17 June 2014

Pitfalls Of Raising CPF Interest Rate

Some people are demanding that the Government raise the interest rate on their moneys in their Central Provident Fund ("CPF") accounts.

They say that Temasek Holdings, which together with Government of Singapore Investment Corporation ("GIC") and Monetary Authority of Singapore ("MAS") invests on behalf of the State, achieved 8.86 per cent return to its shareholder for the financial year ended 31 March 2013 and 13 per cent compound return to its shareholder for the 10 years ended 31 March 2013.

Currently, the CPF interest rate is 2.5 per cent for the Ordinary Account ("OA"), 4.0 per cent for the Special, Retirement and Medisave Accounts, and an additional 1.0 per cent for the first $60,000 of a member's combined balances, with up to $20,000 from the OA.

What are the consequences of raising the CPF interest rate?