Interest Rates of CPF Accounts (& How to Get Extra Interest)

All Singapore citizens or permanent residents (PRs) who are earning an income here must familiarise themselves with the Central Provident Fund (CPF). 

This is because many aspects of financial planning revolve around it. 

Knowing the interest rates you’re getting on your CPF balances and how they’re calculated are crucial because the interests will be compounded over many decades, resulting in a significant sum when you enter your golden years. 

So, today we’ll take a deeper look at CPF interest rates and the best ways to maximise your returns. 

4 Types of CPF Accounts (& Their Current Interest Rates in 2022)

You and your employer will contribute a percentage of your salary into your CPF accounts. These contributions will be allocated into various accounts depending on your age and income. For more information on CPF contributions and allocations, read this article

Here are the interest rates of the CPF accounts: 

Current Interest Rate (p.a.) Maintained Until
Ordinary Account (OA) 2.5%31 March 2022
Special Account (SA) 4%31 December 2022
MediSave Account (MA) 4%31 December 2022
Retirement Account (RA)4%31 December 2022

These interest rates aren’t fixed; they get reviewed either every quarter or every year. As of 5 January 2022, the OA interest rate will stay fixed until 31 March 2022, while the floor interest rate for Special, MediSave, and Retirement Accounts (SMRAs) will stay fixed until 31 December 2022. I’ll talk more about how these interest rates are calculated later on. 

Note: monies in your Supplementary Retirement Scheme (SRS) account aren’t considered CPF monies; they earn an interest of 0.05% per year. 

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How to Get Extra Interest Rates

On top of the “base interest rates” above, you’re also able to get bonus interest rates. 

If you’re below the age of 55 

There will be an extra 1% p.a. on the first $60,000 of your combined CPF balances. 

What makes up your combined CPF balances? Here’s the order: 

  1. Ordinary Account (cap of $20,000) 
  2. Special Account
  3. MediSave Account

Note: the extra interest earned on your OA balances will go into your SA, while the extra interests on your SA and MA balances go into their respective accounts. 

For example, if you have these balances: 

  • OA: $50,000 
  • SA: $12,500
  • MA: $12,500

Even though your total CPF balances add up to $75,000, you’ll not enjoy the full benefit of the extra 1% interest. 

This is because your “combined CPF balances” are only $45,000 ($20,000 from OA, $12,500 from SA, and $12,500 from MA). You could consider transferring money from OA to SA.

If you’re aged 55 and above

There will be an extra 2% p.a. on the first $30,000 and 1% p.a. on the next $30,000 of your combined balances. 

As your Retirement Account (RA) is created, it will be part of your combined CPF balances. 

What makes up your combined CPF balances? Here’s the order: 

  1. Retirement Account (including any CPF LIFE premium balance)
  2. Ordinary Account (cap of $20,000)
  3. Special Account
  4. MediSave Account

Note: the extra interests on your OA balances will go into your RA, while the extra interests earned on your RA, SA, and MA will go into their respective accounts. If you’ve joined the CPF LIFE, extra interests earned will go into your RA or accumulate with the interest earned on premiums of all CPF LIFE members. 

For example, if you have these balances: 

  • RA: $20,000
  • OA: $60,000 
  • SA: $15,000
  • MA: $15,000

An extra 2% will be paid on the first $30,000 of combined CPF balances ($20,000 from RA and $10,000 from OA).

An extra 1% will be paid on the next $30,000 of combined CPF balances ($10,000 from OA, $15,000 from SA, and $5,000 from MA). 

These bonus interest rates enable CPF members who have lower balances to receive more help. 

How Are the CPF Interest Rates Determined? 

Why aren’t the interest rates fixed and how does CPF decide how much interest to give you? 

Here are more details. 

Ordinary Account Interest Rate 

You’ll either get the three-month average of local banks’ interest rates (0.09% from Aug 2021 to Oct 2021) or the legislated minimum of 2.5% p.a. 

The interest rate for OA is reviewed every quarter. 

It’s currently at 2.5% until 31 March 2022.

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Special and MediSave Account Interest Rates

You’ll either get the 12-month average yield of 10-year Singapore Government Securities (SGS) plus 1% (2.34% from November 2020 to October 2021), or the current floor interest rate of 4%. 

The interest rates for SA and MA are reviewed every quarter. 

They’re currently at 4% until 31 December 2022.

Retirement Account Interest Rate 

The computed interest rate is based on the weighted average interest rate of the entire invested portfolio. New RA savings earn the 12-month average yield of 10-year Singapore Government Securities plus 1%, or the current floor interest rate of 4%. 

The interest rate for RA is reviewed every year. 

It’s currently at 4% until 31 December 2022.

Overall, if there were no legislated minimum or floor interest rates, CPF members will receive much lower returns because of the current low interest environment. 

As these interest rates may be subject to change, have they ever changed before? Let’s find out. 

The Historical Interest Rates of the 4 CPF Accounts

CPF started on 1 July 1955, and back then, there was only the Ordinary Account. 

SA was then introduced in 1977, followed by MA in 1984, and lastly, RA in 1987.

The extra interest rate of 1% on the first $60,000 of combined CPF balances was introduced in 2008, and in 2016 came the extra interest of 1% on the first $30,000 of combined CPF balances (for members age 55 and above). 

I’ve looked at the history of the CPF interest rates. I do think it’s pointless to look at rates when it all started, so let’s just focus on rates from the year 2000. 

