The Central Provident Fund (CPF) Special and MediSave Accounts (SMA) will experience a significant uptick. The interest rate is set to reach 4.04% per annum during the fourth quarter of this year.
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This announcement was made jointly by the CPF Board and the Housing Board (HDB) on 21 September, marking the second consecutive increase in interest rates for these accounts.
The previous rate hike to 4.01% for the third quarter of this year. This represented the first increase since the establishment of the 4% floor rate in 2008.
In a joint news release, the CPF Board and HDB attributed this change to the rise in the 12-month average yield of 10-year Singapore Government Securities, to which the SMA interest rate is pegged.
Meanwhile, the Ordinary Account (OA) interest rate will remain steady at 2.5% for the same period since the pegged OA rate remained below the 2.5% floor rate.
“The government is watching the interest rate environment closely to ensure that the CPF interest rate pegs remain relevant in the prevailing operating environment while taking into consideration the longer-term outlook,” the CPF Board and HDB stated.
Under the revised rates, CPF members under the age of 55 will continue to receive an additional 1% interest on the first S$60,000 of their combined balances, capped at S$20,000 for the OA.
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For members aged 55 and above, the government will offer an extra 2% interest on the initial S$30,000 of their combined balances, also capped at S$20,000 for the OA, and an additional 1% on the subsequent S$30,000.
“The extra interest received on the OA will go into the member’s Special Account (SA) or Retirement Account (RA),” the CPF Board and HDB explained.
“If a member is above 55 years old and participates in the CPF LIFE scheme, the extra interest will still be earned on his or her combined balances, which includes the savings used for CPF LIFE.”
Furthermore, the concessionary interest rate for HDB housing loans, which is pegged at 0.1% above the OA interest rate, will remain unchanged at 2.6% per annum for the same period. These updated interest rates will take effect from 1 October to 31 December.
The CPF Board and HDB have extended the 4% interest rate floor for interest earned on all Special, MediSave, and Retirement Accounts for another year from 1 January to 31 December.
“This provides certainty for CPF members amid the uncertain interest rate environment,” they said.
“Since Jan 1, 2008, CPF interest rates have been pegged to market instruments of comparable risk and duration to ensure that members receive fair and reasonable returns.
“The (Special, MediSave, and Retirement Account) rates will continue to be reviewed regularly and CPF members will earn the higher of the floor or pegged rate.”
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