ST : CPF extends 4% floor rate

Dec 10, 2009
CPF extends 4% floor rate

TO HELP members cope with the current economic climate, the Government will maintain the 4 per cent floor rate for interest earned on all Special and Medisave Accounts (SMA) monies and Retirement Account (RA) monies for another year until Dec 31, 2010.

After that, the 2.5% floor rate will apply for all CPF accounts, said CPF in a statement on Thursday.

Since Jan 1 last year, savings in the SMA have been invested in Special Government Securities (SSGS) which earn an interest rate pegged to the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1 per cent, adjusted quarterly.

The 12-month average yield of the 10YSGS plus 1 per cent rate worked out to be 3.31 per cent for the period Dec 1 2008 to Nov 30 2009. Since the interest rate peg for SMA monies is below 4 per cent, the SMA interest rate from Jan 1 to March 31 next year will be held at 4 per cent, said the CPF Board.

As for the Retirement Account, from Jan 1, such savings will be invested in SSGS which earn a fixed coupon equal to the 12-month average yield of the 10YSGS plus 1 per cent at the point of issuance. The interest rate to be credited to the RA will be the weighted average interest of the entire portfolio of these SSGS, and adjusted yearly in January.

Since the interest rate peg for the fixed coupon is below 4 per cent, existing RA savings will be invested in SSGS which earn a fixed coupon of 4 per cent, the floor rate. Hence, the RA interest rate from Jan 1 to Dec 31 2010 will be 4 per cent.

CPF added that an additional 1 per cent interest will continue to be paid on the first $60,000 of a member's combined balances, with up to $20,000 from the Ordinary Account (OA). The additional interest received on the OA will go into the member's SA or RA to enhance his retirement savings. If the member is above 55 years old and participates in the LIFE scheme, the additional 1 per cent interest will also apply to his annuity premium, less annuity payouts already made. The additional interest earned on the member's LIFE annuity monies will be paid into his RA.

Also from Jan 1, the Medisave Required Amount (MRA) will be raised from the current $18, 000 to $22,500.

Since Jan 1 2004, CPF members who turn 55 and are able to meet the CPF Minimum Sum1 are required to set aside a Required Amount in their Medisave Account when they make a CPF withdrawal. If such members have less than the Required Amount in their Medisave Accounts, their Ordinary and/or Special Account balances in excess of the Minimum Sum will be used to top up the Required Amount.