from a casual reading of a highly popular blog, i came across a reader's query on whether to invest his six figure amount in his retirement account for the next 10 years or invest it.
and the expert's advice is for the reader to leave his monies in his cpf retirement account to earn 4%.
my comments:
firstly, please allow me to quote directly from the cpf's website on cpf interest rates:
CPF interest rate for Special and Medisave Accounts stays at 4%
CPF members will continue to receive interest of 4% a year on their Special and Medisave Accounts (SMA) savings from 1 July 2010 to 30 September 2010.
Since 1 January 2008, savings in the SMA have been invested in Special Government Securities (SSGS) which earn an interest rate pegged to the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, adjusted quarterly.
As announced previously, the Government will maintain the 4% p.a. minimum rate for interest earned on all Special and Medisave Accounts (SMA) monies and Retirement Account (RA) monies until 31 December 2010. Beyond this date, interest rates on all CPF account monies will be subject to a minimum rate of 2.5% p.a.
For the period 1 June 2009 to 31 May 2010, the 12-month average yield of the 10YSGS plus 1% worked out to be 3.59%. Please refer to Annex A for the 10-year SGS yield. Since this rate is below the minimum rate of 4%, the SMA interest rate from 1 July 2010 to 30 September 2010 will remain at 4% p.a.
Background information on other announcements related to CPF Interest Rate for SMA and RA:
* Interest Rate for Retirement Account Monies
From 1 January 2010, Retirement Account (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 point of issuance. The interest rate to be credited to the RA will be the weighted average interest of the entire portfolio of these SSGS, and adjusted yearly in January. As announced in December 2009, the RA interest rate from 1 January 2010 to 31 December 2010 will be maintained at 4% p.a.
* Additional Interest of 1%
An additional 1% interest will continue to be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account (OA). The additional interest received on the OA will go into the member’s SA or RA to enhance his retirement savings. If the member is above 55 years old and participates in the LIFE scheme, the additional 1% interest will also apply to his annuity premium, less annuity payouts already made. The additional interest earned on the member’s LIFE annuity monies will be paid into his RA.
if our government implements the new rates to the cpf special, medisave account and retirement account effective january 01, 2011, then there will no longer be the 'automatic' 4% interest rate earned in these accounts.
in the light of the cpf board's information on interest rates, perhaps the expert should have doubled-checked his response to his reader before posting it in his blog. |
