Living in Singapore, we can’t ignore our CPF account balances. Each month, we make mandatory CPF contributions of up to 37% of our salary. Over three to four decades in the workforce, our CPF balances can compound into a substantial amount.
While we are younger, more funds are channelled into our Ordinary Account (OA), and as we gradually age, a larger proportion is funnelled into our Special Account (SA) and MediSave Account (MA) for our retirement and healthcare needs instead. When we hit 55, a new Retirement Account (RA) is opened for us to set aside our retirement funds for our golden years.
Understanding how the CPF system works, and the interest rates it pays, allows us to maximise the scheme and make better financial decisions.
How Much Interest Do We Earn On Our CPF Balances?
The best part about our CPF contributions is that they start earning a return immediately. We do not need to make any investment decision nor take on any investment risk to earn a relatively good interest return.
| CPF Account | Interest We Receive (p.a.) |
| Ordinary Account | 2.5% |
| Special Account | 4.0% |
| Retirement Account (only opened when we hit 55) | 4.0% |
| MediSave Account | 4.0% |
While these are the interest rates returns we currently receive on our CPF balances, it is not a fixed rate we will always receive. According to the CPF Act, there is a formula that governs the calculation of interest returns on our CPF balances.
In addition, the legislated minimum interest rate is 2.5% per annum. The higher 4.0% interest return on our Special Account (SA), Retirement Account (RA) and MediSave Account (MA) is technically not mandated, but it is a commitment that the government has made.
Due to the low interest rate environment, we are currently paid the legislated minimum interest rate of 2.5% on our OA balances, and the committed floor rate of 4.0% on our SA, RA and MA balances.
| CPF Accounts | Interest Rate Formula | Floor Interest Rate |
| Ordinary Account | 80% : 20% fixed deposit to savings rate of preceding 3-month average of major local banks’ interest rates | 2.5% per annum |
| Special Account | 12-month average yield of 10-year Singapore Government Securities plus 1% | 4.0% per annum |
| Retirement Account | 12-month average yield of 10-year Singapore Government Securities plus 1% | 4.0% per annum |
| MediSave Account | 12-month average yield of 10-year Singapore Government Securities plus 1% | 4.0% per annum |
Read Also: Why CPF Needs To Review Interest Rates For Our Ordinary, Special, MediSave And Retirement Account
We Also Receive Extra Interest Rates On Our CPF Balances
Extra Interest Rate
On top of the interest rates paid on our CPF balances, we are also paid an extra interest of 1.0% p.a. on the first $60,000 of our combined CPF balances (with up to $20,000 coming from our OA). This helps those with lower CPF balances compound their balances at a faster rate.
Do note that there is a cap of $20,000 that can come from our OA balances. This means that if we have $40,000 in our OA, and $10,000 in our SA and another $10,000 in our MA, we will not fully benefit from the extra interest rate of 1.0% despite having $60,000 of combined CPF balances.
This is because only $20,000 can come from our OA. Hence, in this scenario, we will only be receiving the extra interest on $40,000 – $20,000 from OA, $10,000 from SA and $10,000 from MA.
One other difference is that the extra interest earned on our OA balances will be paid into our Special Account (if we are under 55) or Retirement Account (if we are over 55). The extra interest earned on our SA and MA will flow into the respective accounts.
For the scenario above, here’s what it looks like:
| CPF Account | CPF Balance | Interest Rate We Receive | Extra Interest Rate |
| Ordinary Account | $40,000 | 2.5% | 1.0% on $20,000 (paid into SA) |
| Special Account | $10,000 | 4.0% | 1.0% on $10,000 |
| MediSave Account | $10,000 | 4.0% | 1.0% on $10,000 |
| Total | $60,000 | 1.0% on $40,000 | |
This is why we may read that those under the age of 55 can receive up to 5.0% interest on our CPF balances or that we may earn up to 3.5% on our Ordinary Account balances. These figures are not applied uniformly to our entire CPF balances. Instead, they only apply to the first $60,000 of our CPF balances. That too with restrictions on the first $20,000 coming from our OA.
Additional Extra Interest Rate
For those 55 and above, we will also be paid an additional extra interest of 1.0% on the first $30,000 of combined CPF balances. This is on top of the extra interest on the first $60,000 of combined CPF balances.
The additional extra interest rate is also capped on up to $20,000 that can come from our Ordinary Account.
In another scenario, consider if we had $52,500 in our OA, and $2,500 in our SA, $2,500 in our RA and another $2,500 in our MA. We will first receive the extra interest rate of 1.0% on $20,000 on our OA, $2,500 on our SA, $2,500 on our RA and $2,500 on our MA. In total, we will receive the extra interest of 1.0% on $27,500 despite having $60,000 in combined CPF savings.
Furthermore, we will receive another 1.0% additional extra interest on $20,000 on our OA, $2,500 on our SA, $2,500 on our RA and $2,500 on our MA. In total, we will receive the additional extra interest of 1.0% $27,500 despite having more than $30,000 in combined CPF savings.
For the scenario above, here’s what it looks like:
| CPF Account | CPF Balance | Interest Rate We Receive | Extra Interest Rate | Additional Extra Interest Rate |
| Ordinary Account | $52,500 | 2.5% | 1.0% on $20,000 (paid into RA) | 1.0% on $20,000 (paid into RA) |
| Special Account | $2,500 | 4.0% | 1.0% on $2,500 (paid into RA) | 1.0% on $2,500 (paid into RA) |
| Retirement Account | $2,500 | 4.0% | 1.0% on $2,500 | 1.0% on $2,500 |
| MediSave Account | $2,500 | 4.0% | 1.0% on $2,500 | 1.0% on $2,500 |
| Total | $60,000 | 1.0% on $27,500 | 1.0% on $27,500 | |
Similar to the point above, this is why we may read that those above 55 can receive up to 6.0% returns on their CPF balances. This is restricted on the first $30,000 of our CPF balances and only $20,000 can come from OA – which usually forms the largest component of our CPF balances.
Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.
