CPF to Extend 4 Per cent Interest

For the second time, Singapore’s government will extend the 4 per

cent floor rate for interest earned on all Special, Medisave and

Retirement Account (SMRA) monies for another year until 31

December 2011, the Central Provident Fund (CPF) Board

announced Monday. Thereafter, interest rates on all CPF account

monies will be subject to a minimum rate of 2.5 per cent per

annum.

Explaining the move, Mr Gan Kim Yong, Minister for Manpower,

said: “Despite our strong economic recovery, interest rates have

remained low this year. The sharp drop in interest rates at the

expiry of the 4 per cent floor rate may impact CPF members who

may not have benefited fully from the economic recovery yet.

Therefore, the Government has decided to extend the 4 per cent

floor rate on SMRA monies for another year.”

Since 1 January 2008, savings in the SMRA have been invested in

Special Government Securities (SSGS), which earn an interest

rate pegged to the 12-month average yield of 10-year Singapore

Government Securities (10YSGS) plus 1 per cent. This is a

market-based rate for instruments of comparable risk and duration,

and will ensure that members receive fair and reasonable interest

rates, according to the CPF Board.

However, to help members cope with the transition, the government

had committed to providing a 4 per cent floor rate for SMRA

interest for two years up to December 2009. This was extended to

December 2010, in light of the global economic conditions and

exceptionally low interest rate environment a year ago.