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CPF: One–Year Extension of 4% Floor Rate for all SMA and RA Monies

by Rocky on December 10, 2009

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To help members cope with the current economic climate, the Government will maintain the 4% floor rate for interest earned on all Special and Medisave Accounts (SMA) monies and Retirement Account (RA) monies for another year until 31 December 2010.

After 31 December 2010, the 2.5% floor rate will apply for all CPF accounts.

Interest Rate for SMA Monies

Since 1 January 2008, savings in the SMA 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%, adjusted quarterly.

The 12-month average yield of the 10YSGS plus 1% rate worked out to be 3.31% for the period 1 December 2008 to 30 November 2009. Please refer to Annex A for the 10-year SGS yield. Since the interest rate peg for SMA monies is below 4%, the SMA interest rate from 1 January 2010 to 31 March 2010 will be maintained at 4%.

Interest Rate for RA Monies

From 1 January 2010, RA savings will be invested in SSGS which earn a fixed coupon equal to the 12-month average yield of the 10YSGS plus 1% at the point of issuance. The interest rate to be credited to the RA will be the weighted average interest of the entire portfolio of these SSGS, and adjusted yearly in January.

Since the interest rate peg for the fixed coupon is below 4%, existing RA savings will be invested in SSGS which earn a fixed coupon of 4% (floor rate). Hence, the RA interest rate from 1 January 2010 to 31 December 2010 will be 4%.

Additional Interest of 1%

An additional 1% interest will continue to be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account (OA). The additional interest received on the OA will go into the member’s SA or RA to enhance his retirement savings. If the member is above 55 years old and participates in the LIFE scheme, the additional 1% interest will also apply to his annuity premium, less annuity payouts already made. The additional interest earned on the member’s LIFE annuity monies will be paid into his RA.

Medisave Required Amount

From 1 January 2010, the Medisave Required Amount (MRA) will be raised from the current $18,000 to $22,500.

Since 1 January 2004, CPF members who turn 55 and are able to meet the CPF Minimum Sum (The prevailing Minimum Sum is $117,000) are required to set aside a Required Amount in their Medisave Account when they make a CPF withdrawal. If such members have less than the Required Amount in their Medisave Accounts, their Ordinary and/or Special Account balances in excess of the Minimum Sum will be used to top up the Required Amount.

Source: CPF website

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Tagged as: CPF, medisave, retirement