With Covid-19 emptying bank accounts faster than bubble tea stores, it’s more important than ever to save for the future.
Fortunately, the government is helping us out.
Interest Rate Floor For CPF to Be Extended For A Year
The 4% floor rate on all Special, MediSave and Retirement Account (SMRA) funds will be extended for another year, until 31 Dec 2021.
Before the extension, the current interest rate was due to expire on 31 Dec this year.
This will help CPF members boost their savings, the Central Provident Fund (CPF) Board and the Housing & Development Board (HDB) said in a joint statement on Friday (25 Sep).
Another announcement will be made on the interest rate floor for the Ordinary Account (OA) in 2021 later this year, according to Mothership.
A Breakdown
If you’re like me and you have no idea what some of these accounts are for, here’s a little breakdown, courtesy of Dr Wealth.
The Ordinary Account (OA) is meant for housing, insurance, investment, and education.
The Special Account (SA) is meant for old age and investment in retirement-related financial products.
Your Medisave Account (MA) is meant for hospital expenses and other approved medical insurance.
And finally, your Retirement Account (RA) will be created on your 55th birthday. Savings from your SA and OA will be transferred to your RA to form your retirement sum, which will provide you with monthly payouts.
The minimum interest rate until 31 Dec 2020 is 2.5% for the OA, and 4% for the SMRA accounts.
It will remain 4% for the SMRA accounts until 31 Dec 2021, but the rate for the Ordinary account for next year will only be revealed later on.
Higher Interest Rates For Older CPF Members
CPF members can earn even more interest, though, provided they’re of a certain age.
Members older than 55 will receive an additional 2% interest on the first S$30,000 of their combined balances, as well as an extra 1% on the next S$30,000.
Since the SMRA accounts offer 4% interest, this means that CPF members over 55 could earn up to 6% interest on these accounts.
Conversely, CPF members below 55 will receive an additional 1% interest on the first S$60,000 of their combined accounts.
So they’ll earn 3.5% interest on their OA accounts and 5% on their SMRA funds.
The added interest is part of the Government’s efforts to grow the retirement savings of CPF members, reported ST.
According to CPF, even if you’re participating in the CPF LIFE scheme, which provides a lifelong monthly payout starting from age 65, this extra interest will still be earned on your combined balances, including the savings used for CPF LIFE.
Those who have questions can visit CPF’s official site or call the CPF call centre on 1800-227-1188.
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