Many changes happen to our CPF accounts at 55 years old. Most significantly, 1) a new Retirement Account (RA) is created for us and 2) our Ordinary Account and Special Accounts savings will be transferred to this account, up to the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) if we have pledged our property.
For more details on what happens to our CPF accounts when we turn 55, read our article on What Happens To Your CPF Monies After Transferring It To Your Retirement Account (RA) At Age 55?
While these changes are in preparation for our eventual retirement and CPF LIFE payouts at 65, our CPF monies still remain in our CPF accounts (unless we withdraw them) and continue to earn interest.
Here’s what happens to the interest paid to our CPF monies after 55.
Interest Paid On Our CPF Monies Increases After 55
Before 55, the interest we earn on our CPF savings is 2.5% p.a. for our Ordinary Account and 4% p.a. for our Special and MediSave Account. We also earn an additional 1% p.a. interest paid on the first $60,000 of our combined CPF balances (of which up to $20,000 is from our Ordinary Account).
After 55, we continue to earn 2.5% p.a. for our Ordinary Account (OA) and 4% for our Special Account (SA) and MediSave Account (MA). Our Retirement Account also earns the same base interest of 4% p.a. What changes is the additional interest we earn. When we turn 55 years old, the first $30,000 of our combined CPF balances earns an additional 1% p.a. of interest, on top of the existing 1% p.a. interest we received on the first $60,000 of our combined CPF balances.
|Combined CPF Balances||Interest rate (p.a.) (before 55)||Interest rate (p.a.) (after 55)|
|First $30,000||5% for SA and MA,
3.5% for OA (up to $20,000)
|6% for SA, MA and RA
4.5% for OA (up to $20,000)
|Next $30,000||5% for SA and MA,
3.5% for OA (up to $20,000),
|5% for SA and MA,
3.5% for OA (up to $20,000),
|Amount above $60,000||4% for SA and MA,
2.5% for OA
|4% for SA, MA and RA,
2.5% for OA
The Extra Interest Is Intended To Boost Retirement Savings
As the extra interest is meant to boost our retirement savings, the extra interest we earn on our Ordinary Account savings is channelled to our Special Account if we are below 55 or to our Retirement Account if we are 55 and above.
Additionally, there is a priority to the accounts that form the first $60,000 or $30,000 that earns the extra interest. In order of priority, the accounts that count to the combined balances for extra interest are:
- our Retirement Account, including any CPF LIFE premium balance, followed by
- our Ordinary Account (up to $20,000), followed by
- our Special Account and finally
- our MediSave Account.
Nonetheless, as the extra interest earned on our OA would flow to our RA or SA, we would not be able to use it for non-retirement purposes (like housing). The only exception is when our MA balances form part of the first $60,000, in this case, the extra interest earned on our MA balances will remain in our MA and can be utilised for healthcare purposes.
Our CPF Life Premiums Continue To Earn Interest When We Join CPF Life
This boost in interest rates continues when we turn 65 and are eligible to join CPF Life.
At 65, for those of us who choose to join CPF Life on the Standard or Escalating Plan, the full amount in our RA would be used as our CPF Life premium. This premium will continue to earn the same CPF interest as they were under our RA and we will continue to enjoy the extra interest. This extra interest earned is factored into the monthly CPF Life payout and increases the amount of payout we will receive.
Under the Standard or Escalating Plan, our CPF LIFE monthly payouts will first be paid from our CPF LIFE premium. When our CPF LIFE premium is used up, we would continue to receive monthly payouts, no matter how long we live. This is possible because of the feature of risk-pooling – the interest accumulated by all CPF Life members is sufficient to sustain the monthly payouts for those who live beyond their premiums paid.
For those of us who choose to join CPF Life on the Basic Plan, about 10-20% of our RA savings will be deducted as CPF LIFE premium. We would continue to enjoy the extra interest on our RA and the amount used for CPF Life premium. As the extra interest earned will flow into our RA, it does not increase the amount of monthly payout we receive. Instead, the extra interest earned is paid as part of our monthly payouts. As our RA balances fall due to payouts, the extra interest earned will reduce and we will receive lesser payouts over time.
Under the Basic Plan, our monthly payout will first be paid from our RA and is estimated to last until 90. After our RA is depleted, monthly payouts will be paid from our CPF LIFE premium. Thereafter, like those who joined under the Standard or Escalating Plan, we will continue to receive monthly payouts no matter how long we live, even when our CPF Life premium is depleted.
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