4% interest rate for Special, Medisave accounts to remain

PHOTO: 4% interest rate for Special, Medisave accounts to remain

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 rateĀ 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.

Additional Interest of 1 per cent

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 CPF LIFE scheme, the additional 1 per cent interest will still be earned on his combined balances including the savings used for CPF LIFE.

Medisave Required Amount

From Jan 1 next year, the Medisave Required Amount (MRA) will be raised from the current $32,000 to $38,500.

Since Jan 1, 2004, CPF members who turn 55 and are able to meet the CPF Minimum Sum are required to set aside the MRA in their Medisave Account when they make a CPF withdrawal.

If such members have less than the MRA in their Medisave Accounts, their Ordinary and/or Special Account balances in excess of the Minimum Sum will be used to top up the MRA.

The requirement for members to set aside the MRA in their Medisave Account is to enable them to have enough savings to meet their healthcare needs during old age.