The interest rate for Central Provident Fund (CPF) members’ Special and MediSave Account (SMA) has been raised to 4.01 percent per annum from July 1 and September 30.
The increase is attributed to a rise in the 12-month average yield of 10-year Singapore Government Securities, to which the SMA’s interest rate is linked.
Since 2008, the Government has maintained a minimum interest rate of 4 percent for the Special, MediSave, and Retirement accounts. This is the first time since the SMA’s interest rate has surpassed 4 percent.
In contrast, the interest rates for the Ordinary Account (OA) and Retirement Account will remain the same. The OA will continue to earn an interest rate of 2.5 percent per annum, while the Retirement Account will maintain its interest rate of 4 percent per annum.
At a glance:
| CPF ACCOUNT | CURRENT CPF INTEREST RATE (per annum) | INTEREST RATES (per annum)
FROM JULY -30 SEPT 2023 |
| Ordinary Account (OA) | 2.5% | 2.5% |
| Special Account (SA) | 4.0% | 4.01% |
| Medisave Account (MA) | 4.0% | 4.01% |
| Retirement account (RA) | 4.0% | 4.0% |
Extra Interest on CPF Balances
To enhance your retirement savings, the Government provides additional interest on the initial $60,000 of your combined CPF balances. For the Ordinary Account (OA), the maximum amount eligible for this extra interest is $20,000.
| Age | Extra interest |
| Below 55 years old | 1% per annum on the first $60,000 (capped at $20,000 for OA) |
| 55 years old and above | 2% per annum on the first $30,000, 1% per annum on the next $30,000 (capped at $20,000 for OA) This means that you earn up to 6% on your retirement savings |
This translates to a potential 6% return on your retirement savings.
The additional interest earned on your OA savings is allocated to either your Special Account (SA) or Retirement Account (RA), thereby bolstering your retirement savings. If you are enrolled in the CPF LIFE scheme, you will still receive the extra interest on your combined CPF balances, including the savings utilized for CPF LIFE.
Interest Rate of CPF in Singapore History
Since its introduction in 1955, the Central Provident Fund (CPF) system in Singapore has undergone several changes to meet the evolving needs of the population. The CPF savings are divided into four main accounts: Ordinary Account (OA), Special Account (SA), MediSave Account (MA), and Retirement Account (RA).
Here is a summary of the historical CPF interest rates and key milestones:
1955: CPF scheme was introduced with an OA interest rate of 2.50% per annum.
1972-1975: CPF contribution rates became asymmetric, with employers contributing 14% and employees contributing 10% of wages.
1977: SA was introduced, and the SA interest rate was 6.50%.
1984: MA was introduced with an interest rate of 6.50%.
1987: RA was introduced as the fourth CPF account to address the risk of outliving savings.
1995: Uniform floor interest rate of 2.50% applied to all CPF accounts.
1998: Floor interest rates increased to 4.00% for SA, MA, and RA, while OA remained at 2.50%.
2008: Extra interest of 1% was introduced for CPF members with lower CPF balances.
2009: CPF LIFE annuity scheme introduced.
2010: RA savings invested in Singapore Government Securities (SSGS).
2016: Additional 1% interest for CPF members aged 55 and above on first $30,000 of balances.
2022-2024: Contribution rates for older workers increased, and the CPF Salary Ceiling was raised to $8,000 by 2026.
Overall, CPF interest rates have varied over the years, with the highest rates recorded in the past being 6.50%. The interest rates have generally remained stable between 2.50% and 4.00% since the late 1990s, with recent increases to 4.01% for SA, MA, and RA in 2023.
These changes reflect the government’s efforts to ensure retirement adequacy and address the needs of an aging population.
How Are CPF Savings Invested?
CPF savings are invested under the CPF Investment Scheme (CPFIS), managed by the Singapore government. This scheme allows CPF members to put their Ordinary Account (OA) and Special Account (SA) savings into various investments.
It could be anything from insurance products, unit trusts, fixed deposits, bonds, shares, property funds, and even gold.
However, it’s crucial to note that the investment options available depend on the account type. For instance, OA savings offer a wider range of investment options compared to SA savings, which are primarily meant for retirement and are therefore invested more conservatively. The government is, however, watching the interest rate environment to ensure it remains unchanged.
Scenarios
Scenario 1
If you have $40,000 on your OA, $10,000 in your MA and $10,000 in your SA, you may not benefit from the extra interest rate despite your combined CPF balances being $60,000. Please note, there is a cap of $20,000 that will come from your ordinary account.
