CPF interest pegs: Government watching rate environment closely

THE government is watching the interest rate environment closely “to ensure that the CPF (Central Provident Fund) interest rate pegs remain relevant in the prevailing operating environment”.

This was revealed in a joint news release by the Central Provident Fund Board, Housing and Development Board and Ministry of Health. The longer-term outlook will also be considered, the release added.

The paragraph is an unusual addition in the quarterly release which updates on changes in the CPF interest rates. Amid a rising interest rate environment, some banks are offering promotional rates of above 3 per cent for 12-month fixed deposits of at least $20,000.

The CPF Board said those aged above 55 years old can continue to earn up to 6 per cent interest per annum on their retirement balances, while the interest rate for the Ordinary Account (OA) and Special and MediSave Accounts (SMAs) remains unchanged.

Currently, the floor rates for OAs and SMAs stand at 2.5 per cent and 4 per cent, respectively. The board said the OA interest rate will remain unchanged from Jan 1 to Mar 31, but did not provide further indications of the interest rates beyond Mar 31.

The concessionary interest rate for Housing and Development Board housing loans, pegged at 0.1 per cent above the OA interest rate, will also remain unchanged at 2.6 per cent per annum from Jan 1 to Mar 31.

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However, members aged 55 and above will get an extra 2 per cent interest on the first S$30,000 of their combined balances – capped at S$20,000 for OAs – and an extra 1 per cent on the next S$30,000.

The extra interest received on the OA will go into one’s Special Account or Retirement Account. If the member is above 55 and participates in the CPF Life scheme, the extra interest will still be earned on their combined balances, which include the savings used for the scheme.

The adjustments made are part of the government’s efforts to enhance the retirement savings of CPF members, CPF said.

Additionally, the basic healthcare sum, which is the cap applied to the MediSave Account, will be raised from S$66,000 to S$68,500 for those under 65. It will remain fixed at S$68,500 for those who turn 65 in 2023, while the sum for those aged 66 and above remains unchanged.

“CPF members who have less than the basic healthcare sum are not required to top up their MediSave Account, and will still be able to withdraw from their MediSave Account to pay for approved medical expenses,” added the board.