

Interest Rate for Retirement Account from 1 October to 31 December 2021

The RA interest rate will be maintained at 4% p.a.

This will be further extended until 31 Dec 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.

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
MarketThree month average of major local banks' interest rates.0.09
Special Account4.00QuarterlyFloorCurrent interest rate floor4.00
Market12-month average yield of 10YSGS + 1%2.01
Medisave Account4.00QuarterlyFloorCurrent interest rate floor4.00
Market12-month average yield of 10YSGS + 1%2.01
Retirement Account4.00YearlyFloorCurrent interest rate floor4.00
MarketWeighted average of entire SSGS portfolio + 1%1.84

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.

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 a pitiful interest rate of 0.09% 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 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% p.a., whichever is the higher.

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 the average yield of the 10YSGS plus 1% from February 2020 to January 2021 is 2.01% p.a. which is lower than the current floor interest rate of 4% p.a.

We’ll receive 4% p.a. instead.

This is also reviewed quarterly.

Retirement Account (RA) Interest Rate

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 January to take into account the coupon rates payable by the new SSGS issued.

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% p.a., whichever is the higher.

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

In view of the continuing low-interest rate environment where the average yield of the 10YSGS plus 1% is 1.84% p.a. from Jan 2020 to Dec 2020.

The RA interest rate will be maintained at 4% p.a. from 1 Jan 2021 to 31 Dec 2021, as announced on 25 Sep 2020.


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.

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% 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 3.5% p.a. a year on your OA monies.

And up to 5% p.a. on your SMA 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% 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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