SINGAPORE - The CPF Board today announced that the interest rate for the Special and Medisave Accounts (SMA) will stay at 4 per cent from July 1 to Sept 30 this year.
This is in line with the Government's announcement made in September 2012 to maintain the 4% p.a. floor rate for interest earned on all SMA monies and Retirement Account (RA) monies until 31 December 2013.
Interest rate for SMA monies
Savings in the SMA currently earn either 4% or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, 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%, from 1 June 2012 to 31 May 2013, works out to be 2.43%. Accordingly, the SMA interest rate payable to CPF members from 1 July 2013 to 30 September 2013 will be maintained at the current floor of 4%.
Additional Interest of 1%
As part of the CPF board's efforts to enhance the retirement savings of CPF members, an extra 1% 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% interest will also be payable on his annuity premium, less annuity payouts already made. The additional interest earned on the member's CPF LIFE annuity monies will be paid into his RA.
Interest Rate for RA Monies
New RA savings are invested in Special Singapore Government Securities (SSGS) which earn a fixed coupon equal to either the 12-month average yield of the 10YSGS plus 1% at the point of issuance, or 4%, whichever is the higher, adjusted yearly.
Given the lower 10YSGS yield, new RA savings will earn a fixed coupon of 4% (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% at the moment, so the interest rate payable to CPF members on their RA balances from Jan 1 to Dec 31 this year is 4%, as announced in December last year.