CPF Special Account closure not aimed at saving interest monies: Tan See Leng

IN CLOSING Central Provident Fund (CPF) Special Accounts (SAs) for members aged 55 and above, the government is not trying to save money that is paid out as interest, said Manpower Minister Tan See Leng in Parliament on Wednesday (Feb 28).

Rather, the move ensures that funds which are meant for long-term savings are appropriately put in a long-term retirement account, he said on the third day of the Budget 2024 debate.

The move to close SAs for those aged 55 and above, which will take effect in 2025, was announced by Finance Minister Lawrence Wong in his Budget speech on Feb 16.

Upon closure, SA savings will be transferred to the Retirement Account (RA) up to the Full Retirement Sum, with remaining monies going to the Ordinary Account (OA).

In Parliament on Wednesday, Progress Singapore Party Non-Constituency Member of Parliament Leong Mun Wai asked how much more the government was paying to CPF SAs, due to the difference in interest rates with the OA.

SA savings earn an interest rate of at least 4 per cent, while OA savings earn 2.5 per cent.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Wong said he did not have specifics on how much more the government is paying, but that the move was being made because the RA earns that same long-term interest rate of at least 4 per cent.

Taking up Leong’s question, Dr Tan said: “I think it’s important that members of the House understand that the closure of the SA is not aimed at saving interest monies.”

Rather, it ensures that monies meant for the long term are put in a long-term account, he said. OA and SA savings can be withdrawn on demand for members aged 55 and above, whereas RA savings cannot.

Said Dr Tan: “I don’t think that there’s any system in the world, any financial institution in the world, any bank in the world that will pay a long-term assured fixed deposit interest rate and allow you the flexibility to withdraw like an ATM.”

Those aged 55 and above who want the flexibility of withdrawing their monies can always leave their funds in the OA, said Dr Tan. They are also free to invest their monies through other instruments, such as T-bills.

“This is not about saving money, it is not about locking up money,” said Dr Tan, adding that he will provide a fuller explanation on the move during the Ministry of Manpower’s Committee of Supply debate.