Old Asian Couple

SINGAPORE: In a joint announcement by the Central Provident Fund (CPF) Board, Housing & Development Board (HDB), and Ministry of Health (MOH) on Wednesday, Dec 6, it was revealed that interest rates for CPF SMA and Retirement Accounts will rise to 4.08% per annum in the first quarter of 2024. This marks the third consecutive increase, with previous adjustments earlier in the year to 4.01% and 4.04% for SMA.

Channel News Asia reports that the rise in CPF Special and MediSave Accounts(SMA) interest rates is attributed to the 12-month average yield of 10-year Singapore Government Securities (10YSGS), which is pegged to the SMA interest rate. The government’s decision to align RA interest rates with SMA and compute them quarterly, starting from Jan 1, 2024, aims to make the RA interest rate more responsive to the prevailing interest rate environment.

According to the authorities, “As part of the government’s review of the CPF interest rate pegs, the RA interest rate peg will be aligned to that of the SMA and computed quarterly instead of annually from Jan 1, 2024. Hence, savings in the RA will likewise earn 4.08 per cent in the first quarter of 2024. This change will allow the RA interest rate to be more responsive to the prevailing interest rate environment.”

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Also, the authorities emphasise that there will be no change to the SMA and RA floor rate of 4% until the end of 2024. The Ordinary Account (OA) interest rate will also remain at 2.5% during the same period.

To enhance retirement savings, CPF members will continue to earn extra interest on their CPF savings. Members below 55 will receive an extra 1%  interest on the first S$60,000 of their combined balances, capped at S$20,000 for the OA. For members aged 55 and above, an extra 2% interest will be paid on the first S$30,000 of their combined balances, with an additional 1% on the next S$30,000. The extra interest will be directed to the CPF member’s Special Account (SA) or RA.

For those participating in the CPF LIFE scheme and above 55 years old, the extra interest will still apply to their combined CPF balances, including the savings used for CPF LIFE.

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Despite the unchanged OA interest rate at 2.5% in Q1 2024, the concessionary interest rate for HDB housing loans, linked to the OA interest rate, will remain at 2.6% per annum for the same period.

In addition to the interest rate adjustments, the authorities announced an increase in the Basic Healthcare Sum (BHS) for 2024. CPF members below 65 will see their BHS rise from S$68,500 to S$71,500 from Jan 1. For members turning 65 in 2024, their BHS will be fixed at S$71,500 and will not change thereafter. Those aged 66 and above in 2024 will retain their fixed BHS.

The BHS represents the estimated savings required for basic subsidised healthcare needs in old age and is adjusted yearly by MOH for those below 65 to keep pace with the growth in MediSave use.

Members can contribute to the MediSave Account (MA) up to the BHS, with excess contributions automatically transferred to other CPF accounts. Members with less than the BHS are not obligated to top up their MA and can still withdraw from it to cover approved medical expenses. The revised rates and BHS adjustments will take effect from Jan 1 to Mar 31, 2024. /TISG