More FAQs: Overview of CPF Reforms and Other Measures | Help Singaporeans Work Longer | Make Savings Last for Life Expectancy | Implementation and Public Communication
1.	How is the Government helping members to improve returns?
2.	How many members will benefit from all the interest rate changes?
3.	Is the new CPF interest rate structure fair?
Extra Interest
4.	How much additional interest will members earn as a result of the extra interest?
5.	What is the impact of additional interest over time?
6.	Why is there a $60,000 limit on CPF monies earning the extra interest?
7.	Why is there a $20,000 limit on OA monies earning extra interest?
8.	Will the HDB concessionary loan interest rate change?
9.	Will the extra 1% interest for the OA be credited into the OA account?
10.	Will the OA rate formula be changed?
11.	Why is the OA rate formula not changed?
12.	I have committed to regular payments from my Ordinary Account (OA) or Special Account (SA), through the CPF Investment Scheme. Will the restriction on investments in OA and SA affect me?
13.	What will be the impact of restricting investment on the insurance and fund management industry?
14.	How much will the 1% extra CPF interest cost the Government?
SMRA Interest Rate
15.	How often will the new SMRA interest rate be adjusted?
16.	What is the reason for re-pegging the SMRA interest rate?
17.	Why is the SMRA interest rate re-pegged at 1%-point above the 10YSGS yield?
18.	Why is the SMRA rate not pegged to longer-term bonds such as 15YSGS and 20YSGS?
19.	Following the change, how much extra interest will I earn on my SMRA savings?
20.	Where can I find information on 10YSGS yields?
21.	Following the re-peg, will the SMRA rate be very volatile?
22.	Why does the Government not offer a guaranteed floor interest rate of 4% for the SMRA, given that fluctuations can be expected as a result of the re-pegging?
23.	Currently, SMRA interest rate is subjected to a floor of 4% p.a. Following the re-peg, will the SMRA interest rate fall below this floor interest rate?
24.	What balances in the SMRA accounts will be guaranteed the 4% floor interest rate for 2 years?
25.	If the 10YSGS +1% computed interest rates are higher than the 4% floor, will the SMRA interest take the higher value?
26.	Why is the guarantee only for 2 years and not longer?
27.	Why is there a 1-month window before the interest rate for the next 3 months is announced?
28.	What recourse is available to members who transferred their OA balances to SA thinking that there would be a 4% guaranteed floor rate?

1.	How is the Government helping members to improve returns?
	To improve the overall returns, an extra interest rate of 1% per annum will be paid on the first $60,000, including up to $20,000 on the OA, in the combined accounts of each CPF member. For example, $60,000 in the SMRA will earn the member an additional $7,200 over 10 years and $17,900 over 20 years. In addition, the SMRA rate will be re-pegged to the yield of the 10-year Singapore Government Security (10YSGS) plus 1%. The average 10YSGS yield for the 12 months to 31 Aug 07 was 3.0%. On this basis, the SMRA rate would be 3.0% plus 1%, or 4.0%. Had the new SMRA formula been in place since the first issue of 10YSGS, the SMRA rate would have averaged 4.5%. To help members adjust to the floating SMRA rate, we will keep the 4% floor for the SMRA rate for the first two years. The 4% floor will also apply to the extra interest tier, in the very unlikely event that the 10YSGS rate falls below 2%. After two years, the 2.5% floor rate will apply for all accounts as prescribed under the CPF Act. The interest rate changes will take effect on 1 January 2008.
2.	How many members will benefit from all the interest rate changes?
	All CPF members will gain from the interest rate changes. In particular, 70% of them will earn the extra 1% interest on their entire CPF balances. The rest of CPF members will receive the extra 1% on the first $60,000 of their CPF monies.
3.	Is the new CPF interest rate structure fair?
	The new CPF interest rate structure is a long-term framework which provides a fair rate of return that compares well with any offer from private pension plans. It is more than fair since it is still essentially risk-free. Even if interest rates come down, the member will not lose any of his savings but instead will always earn at least 2.5% per year on his savings and the extra 1% for the first $60,000. The extra interest is structured so that it will benefit all, but those with small and middle-size balances will enjoy the extra 1% interest on all their balances.
