news release by the cpf board

the CPF board has announced that cpf members will continue to enjoy an interest rate of 4% on their Special and Medisave Accounts (SMA) from 1 January 2012 to 31 March 2012. but for their Retirement Account, the 4% interest rate will apply from 1 January 2012 to 31 December 2012.

this is in line with the Government’s announcement made in September 2011 to maintain the 4% p.a. floor rate for interest earned on all SMA monies and Retirement Account (RA) monies until 31 December 2012.

but the savings in the SMA currently earn either 4% or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, whichever is the higher. The interest rate on SMA savings is adjusted quarterly, based on interest rates on 10YSGS over a preceding 12-month period.

The average yield of the 10YSGS plus 1%, from 1 December 2010 to 30 November 2011, works out to be 3.19%. Accordingly, the SMA interest rate payable to CPF members from 1 January 2012 to 31 March 2012 will be maintained at the current floor of 4%.

Additional Interest of 1%

An additional 1% interest will continue to be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account (OA). The additional interest received on the OA will go into the member’s SA or RA to enhance his retirement savings. If the member is above 55 years old and participates in the LIFE scheme, the additional 1% interest will also be payable on his annuity premium, less annuity payouts already made. The additional interest earned on the member’s LIFE annuity monies will be paid into his RA.

another announcement is in the form of the adjustment of the medisave required amount which will be raised from the current $27,000 to $32,000 wef january 01, 2012.

Since 1 January 2004, CPF members who turn 55 and are able to meet the CPF Minimum Sum are required to set aside the MRA in their Medisave Account when they make a CPF withdrawal. If such members have less than the MRA in their Medisave Accounts, their Ordinary and/or Special Account balances in excess of the Minimum Sum will be used to top up the MRA.

source: http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_19Dec2011.htm

my comments:

with the world markets continued to be dogged by one crisis after crisis, the interests earned in the cpf accounts can be said to be almost free of risk as they are guaranteed by our government.

against the backdrop of guaranteed cpf returns, many cpf members i know have regretted investing their cpf-oa monies and worst, some with their cpf-sa funds as well. and liquidating these investments now is not even an option because of high surrender costs.

that's why consumers should think carefully when they are approached into investing their cpf funds from chasing potentially higher returns which were never even guaranteed in the first place.