Interest Rate p.a. (Since 2000) 
Ordinary Account2.5% throughout 
Special Account4% throughout 
MediSave Account2.5% from 2000 to Sep 2001; thereafter, 4% throughout
Retirement Account4% throughout
Extra 1% on First $60,000 of Combined Balances1% throughout
Extra 1% on First $30,000 of Combined Balances (Age 55 and Above)1% throughout

As you can see, CPF interest rates have remained constant, except for MA, which increased from 2.5% to 4% after Sep 2001.

How Are the CPF Interest Rates Compounded & Credited to You?

If you don’t know what compounding is, here’s a simple illustration. 

If you have $100 and put it in a bank that gives you an interest of 10% per year, you’ll get $10 of interest after one year. Your balance in the next year will be $110, and then at the end of the second year, you’ll get an interest of $11, and you’ll have a total balance of $121. 

This is a very simple illustration. In reality, it’s not so simple. We have to also look at the computation, compounding frequency, and when the interest is credited. 

Let’s look at a typical bank account in Singapore. Usually, the bank credits the interest at the end of the month. This means that your interest appears in the next month along with your past balance, and thus, “interest on interest” happens at a more frequent rate.

In CPF accounts, the interest is computed monthly, credited by 1 January of the next year, and compounded annually.

Although it seems straightforward, it’s not. Let’s break it down and just use the OA as an example. 

If you have a balance of $50,000 (ignoring any extra interests or contributions/withdrawals), when the interest is computed monthly, it means that you’ll get $104.17 (2.5%/12*50,000) of interest for that month. 

This interest isn’t credited in the next month (only on 1 Jan the next year).

And so, you’ll still get the same interest for the next month because your balance doesn’t increase.

MonthBalanceInterest
July$50,000$104.17
August$50,000$104.17
September$50,000$104.17

But contributions and withdrawals do happen, which make the calculation much more complex. 

Interest computation for contributions will only start from the next month onwards, whereas withdrawals/deductions will not earn any interest immediately. Read here for more details.

The first part of the sentence is simple.

For example, if you have a starting balance of $50,000 in July and you made a contribution of $10,000 on 15 July, only $50,000 will be used for interest computation for that month. This means you’ll only get an interest of $104.17.

As for the second part of the sentence, if you have a starting balance of $50,000 in July and you made a withdrawal of $30,000 on 15 July, only $20,000 will be used for interest computation in July.

Note: as interest is calculated on a monthly basis, it doesn’t matter when exactly in the month you make a contribution/withdrawal (i.e., whether it’s on 1 Jul or 31 Jul doesn’t have any significance).

How the CPF interest rates are calculated and when they’re credited do affect when you should make CPF cash top-ups, transfers, and top-ups using the Retirement Sum Topping-Up (RSTU) Scheme.

So, how do you maximise your returns?

If you’re absolutely sure you want to do a cash top-up this year (and ignoring CPF annual limits and whether you’d qualify for tax reliefs), it makes sense to do it in January, rather than wait until December. 

This is because if you make the top-up in January, interests on that top-up will be computed from February onwards (although the interests will only be credited the following year). 

If you make the top-up in December instead, you won’t earn any interest on that top-up for December or that year (although you may still qualify for tax reliefs).

How Is CPF Able to Provide You With These Returns?

If balances in your CPF accounts are just sitting there not earning any interest, the value of your money will reduce as the cost of living increases with time

CPF knows this, and this is why your CPF monies are eventually reinvested to earn higher potential returns. 

CPF does this for you knowing that a portion of the population might not know how to or wish to take on additional risks on their CPF monies. If you want, you can invest your balances with the CPF Investment Scheme (CPFIS), subject to higher risks. 

As it is, the risk-free interest rate you get from CPF is decent when compared to other similar financial instruments in the market, assuming the rates don’t change in the future.

But, do you know how your CPF monies are invested? 

To keep functions separate, CPF doesn’t invest your CPF monies directly. The CPF Board invests the monies into Special Singapore Government Securities (SSGS), a type of government bond specially issued to the CPF Board. 

The funds from SSGS, including funds from Singapore Government Securities (SGS), government surpluses, and land sales, are pooled together, then get transferred to the Monetary Authority of Singapore (MAS) to be converted into foreign assets, and eventually transferred to GIC to be professionally managed for the long term. The proceeds from SSGS don’t get passed to Temasek for management. 

Collectively, the three organisations who hold the government’s assets, MAS, GIC, and Temasek, hold at least S$1.05 trillion. The actual figure is much higher because GIC’s fund is not publicly known. 

How to Grow Your Assets Further

One of the main objectives of CPF is to provide a basic retirement for its members. 

If you’re a firm believer in CPF, there are ways to increase your CPF funds, such as cash top-ups, OA to SA transfers, RSTU, etc.

However, there’s always a limit to how much you can contribute. There’s only so much that can be done with CPF. 

So what do you do with your excess cash? 

You’ll have to look at other alternatives to grow your money, and diversification is always useful.

If you’re unsure where to even start, consider going through a financial planning session today.

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Disclaimer: The statements or opinions expressed on this site are of my own. The information is meant purely for informational purposes and should not be relied upon as financial advice.
Abram Lim

With over 7 years of experience in the financial advisory industry, and previous stints in Citibank and UOB, Abram eagerly shares his knowledge by publishing research-backed articles. Learn more about Abram