Current CPF interest rates higher than market rate pegs: Tan See Leng

The SMRA interest rates, meanwhile, are pegged to the 12-month average yield of 10-year Singapore Government Securities plus 1 per cent. The peg was 2.72 per cent as of May, and is around 3 per cent based on CPF’s latest estimates. 

As these are below the floor rates for CPF accounts, the interest rates for the Ordinary Account and SMRA are maintained at 2.5 per cent and 4 per cent respectively.

“Despite the low-interest rate environment since the global financial crisis, the Government has continued to pay generous interest rates due to the floor rates,” said Dr Tan.

“If the pegged rates exceed the floor rates, members will correspondingly earn the higher interest rates on their CPF savings.

“Members can also transfer their Ordinary Account monies to the Special or Retirement Account to earn the higher risk-free rate,” he added. “I want to emphasise, this is risk-free.”

RATES FOR THE LONG TERM: MINISTER

Mr Chua asked in a supplementary question what would be the hurdle for the Government to consider granting extra interest rates. He also noted that local banks have raised interest rates for their savings accounts in recent days, and asked if this would prompt the CPF Board to review its pegging formula.

Dr Tan said that the CPF system is aimed at giving members better security in retirement over the long term and in old age, while the bank accounts mentioned by Mr Chua are short-term, volatile instruments.

“The CPF interest rates … continue to be attractive,” said Dr Tan, reiterating that CPF floor rates are higher than the rates they are pegged to.

The minister also pointed out that CPF rates have no further conditions attached, while the promotional rates for the banks’ accounts are contingent on the customers fulfilling criteria such as minimum spending on credit cards, or crediting of salaries into their accounts.

“These benefits are not uniformly applicable to all balances of all the depositors,” he said.

The CPF interest rates are reviewed periodically. The interest rates on the Ordinary Account, Special Account, and MediSave Account are reviewed quarterly, while the interest rate on the Retirement Account is reviewed annually.