Extra Interest
4.	How much additional interest will members earn as a result of the extra interest?
	This will depend on a member's CPF balance. The maximum benefit of the additional 1% extra interest is $600 each year. The gains will grow when they are compounded year after year. OA Rate = 2.5% 10YSGS = 3.0% SMRA Rate = 10YSGS + 1% = 4% Extra Interest = 1% for the first $60K (up to $20K from OA) Interest earned after each year Example 1: Combined balances = 60K; OA = 20K, SMRA = 40K Total balances OA $20,000 SMRA $40,000 Total $60,000 Interest earned Extra 1%   2.5% -> $500 $200 (credited to S/RA) 4.0% -> $1,600 $400   $2,100 $600   Total interest earned $500 $2,200 $2,700 $600 more compared to current system = $(2,100 + 600) = $2,700 Example 2: Combined balances = 60K; OA = Nil , SMRA = 60K Total balances OA Nil SMRA $60,000 Total $60,000 Interest earned Extra 1%   2.5% -> $0 Nil (credited to S/RA) 4.0% -> $2,400 $600   $2,400 $600   Total interest earned Nil $3,000 $3,000 $600 more compared to current system = $(2,400 + 600) = $3,000 Example 3: Member with balances below $60K Total balances OA $10,000 SMRA $20,000 Total $30,000 Interest earned Extra 1%   2.5% -> $250 $100 (credited to S/RA) 4.0% -> $800 $200   $1,050 $300   Total interest earned $250 $1,100 $1,350 $300 more compared to current system = $(1,050 + 300) = $1,350 Example 4: Member with high balances Total balances OA $30,000 SMRA $70,000 Total $100,000 Interest earned Extra 1%   2.5% -> $750 Max $20,000 -> $200 (credited to S/RA) 4.0% -> $2,800 Max $40,000 -> $400   $3,550 $600   Total interest earned $750 $3,400 $4,150 $600 more compared to current system = $(3,400 + 750) = $4,150
5.	What is the impact of additional interest over time?
	The maximum benefit of the additional 1% extra interest is $600 for members with at least $60,000 in their CPF. Over time, the compounding effect will significantly enhance CPF savings. Please see the example below based on a starting balance of $20,000 in the OA, $40,000 in SMRA and no further contributions and withdrawals. OA = 2.5% 10YSGS = 3.0% SMRA = 10YSGS + 1% = 4.0% Extra Interest = 1% for first $60K (up to 20K from OA) $20,000 in Ordinary Account, $40,000 in Special, Medisave, Retirement Accounts Time Horizon Total CPF Balances Gain Current System New System In 10 yrs $84,800 ($25,600 OA, $59,200 SMRA) $92,000 ($25,600 OA, $66,400 SMRA) $7,200 In 20 yrs $120,400 ($32,800 OA, $87,600 SMRA) $138,300 ($32,800 OA, $105,500 SMRA) $17,900 The same gain of $7,200 and $17,900 is also achieved if the member in this example started off with no OA balances but $60,000 in the SMRA. $10,000 in Ordinary Account, $20,000 in Special, Medisave, Retirement Accounts Time Horizon Total CPF Balances Gain Current System New System In 10 yrs $42,400 ($12,800 OA, $29,600 SMRA) $46,800 ($12,800 OA, $34,000 SMRA) $4,400 In 20 yrs $60,200 ($16,400 OA, $43,800 SMRA) $73,300 ($16,400 OA, $56,900 SMRA) $13,100
6.	Why is there a $60,000 limit on CPF monies earning the extra interest?
	There is a limit on CPF monies earning the extra interest because members receive essentially a risk free rate. It provides a fair rate of return on CPF monies that compares well with any offer from private pension plans while minimising the financial risk to members. The new system has to be justified to the President, that the Government can afford it, and that it will not draw on past reserves. The extra interest is structured so that it will benefit all, but those with small and middle-size balances will benefit more. Under the new system, all CPF members will receive higher interest payments. 70% of all CPF members (or 55% of all active members) will receive the extra 1% on all their CPF monies.
7.	Why is there a $20,000 limit on OA monies earning extra interest?
	The limit of $20,000 from OA is imposed because OA savings are short-term in nature and can be withdrawn on demand for a few purposes such as housing and education. The extra interest from OA will go into the members’ SA/RA to improve their retirement savings.
8.	Will the HDB concessionary loan interest rate change?
	No. The HDB loan rate formula of OA rate + 0.1% stays the same, because the OA rate is unchanged.
9.	Will the extra 1% interest for the OA be credited into the OA account?
	No, the extra 1% interest for the OA will be credited into the Special Account to enhance CPF members’ retirement adequacy.
10.	Will the OA rate formula be changed?
	No.
11.	Why is the OA rate formula not changed?
	The OA, which contains short-term money, is pegged to a weighted average of savings deposit and 1 year fixed deposit rates, subject to the CPF guaranteed floor rate of 2.5%. As the formula already reflects the short term nature of OA funds, there is no need to change this formula.
12.	I have committed to regular payments from my Ordinary Account (OA) or Special Account (SA), through the CPF Investment Scheme. Will the restriction on investments in OA and SA affect me?
	From 1 April 2008, you will not be able to invest the first $20,000 in your Ordinary Account and first $20,000 in your Special Account. From 1 May 2009, only monies in excess of $20,000 in your Ordinary Account and $30,000 in your Special Account can be invested. However, you can continue to service your agent bank fees and regular premium insurance policies (excludes recurring single premium insurance policies or regular savings plans for unit trusts) even if your Ordinary Account balance falls below $20,000. If you have already made investments using your Ordinary Account or Special Account balances, you are not required to sell these investments.
