Minimum 4% Interest Rate For Special, Medisave And Retirement Account Monies To Be Extended Until 31 December 2017
CPF BOARD - HDB JOINT NEWS RELEASE
In view of the continuing low interest rate environment, the Government has decided to further extend the 4% floor rate for interest earned on all Special, Medisave and Retirement Account (SMRA) monies for another year until 31 December 2017.
2 Since 1 January 2008, savings in the SMRA have been invested in Special Singapore Government Securities (SSGS) which earn an interest rate pegged to the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%. This is a market-based rate for instruments of comparable risk and duration, and will ensure that members receive fair and reasonable interest rates.
3 To help members cope with the transition, the Government had committed to providing a 4% floor rate for SMRA interest for two years up to December 2009. This was subsequently extended in light of global economic conditions and the fact that interest rates had been exceptionally low. The 4% floor rate is currently due to expire on 31 December 2016.
4 Central Provident Fund (CPF) members will continue to earn interest rates of up to 3.5% per annum on their Ordinary Account (OA) monies, and up to 5% per annum on their Special and Medisave Accounts (SMA) monies in the fourth quarter of 2016. These interest rates include an extra 1% interest paid on the first $60,000 of a member’s combined balances (with up to $20,000 from the OA) which is part of the Government’s efforts to enhance the retirement savings of CPF members.
5 CPF members aged 55 and above will also earn an additional 1% extra interest on the first $30,000 of their combined balances (with up to $20,000 from the OA) from January 2016. This is paid over and above the current extra 1% interest that is earned on the first $60,000 of their combined balances. As a result, CPF members aged 55 and above will earn up to 6% interest per year on their retirement balances.
6 The extra interest received on the OA will go into the member’s Special Account (SA) or Retirement Account (RA) to enhance his or her retirement savings. If a member is above 55 years old and participates in the CPF LIFE scheme, the extra interest will still be earned on his or her combined balances, which includes the savings used for CPF LIFE.
7 The OA interest rate will be maintained at 2.5% per annum from 1 October 2016 to 31 December 2016, as the computed rate of 0.24% is lower than the legislated minimum interest rate.
8 Correspondingly, the concessionary interest rate for HDB mortgage loans, which is pegged at 0.1% above the OA interest rate, will remain unchanged at 2.6% per annum from 1 October 2016 to 31 December 2016.
9 Please refer to Annex A for the detailed computation of the OA interest rate and HDB mortgage rate.
10 The SMA interest rate will be maintained at 4% per annum from 1 October 2016 to 31 December 2016, as the computed rate of 3.28% is lower than the current floor interest rate of 4% per annum.
11 Please refer to Annex B for the detailed computation of the SMA interest rate.
12 The RA interest rate will be maintained at 4% per annum from 1 January 2016 to 31 December 2016, as announced on 30 November 2015.
13 Please refer to Annex C for the detailed computation of the RA interest rate.
14 CPF members can visit www.cpf.gov.sg or call the CPF Call Centre at 1800-227-1188 for enquiries.
Computation of CPF OA Interest Rate and HDB Mortgage Rate for 1 October 2016 to 31 December 2016
The interest rate on OA monies is adjusted quarterly. OA monies earn either the legislated minimum interest of 2.5% per annum, or the 3-month average of major local banks’ interest rates, whichever is higher.
Computation of CPF SMA Interest Rate for 1 October 2016 to 31 December 2016
The interest rate on SMA monies is adjusted quarterly. SMA monies earn either the current floor interest rate of 4% per annum or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, whichever is higher.
Source: Yields of 10-Year Singapore Government Securities are obtained from www.sgs.gov.sg
Computation of CPF RA Interest Rate for 1 January 2016 to 31 December 2016
RA monies credited in 2016 will be invested in newly-issued Special Singapore Government Securities (SSGS) which will earn a fixed coupon rate equal to either the 12-month average yield of the 10YSGS plus 1% computed for the year, or the current floor rate of 4% per annum, whichever is higher.
The average yield of the 10YSGS plus 1% from November 2014 to October 2015 is 3.39% per annum. As this is below the current floor rate of 4% per annum, new SSGS issued in the year of 2016 will pay a fixed coupon of 4%.
The interest rate earned by RA monies is the weighted average interest rate of the entire portfolio of these SSGS, which is adjusted in January each year to take into account the coupon rates payable by the new SSGS issuance.