Written Answer by Minister for Manpower Dr Tan See Leng to PQ on One-off Adjustment to CPF Ordinary Account Interest Rates to Better Reflect Inflation Premium
NOTICE PAPER NO. 1336 OF 2022 FOR THE SITTING ON OR AFTER 13 SEPTEMBER
QUESTION NO. 2116 FOR WRITTEN ANSWER
- The commercial banks’ lending rates take into account factors that include the possibility that the loans may go bad and not be repaid. Therefore, the Ordinary Account (OA) interest rate is not comparable to banks’ lending rates because OA principal and interest are guaranteed by the Government.
- In response to rising inflationary pressures, MAS has tightened its monetary policy four times since October 2021. The stronger exchange rate has helped to dampen imported inflationary pressures. To help Singaporeans cope with rising inflation, MOF has also announced a $1.5 billion support package in June 2022. Instead of a one-off adjustment to CPF OA interest rate, the package provides more targeted and immediate relief, especially for the lower-income and vulnerable groups who are disproportionately impacted by the effects of higher prices.
- Even though the OA pegged rate remains at around 0.09%, the Government is paying up to 3.5% on the OA balances due to the 1% extra interest and the statutory minimum of 2.5%. Members can also transfer their OA monies to the Special or Retirement Account to earn up to 6% for members aged 55 and above, or up to 5% for members below age 55.
- That said, our policies are not static. We are watching the interest rate environment closely to ensure that the OA interest rate peg remains relevant in the prevailing operating environment whilst taking into consideration the longer-term outlook.