Last Updated on by Tree of Wealth
The Central Provident Fund (CPF) is an important aspect of Singaporeans’ lives, and is also a highly contested topic.
However, whether we are a fan of it or not, we make mandatory contributions of a significant percentage of our salaries to it each month.
We each have four different CPF accounts – the Ordinary Account (OA), Special Account (SA), Medisave Account (MA) and Retirement Account (RA). Each account has different interest rates and payouts.
Understanding how the CPF interest rates allow us to make the most of the CPF scheme, and make educated financial decisions.
What are the CPF interest rates?
The aim of the CPF scheme is to help Singaporeans prepare for retirement. To do that, the Government pays an extra interest on the first S$60,000 of your combined CPF balances.
This is on top of the floor rate of 2.5% interest on the OA. The interest rates for the OA is capped at S$20,000.
The extra interest earned on the OA savings go into the SA or RA. Those participating in the CPF LIFE scheme will still be able to earn an extra interest on their combined CPF balances. This includes the savings used for CPF LIFE.
However, the interest rates differ based on the age of CPF members.
Those below 55 years old will earn 1% per annum on the first S$60,000. Those 55 and above will earn 2% per annum on their first S$30,000, and 1% per annum on the next S$30,000.
To add on, there is a minimum floor rate of 4% for interest earned on the SA, MA and RA, until 31 December 2022.
How are the CPF interest rates determined?
All the interest rates for the various accounts are reviewed quarterly. The sections below go into greater detail on how the interest rates are calculated for each account type.
The current interest rate for the OA is 2.5% per annum, from 1 April to 30 June 2022. The rate is computed based on the 3-month average of major local banks’ interest rates, which stand at 0.009% from November 2021 to January 2022.
Special Account, Medisave Account and Retirement Account
The current interest rate for the SA, MA and RA is 4% per annum. However, they are computed slightly differently.
The rate for the SA and MA is reviewed quarterly, and is the 12-month average yield of 10-year Singapore Government Securities, plus 1%.
From February 2021 to January 2022, the 12-month average yield was 2.55%.
On the other hand, the rate for the RA is computed based on the weighted average interest rate of the entire invested portfolio.
Any new savings accredited to the RA each year earn the 12-month average yield of 10-year Singapore Government Securities, plus 1%.
The 4% floor rate for interest earned on the SA, MA and RA savings will be extended until 31 December 2022, due to the low interest rate environment.
When will I receive my CPF interest?
You will receive your interest by 1 January each year.
The CPF interest is computed monthly, and compounded annually. The balances used for interest computation are affected by the transactions in your accounts.
For example, contributions received in the current month will begin generating interest in the following month, while deductions in the current month will not earn interest from that month onwards.
The many interest rates and numbers can be confusing. Here’s a handy table that summarizes the different interest rates available for each account.
|Interest Received||Extra interest|
|2.5%||Below 55-years-old: 1% per annum on the first S$60,000
55 and above: 2% per annum on their first S$30,000, and 1% per annum on the next S$30,000.
Capped at S$20,000