Introduced in 1955, the Central Provident Fund (CPF) system has been a cornerstone of retirement planning for Singaporeans over the years. It has evolved from purely saving for retirement adequacy to covering our housing and medical needs as well.
Today, our CPF savings are apportioned into three main accounts: Ordinary Account (OA), Special Account (SA), and MediSave Account (MA). Additionally, for those of us turning 55 years old, a Retirement Account (RA) consisting of the retirement sum is opened to help pay for the CPF Life annuity premiums.
The interest rates on the CPF accounts have largely remained stable at floor interest rates of between 2.50% and 4.00% over the last two decades. However, the calculated interest rates on the SA recently rose above the floor rate for the first time since 1999. This first happened from July to September 2023 – rising to 4.01%. From September to December 2023, the rates have risen again to 4.04%
This comes as a result of the increase in global interest rates over the previous two years due to the US Central Bank’s interest rate policy.
This recent change may have gotten many of us, CPF members, excited about the possibility of earning more interest on our CPF savings. But, the current high of 4.04% p.a. interest is not the highest in the CPF’s history. Here’s a look back at how CPF interest rates have changed over time.
Historical CPF Account Interest Rates
To determine the historical CPF interest rates, we used the highest interest rate recorded for the different CPF accounts for each year, though the rates may have only been applicable for one quarter.
Furthermore, it should be noted that CPF members earned the higher of the calculated and floor rates each year.
Chart 1: CPF Ordinary Account Rates (1955-2023)
- The interest rate for the OA was highest at 6.50% from 1974 to 1986.
- The CPF OA floor rate has been held constant since its inception at 2.50%.
- Since 2000 to 2023, the calculated interest rate for OA has been lower than the floor rate of 2.50%.
Chart 2: CPF Special Account Rates (1977-2023)
- The interest rate for the SA was highest at 6.50% from 1977 to 1986.
- The floor interest rate on the SA was raised from 2.50% to 3.75% in 1995, and it was raised again to 4.00% in 1998.
- Since 2000 to 2022, the calculated interest rates on SA have been lower than the floor rate of 4.00%.
- The calculated interest rate of 4.01% breached the floor rate of 4.00% in 2023.
Chart 3: CPF MediSave Account Rates (1984-2023)
- The interest rate for the MA was highest at 6.50% from 1984 to 1986.
- The floor interest rate on the MA was raised from 2.50% to 4.00% in 1998.
- Since 2000 to 2022, the calculated interest rates on MA have been lower than the floor rate of 4.00%.
- The calculated interest rate of 4.01% breached the floor rate of 4.00% in 2023.
Chart 4: CPF Retirement Account Rates (1987-2023)
- The interest rate for the RA was highest at 5.91% in 1999.
- The floor interest rate on the RA was raised from 2.50% to 3.75% in 1995, and it was raised again to 4.00% in 1998.
- Since 2000 to 2023, the calculated interest rate for RA has been lower than the floor rate of 4.00%.
With that, here’s a closer look at the significant milestones and how CPF interest and contribution rates have changed along the way since its beginning.
The Central Provident Fund (CPF) scheme was introduced on 1 July 1955 under the British Colonial government as a national-funded pension scheme. It mandated all workers earning less than $500 and their employers to make a mandatory 5% monthly CPF contribution, respectively.
When it was launched, the now-known Ordinary Account (OA) gave an interest rate of 2.50% per annum, which was credited and compounded annually.
Following the implementation of the Home Ownership for the People Scheme in 1964, which allowed Singaporeans to buy 99-year leasehold flats from the government, the Public Housing Scheme was introduced in 1968. This allowed Singaporeans to use their CPF savings beyond saving for retirement to finance the mortgages on their HDB flats.
1972 – 1975
The CPF contribution rate, which placed an equal burden on the employee and the employer, first became asymmetric in 1974. Employers were made to contribute 14% of their employees’ wages, while the employees contributed 10% of their wages, for a total CPF contribution rate of 24%.
The contribution rate was later revised in 1974 to 30%, with an equal contribution of 15% each by the employer and employee. Additionally, the maximum contribution amount was also increased in 1975 from $450 to $600 per month.
In July 1977, a second CPF account known as the Special Account (SA) was introduced to prevent CPF members from using up all their savings (for housing) before retirement. The savings in SA are meant strictly for retirement purposes, unlike the OA savings and can’t be withdrawn except at retirement. The CPF contribution rate for SA was set at 1%.
Separately, the computation of the CPF interest, which reached a peak of 6.50% per annum from 1974 to 1986, was revised to be credited quarterly and compounded annually.
1981 – 1982
The Public Housing Scheme introduced in 1968 was extended to private residential property under the Residential Properties Scheme in 1981. This allowed more CPF members to finance their residential property purchases using their OA savings.
1984 – 1985
In April 1984, the third CPF account, the MediSave Account (MA), was introduced to allow CPF members to pay for their own or their family’s medical expenses incurred in government hospitals. In the same year, the overall CPF contribution rates reached a high of 50%, with an equal contribution of 25% shared by both employer and employee. This was distributed as 40% to OA, 4% to SA, and 6% to MA. Self-employed persons were allowed to contribute a maximum of $300 a month to their MA.
Later in January 1985, the use of MA savings was extended to also cover bills incurred in private hospitals. During this period, the three CPF accounts—OA, SA, and MA—had a uniform interest rate of 6.50% per annum.
