SINGAPORE - CPF members will continue to enjoy a risk-free interest rate of 4% on their Special and Medisave Accounts (SMA) from Jan 1 to Mar 31 next year, and on their Retirement Account (RA) from Jan 1 to Dec 31 next year.
This is in line with the Government's announcement made in September 2012 to maintain the 4 per cent p.a. floor rate for interest earned on all SMA monies and RA monies until Dec 31, 2013.
Interest rate for SMA monies
Savings in the SMA currently earn either 4 per cent or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1 per cent, whichever is the higher.
The interest rate on SMA savings is adjusted quarterly, based on interest rates on 10YSGS over a preceding 12-month period.
The average yield of the 10YSGS plus 1 per cent, from Dec 1, 2011 to Nov 30, 2012, works out to be 2.49 per cent. Accordingly, the SMA interest rate payable to CPF members from Jan 1, 2013 to Mar 31, 2013 will be maintained at the current floor rate of 4 per cent.
Interest Rate for RA Monies
New RA savings are invested in SSGS which earn a fixed coupon equal to either the 12-month average yield of the 10YSGS plus 1 per cent at the point of issuance, or 4 per cent, whichever is the higher, adjusted yearly.
Given the lower 10YSGS yield, new RA savings will earn a fixed coupon of 4 per cent (floor rate).
The interest rate to be credited to the RA is the weighted average interest rate of the entire portfolio of these SSGS, and adjusted yearly in January.
The weighted average interest of the entire portfolio of these SSGS is 4 per cent at the moment, so the interest rate payable to CPF members on their RA balances from Jan 1, 2013 to Dec 31, 2013 will be 4 per cent.