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SINGAPORE: The interest rate for Central Provident Fund (CPF) Special and MediSave Account (SMA) money will increase to 4.04 per cent per annum in the fourth quarter of this year, the CPF Board and the Housing Board (HDB) said on Thursday (Sep 21).
This is the second such increase in as many quarters, after the rate rose to 4.01 per cent for the third quarter of this year – the first increase since the floor rate of 4 per cent was established in 2008.
“This is due to the increase in the 12-month average yield of 10-year Singapore Government Securities, which the SMA interest rate is pegged to,” the CPF Board and HDB said in a joint news release.
The Ordinary Account (OA) interest rate will remain unchanged at 2.5 per cent for the same period, as the pegged OA rate – the three-month average of major local banks’ interest rates – remains below the floor rate of 2.5 per cent.
“The government is watching the interest rate environment closely to ensure that the CPF interest rate pegs remain relevant in the prevailing operating environment while taking into consideration the longer-term outlook,” the CPF Board and HDB said.
CPF members below the age of 55 will continue to earn an extra 1 per cent interest on the first S$60,000 (US$43,900) of their combined balances, capped at S$20,000 for the OA.
For CPF members aged 55 and above, the government pays an extra 2 per cent interest on the first S$30,000 of their combined balances, also capped at S$20,000 for the OA, and an extra 1 per cent on the next S$30,000.
“The extra interest received on the OA will go into the member’s Special Account (SA) or Retirement Account (RA),” the CPF Board and HDB said.
“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.”
The concessionary interest rate for HDB housing loans, which is pegged at 0.1 per cent above the OA interest rate, will remain unchanged at 2.6 per cent per annum for the same period.
These interest rates will apply from Oct 1 to Dec 31.
The RA interest rate for this year will be maintained at 4 per cent per annum.
The CPF Board and HDB also announced on Thursday that the government has extended the 4 per cent interest rate floor for interest earned on all Special, MediSave and Retirement Account money for another year from Jan 1 to Dec 31 next year.
“This provides certainty for CPF members amid the uncertain interest rate environment,” they said.
“Since Jan 1, 2008, CPF interest rates have been pegged to market instruments of comparable risk and duration to ensure that members receive fair and reasonable returns.
“The (Special, MediSave and Retirement Account) rates will continue to be reviewed regularly and CPF members will earn the higher of the floor or pegged rate.”
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