In 1986, CPF members were allowed to invest their OA savings under the Approved Investment Scheme to generate returns above the prevailing interest rate. Now known as the CPF Investment Scheme (CPFIS), it gives CPF members the option to invest in various investments such as insurance products, gold, unit trusts, fixed deposits, bonds, and shares to earn potentially higher returns.
In the same year, the CPF contribution rates were also cut from the previous rate of 50% to 35% across all age groups.
From 1 March 1986 to 30 June 1999, the formula used to compute the CPF OA calculated rate was based on 50% fixed deposit rate and 50% savings rate of the average of the big 4 local banks over the preceding relevant 6 months. Furthermore, the CPF interest was revised to be computed monthly and compounded and credited annually in 1986 and has remained unchanged since.
In the early days, CPF members were able to fully withdraw their savings upon retirement; however, with the rising life expectancy, there was an increased risk of members outliving their CPF savings. To address this, the Minimum Sum Scheme and the Retirement Account (RA) – the fourth CPF account – were introduced in 1987.
This resulted in up to $30,000 of the CPF member’s savings being transferred to their RA upon reaching their retirement age, which would allow them to receive a fixed monthly income upon reaching their drawdown age until the amount is depleted.
The minimum sum is raised every year to account for inflation, an increasing standard of living, and the longer life expectancy of Singaporeans.
To spur the employment of older workers, the CPF contribution rates, which had been uniform across all age groups, saw cuts in the contribution rates for older workers in 1988. The contribution rates were separated into four age bands as follows:
<= 50 : 36%
50-55 : 36%
55-60 : 31%
60-65 : 28%
>65 : 26%
For July–December 1993, CPF members received a uniform floor interest rate of 2.50% for the first time across all different CPF accounts instead of the lower calculated rate of 2.21%.
From 1 Jul 1995, the Special and Retirement Accounts earned additional interest of 1.25% above the CPF interest rate paid for Ordinary and MediSave Accounts. Prior to that, the interest rates were uniform across the four CPF accounts at 2.50%.
A second revision was made on 1 July 1998 to the Special and Retirement Accounts floor rate, enabling these accounts to earn an additional interest rate of 1.50% above the Ordinary and MediSave Accounts’ floor rate. This meant a floor interest rate of 2.50% for OA and MA and 4.00% for SA and RA. However, for the period of July to December 1998, the calculated rates exceeded the floor rates at 4.29% and 5.79%, respectively.
From 1 July 1999, the formula to compute the OA calculated rate was revised to 80% fixed deposit rate and 20% savings rate of the average of the major local banks over the preceding relevant 3 months – it has remained unchanged since.
The CPF contribution rates were cut for the first time across all age bands to limit the impact on businesses following the Asian Financial Crisis.
|<= 50: 40%||<= 50: 30%|
|50-55: 40%||50-55: 30%|
|55-60: 20%||55-60: 16.5%|
|60-65: 15%||60-65: 9.5%|
|>65: 10%||>65: 7%|
From 1 Oct 2001, the MediSave, Special and Retirement Accounts earned additional interest of 1.50% above the CPF interest rate paid for Ordinary Account.
In 2005, the contribution rates for those aged 50–55, which had all the while been the same as those under 50, saw a cut from 33% to 30%. The rates were gradually cut to a low of 27% by 2006.
To help CPF members with lower CPF balances grow their savings faster, the government started paying an extra interest of 1% from 1 Jan 2008. This is paid on the first $60,000 of a member’s combined balances (capped at $20,000 for OA).
From 1 Jan 2008, the computation of interest for the Special, MediSave and Retirement Accounts is pegged to the 12-month average yield of the 10-year Singapore Government Securities (10YSGS) plus 1%.
In 2009, the government introduced the CPF LIFE annuity scheme, which provides monthly payouts for the lifetime of the CPF member. The premiums for the annuity scheme are paid using the RA savings.
From 1 January 2010, RA savings are invested in SSGS, which earn a fixed coupon equal to the 12-month average yield of the 10YSGS plus 1% at the first point of issuance in the year. The interest rate to be applied to the RA will be the weighted average interest of the entire portfolio of these SSGS, and adjusted yearly in January.
Furthermore, for members who turned 55, their combined balances including the savings used for CPF LIFE will earn extra interest.
From 1 January 2015, the employers CPF contribution rates increased by 1%. This went into the MediSave Account to help workers save for future healthcare expenses.
To make the CPF system more progressive, the government from 1 Jan 2016 pays an extra 1% interest for CPF members aged 55 and above on the first $30,000 of a member’s combined balances (capped at $20,000 for OA). With existing 1% extra interest provided on the first $60,000 of CPF balances, CPF members aged 55 and above will earn up to 6% interest per year on their retirement balances.
Moreover, the CPF Salary Ceiling was raised from $5,000 to $6,000 with effect from 1 January 2016.
2022 – 2024
With an ageing population on hand, the Tripartite Workgroup on Older Workers recommended increasing the Retirement Age from 62 to 65 and the Reemployment age from 67 to 70 by 2030. Along with these changes, the contribution rates for older workers, aged 55–70, to SA will also be gradually raised to help senior workers save more for retirement. These changes were first implemented on 1 January 2022 and a second round of increases took effect on 1 January 2023.
From 1 January 2024, the CPF contribution rates for senior workers will increase by between 1% and 1.5%, as follows:
Furthermore, as announced in Budget 2023, the CPF Salary Ceiling will be raised from $6,000 to $8,000 by 2026. This will be done gradually, as follows:
This article was first published on 15 June 2023 and updated with the latest information.
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