13.	What will be the impact of restricting investment on the insurance and fund management industry?
	CPF members who have already made investments using their OA or SA balances will not be required to sell their investments. Even after restrictions, $42 billion will still be available for investing through CPFIS.
14.	How much will the 1% extra CPF interest cost the Government?
	The 1% extra CPF interest will cost the Government more than $700 million in the first year, which is about equal to the Government’s annual grant to HDB. The extra interest will cost even more in subsequent years as members build up more CPF savings.
SMRA Interest Rate
15.	How often will the new SMRA interest rate be adjusted?
	The SMRA rate will continue to be set quarterly.
16.	What is the reason for re-pegging the SMRA interest rate?
	This is to move the SMRA rate towards a market-based benchmark that better reflects market rates for long term monies as recommended by the Economic Restructuring Committee in 2002.
17.	Why is the SMRA interest rate re-pegged at 1%-point above the 10YSGS yield?
	Ideally, the SMRA rate should reflect the yield on a 30-year SGS. However, there is currently no such instrument. Hence, the SMRA interest rate is re-pegged at 1%-point above the 10YSGS yield, because this would adequately provide for the higher rate that would be expected on a longer term bond. We will review the formula after 5 years, to fine tune if necessary. However, we will keep this general structure that fulfils the objective of paying a good and fair interest to all CPF members for their retirement needs, while benefiting lower and lower-middle income members more.
18.	Why is the SMRA rate not pegged to longer-term bonds such as 15YSGS and 20YSGS?
	This is because the 15YSGS and 20YSGS are still relatively new and not actively traded. The 15YSGS was first issued only in September 2001 and the 20YSGS was first issued just this year, in March 2007, in line with developing the SGS market. The 10YSGS is, however, actively traded. Therefore, for now we will peg the SMRA interest rate at 1%-point above the yield of the 10YSGS.
19.	Following the change, how much extra interest will I earn on my SMRA savings?
	Please use our CPF Extra Interest Calculator to find out the extra interest that you will earn on your SMRA savings.
20.	Where can I find information on 10YSGS yields?
	Information on 10YSGS yields can be found on the MAS website.
21.	Following the re-peg, will the SMRA rate be very volatile?
	As the SMRA interest rate is pegged to bond yields, it should have less volatility than equity returns. Volatility is further moderated by using the average of daily 10YSGS yields over the previous 12 months to determine the SMRA rate.
22.	Why does the Government not offer a guaranteed floor interest rate of 4% for the SMRA, given that fluctuations can be expected as a result of the re-pegging?
	The new SMRA rate has been chosen because it better reflects long term market rates and is therefore more sustainable. Maintaining the guaranteed floor rate at 4% would mean that the Government would be subsidising the CPF system when long term rates are below 4%. However the CPF system is not meant to be subsidised. To help members transit to the new floating SMRA rate, we will keep the 4% floor for the SMRA rate for the first two years. After two years, the 2.5% floor rate will continue to apply for all accounts as prescribed under the CPF Act.
23.	Currently, SMRA interest rate is subjected to a floor of 4% p.a. Following the re-peg, will the SMRA interest rate fall below this floor interest rate?
	Following the re-peg, the 4% floor interest rate will be maintained for 2years for SMRA savings. This is to help members adjust to the new floating SMRA interest rate. After the two years, the 2.5% floor rate will continue to apply for all accounts as prescribed under the CPF Act. The average 10YSGS yield for the 12 months to 31 Aug 07 was 3.0%. On this basis, the SMRA rate would be 3.0% plus 1%, or 4.0%. Had the new SMRA formula been in place since the first issue of 10YSGS, the SMRA rate would have averaged 4.5%.
24.	What balances in the SMRA accounts will be guaranteed the 4% floor interest rate for 2 years?
	All SMRA balances.
25.	If the 10YSGS +1% computed interest rates are higher than the 4% floor, will the SMRA interest take the higher value?
	Yes.
26.	Why is the guarantee only for 2 years and not longer?
	The guarantee is meant to help with the transition to the new SMRA rate and is not meant to be long term.
27.	Why is there a 1-month window before the interest rate for the next 3 months is announced?
	The 1-month window is needed for the CPF Board to administer the change in the SMRA interest rate.
28.	What recourse is available to members who transferred their OA balances to SA thinking that there would be a 4% guaranteed floor rate?
	Monies placed in the SA are pegged to market-based long term bond yields which continue to be higher than OA rates. Moreover, bond yields fluctuate over time. Had the new SMRA formula been in place since 10YSGS became available, members would have enjoyed a return of more than 4% p.a. To help members adjust to the new floating SMRA interest rate, the 4% floor interest rate will be maintained for two years for SMRA savings.