Tan See Leng on CPF interest rates

The Government will continue to review Central Provident Fund (CPF) interest rates periodically, said Manpower Minister Tan See Leng. Replying to MPs' questions in Parliament on Tuesday (Aug 2), Dr Tan said the interest rates on the Ordinary Account (OA), Special Account and MediSave Account are reviewed quarterly, while the interest rate on the Retirement Account is reviewed annually. CPF interest rates are pegged to returns on investments of comparable risk and duration in the market. The OA interest rate is pegged to the three-month average fixed deposit and savings rates of Singapore's three major local banks. Dr Tan said that based on the latest estimates, the interest rate remains at around 0.09 per cent. The Special, MediSave and Retirement Account (SMRA) interest rates are pegged to the 12-month average yield of 10-year Singapore Government Securities plus one per cent. The peg is around three per cent, based on the latest estimates, said Dr Tan. The interest rates for the OA and SMRA are maintained at 2.5 per cent and four per cent respectively. Dr Tan said the Government has maintained the floor rate of four per cent for the SMRA since 2008 and will continue to review this annually. Therefore, despite the low interest rate environment since the global financial crisis, the Government has continued to pay generous interest rates due to the floor rates, he said. If the pegged rates exceed the floor rates, members will correspondingly earn the higher interest rates on their CPF savings, he added. Dr Tan said the Government will continue to pay one per cent of extra interest on the first S$60,000 of members’ combined CPF balances, as well as an additional one per cent on the first S$30,000 of post-55 members’ combined CPF balances to help boost their retirement savings.