Explainer: How are Singapore’s CPF interest rates calculated, and should you move funds to the Special Account amid higher rates?

SINGAPORE, June 2 — Interest rates for the Central Provident Fund Special and Medisave accounts will increase in the third quarter of this year to 4.01 per cent per annum, up from 4 per cent — the first increase since 2008.

However, the rate is subject to a floor interest rate — a legislated minimum interest, of 2.5 per cent per annum. Interest rates for the Ordinary, Special and Medisave accounts’ interest rates are reviewed quarterly while the Retirement Account’s rate is reviewed annually.Interest rates for the CPF Special and Medisave accounts are pegged to interest rates for the 10-year Singapore Government Securities bonds.

“If the Federal Reserve decides to tighten and increase interest rates, then the current rates may still increase,” said Ho. So an increase in this rate would imply higher costs for borrowers, said Assoc Prof Chia, who teaches Economics.

Source: Loan Digest (loandigest.net)

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