Oral Answer to PQ on Computation of CPF interest payments

NOTICE PAPER NO. 2543 FOR THE SITTING ON OR AFTER 7 FEBRUARY 2024
QUESTION NO. 5707 FOR ORAL ANSWER

MP: Mr Chua Kheng Wee Louis

To ask the Minister for Manpower whether the CPF Board has conducted a review of the computation of monthly CPF interest payment and, if so, whether it will consider including (i) contributions received during the month and (ii) amounts held in the account prior to its withdrawal, as pro-rated by the number of days that the respective amounts reside in the CPF accounts during the month.

Answer:

1. Over the past two decades of protracted low interest rate environment, the Government has continued to pay the 2.5% minimum interest on Ordinary Account savings and the 4% floor rate for savings in the Special, MediSave, and Retirement Accounts (SMRA). With the SMRA pegged rate currently exceeding the 4% floor rate, CPF members will receive 4.08% per annum interest on their SMRA savings in the first quarter of 2024. In addition, the Government continues to pay 1% of extra interest on the first $60,000 of combined CPF balances for all members, as well as an additional 1% extra interest on the first $30,000 of combined CPF balances for members aged 55 and above.

2. The CPF Board’s current practice of computing monthly interest payments should be seen in the context of the abovementioned features of our CPF system which do not apply to bank deposits. Furthermore, premature withdrawals from banks’ fixed deposits would in many cases result in the forfeiture of the potential interest earned. While changing the computation method can translate into marginally higher CPF interest payments, the features I have laid out already provide CPF members with much higher interest and a greater boost to their CPF savings.

3. The Government will continue to review CPF interest rates periodically to ensure their relevance in the prevailing operating environment.