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210922 - Ultimate Guide to CPF Interest Rates_ Latest Rates, Calculation Methodology & Additional CPF Interest Explained

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

profileKenneth Fong

21 September 2022 Update: Minimum CPF Interest Rates to Remain Unchanged

Central Provident Fund (CPF) has announced that the interest rates for the CPF Ordinary Accounts (OA), Special and MediSave Accounts (SMA) will be maintained till 31 Dec 2022.

As for the Retirement Account (RA), the 4% p.a. interest rate will remain unchanged till 31 December 2022.

To help CPF members grow their savings, the Government has extended the current 4% interest rate floor on Special, MediSave and Retirement Account monies for another year from 1 January to 31 December 2023.

Source: CPF

The Housing and Development Board (HDB) Concessionary Interest rate will also remain unchanged at 2.6% per annum (p.a.) till 31 Dec 2022.

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

CPF Interest Rates From 1 October 2022 to 31 December 2022

There are no changes to the current CPF interest rates.

 Ordinary Account (From 1 Oct 2022 - 31 Dec 2022)Special and MediSave Accounts (From 1 Oct 2022 - 31 Dec 2022)Retirement Account (From 1 Oct 2022 - 31 Dec 2022)
Interest Rate Floor2.5% p.a.4% p.a.4% p.a.

Interest Rate for CPF Ordinary Account and HDB Mortgage Rate From 1 October 2022 to 31 December 2022

Since the OA interest rate will be maintained at 2.5% p.a. from 1 October 2022 to 31 December 2022.

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 0.1% above the OA interest rate, remains unchanged at 2.6% p.a.

Want to take advantage of a home loan package that is lower than 2.6% p.a.?

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

Interest Rate for Special and MediSave Accounts From 1 October 2022 to 31 December 2022

The Special and MediSave Accounts (SMA) interest rate will be maintained at 4% p.a. from 1 October 2022 to 31 December 2022.

Interest Rate for Retirement Account From 1 January 2022 to 31 December 2022

The RA interest rate will be maintained at 4% p.a. from 1 January 2022 to 31 December 2022 as announced on 21 September 2022.


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%3.06
Medisave Account4.00QuarterlyFloorCurrent interest rate floor4.00
Market12-month average yield of 10YSGS + 1%3.06
Retirement Account4.00YearlyFloorCurrent interest rate floor4.00
MarketWeighted average of entire SSGS portfolio + 1%2.34

If you’re wondering why the CPF interest rates remained the same (when interest rates of Singapore Savings Bonds and Fixed Deposits have increased), 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.

Average banks' interest rate
(May to Jul 2022)
0.09%
CPF OA interest rate
(Oct to Dec 2022)
2.50%
(legislated minimum)
Fee to cover cost of loan administration0.10%
HDB mortgage rate
(Oct to Dec 2021)
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 2021 to Jul 2022)
2.06%
Plus 1%1.00%
CPF SMA interest rate
(Oct to Dec 2022)
3.06%
CPF SMA interest rate floor
(1 Oct 2022 to 31 Dec 2023)
4.00%
(current rate floor; extended till Dec 2023)

Since the average yield of the 10YSGS plus 1% from August 2021 to July 2022 is 3.06% p.a. which is lower than the current floor interest rate of 4% p.a.

We’ll receive the floor interest rate of 4% p.a. instead.

This is also reviewed quarterly.

Retirement Account (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 2022 will earn the 12-month average yield of 10YSGS plus 1% computed for the year.

FYI: for November 2020 to October 2021, that works out to be 2.34%.

OR the current floor interest rate, whichever is higher.

Since the amount is lower than the current floor interest rate of 4% p.a.

We’ll receive the floor interest rate of 4% p.a. instead.


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 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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