Manpower Minister rejects suggestion to change how CPF interest payments are computed

Manpower Minister rejects suggestion to change how CPF interest payments are computed

SINGAPORE: The CPF monthly interest payments will remain the same, according to Manpower Minister Tan See Leng on Wednesday ( Feb 7 ).

He was responding to a question about whether the CPF Board had looked into how monthly interest payments are calculated from Member of Parliament Louis Chua ( WP-Sengkang ).

According to Mr. Tan, all members now profit from the game’s higher interest rates, even though changes may result in significantly increased interest payments for those making CPF transactions.

Now, CPF withdrawals and deductions made in a single month do not accrue interest from that month; only contributions made to the fund earn interest in the following month.

Mr. Chua questioned whether the table would take CPF achievements made throughout the month into account when calculating the monthly interest payment.

Additionally, he inquired about the pro-rating of the monthly interest payment to the number of times a sum is held in the balances prior to departure.

Mr. Chua explained in the House that the Singapore government’s Treasury bills and banks ‘ fixed deposits have been offering competitive interest rates, above the 2.5 percent minimum interest rate on CPF Ordinary Account ( OA ) savings.

However, due to the method used to calculate the CPF monthly interest payment, members who invest in such investments run the risk of losing up to two months ‘ worth of potential interest payments, according to him.

Mr. Tan retorted that it is important to consider the CPF system’s features that do not apply to banks deposits when calculating the latest method of computing regular interest payments.

He emphasized that despite a protracted low interest rate environment over the past 20 years, the government has continued to pay the Special, Medisave, and Retirement Accounts ( SMRA ) 2.5 percent minimum interest and 4 % floor rate.

He continued by saying that the CPF system offers 1 % additional interest to all members on the initial S$ 60, 000 of combined balances. On the first S$ 30, 000 of combined CPF balances, members 55 and older receive an additional 1 % in interest.

Additionally, he stated that consumers frequently lose any potential interest earned if they early withdraw money from banks ‘ set deposits.

The minister stated that while altering the computation method may result in slightly higher CPF interest payments, the features I’ve just outlined now offer our members significantly higher interest rates and a greater increase in their savings.