Written Answer by Mrs Josephine Teo, Minister for Manpower, to Parliamentary Question on CPF balances and interest rates
NOTICE PAPER NO. 1621 OF 2019 FOR THE SITTING ON 6 MAY 2019
QUESTION NO. 2703 FOR ORAL ANSWER
MP: Dr Lim Wee Kiak
To ask the Minister for Manpower (a) what is the average CPF balance for individual CPF members at varying percentiles from the 5th to the 95th percentile; and (b) whether the CPF Board will consider offering differentiated interest rates so those with lower CPF balances can receive more interest to build up their balances and a lower interest rate for those who have high balances.
- The CPF system is already designed to be progressive through limits on CPF contributions and differentiated interest rates.
- There are monthly and annual limits on the amount of CPF contributions a member can make. Mandatory CPF contributions from ordinary wages are capped at the salary ceiling of $6,000 per month. The maximum amount of mandatory and voluntary contributions that a person can make in a calendar year is subject to the CPF annual limit, currently at $37,740.
- CPF members with lower balances earn a higher effective interest rate than those with higher balances. This is because CPF interest rates are differentiated based on a member’s CPF balance. Balances in the Ordinary Account earn 2.5% per annum, while those in the Special Account, Retirement Account, and MediSave Account earn 4% per annum. On top of this, since 2008, an Extra Interest of 1% is paid on the first $60,000 of combined CPF balances. Since 2016, CPF members aged 55 and above also receive an Additional Extra Interest of 1% on the first $30,000 of their combined CPF balances. Hence, members aged 55 and above enjoy interest rates of up to 6% for the first $30,000, up to 5% for the next $30,000 and up to 4% for balances above $60,000.
- Members’ balances can vary widely due to their unique circumstances, such as differences in age, employment, income, and withdrawals for retirement payouts and housing payments. In 2018, for active CPF members turning 55, more than 6 in 10 had at least the Basic Retirement Sum (BRS) of $85,500 in their Ordinary and Special Accounts. Over time, we expect members’ CPF balances to increase with rising income and labour force participation.