From the scenario above, here is how your interest rates look like:
| CPF Account | CPF Balance | Interest Rate We Receive | Extra Interest Rate |
| Ordinary Account | $40,000 | 2.5 per annum | 1.0% on $20,000 (paid into SA) |
| Special Account | $10,000 | 4.01% | 1.0% on $10,000 |
| MediSave Account | $10,000 | 4.01% | 1.0% on $10,000 |
| Total | $60,000 | 1.0% on $40,000 | |
Please note that the terms state that if you are under 55 years, you will receive up to 5% interest in your CPF balance or you may earn 3.5% on your OA balances. The figures are not applied uniformly to your CF balances. Instead, they are applied to the first $60,000 of your CPF balances.
If you are above 55 years, you will be paid an extra 1.0% interest rate in your first $30,000 of combined CPF balances. This will add to the extra interest on the first $60,000.
Scenario 2
If you have $52,000 in your OA, $2,500 in your RA and $2,500 in your SA, and another $2,500 in your MA, you will receive an extra 1.0% on the $2,500 in your RA. You will also receive an extra 1.0% on the $20,000 in your OA, $2,500 in your MA, and $2,500 in your $2,500 since it does not hit the $60,000 mark.
Here is a summary of the above scenario:
| CPF Account | CPF Balance | Interest Rate We Receive | Extra Interest Rate | Additional Extra Interest Rate |
| Ordinary Account | $52,500 | 2.5% | 1.0% on $20,000 (paid into RA) | 1.0% on $20,000 (paid into RA) |
| Special Account | $2,500 | 4.01% | 1.0% on $2,500 | 1.0% on $2,500 |
| Retirement Account | $2,500 | 4.0% | 1.0% on $2,500 | 1.0% on $2,500 |
Good to Know
1. How CPF works?
As you’re employed and contribute to your CPF, you’re building up reserves in three specific accounts: your Ordinary Account (OA), your MediSave Account (MA), and your Special Account (SA). When you reach the age of 55, a Retirement Account (RA) is established in your name.
2. How Much Do I Need to Contribute?
Depending on your age, CPF contribution rates can range from 12.5% to 37% of your monthly wages.
| Employee’s age (years) | Contribution rates from 1 January 2023
(for monthly wages > $750) |
||
| By employer (% of wage) | By employee (% of wage) | Total (% of wage) | |
| 55 and below | 17 | 20 | 37 |
| Above 55 to 60 | 14.5 | 15 | 29.5 |
| Above 60 to 65 | 11 | 9.5 | 20.5 |
| Above 65 to 70 | 8.5 | 7 | 15.5 |
| Above 70 | 7.5 | 5 | 12.5 |
3. How to Save More and Earn Interest
For those under 55, every dollar you deposit into your SA is complemented by an additional $0.85 from your employer, resulting in a total of $1.85.
In approximately two decades, this amount is expected to double to $3.70, and further increase to $7.40 over four decades*. This is a sevenfold increase from the original dollar that you contributed.
*This estimate is calculated based on the base annual interest rate of 4% on your SA.
Other uses of CPF
Many members utilize their CPF savings from the OA to finance real estate purchases or pay off housing loans. MA assists CPF members in setting aside funds for healthcare expenses, particularly for post-retirement needs.
Your accumulated MediSave savings can be used to cover hospitalization, day surgery, and specific outpatient expenses for yourself and those dependent on you. Regarding the use of your RA savings, once you reach the age of 55, you are given the flexibility to extract your CPF savings, provided you have reserved the necessary retirement sum in your RA. Withdrawals can be made in full or in part and as often as desired.
Read Also: CPF Life vs Retirement Sum Scheme and CPF vs Home Loan
Other FAQs
- How Are the CPF Interest Rates Calculated?
- Will the Interest Rates Rise Further?
- What happens to my CPF savings when I turn 55 & 65?
- How Can I Maximize My CPF Money?
Closing
The CPF scheme offers a financial safety net for many needs, including housing, education, medical, and retirement. By staying attuned to the current CPF interest rate and grasping how your CPF savings are invested, you can amplify the effectiveness of your financial strategies.
Key Takeaways
- As of July 2023, the interest rates for CPF accounts are set at 2.5% for the OA and 4.0% for SA
- SA and MA have slightly increased to 4.01%.
- Additional interest is provided on the first $60,000 of combined CPF balances, potentially giving you a return of up to 6%.
- You can use the OA for housing, the MA for healthcare, and the SA and RA for retirement.
- The CPF Investment Scheme allows CPF members to invest their OA and SA savings in various financial products. Knowing these investment opportunities and how to maximize your CPF savings can significantly boost your financial security.
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