Singapore government decided to further extend the 4 percent floor interest rate earned on all Special, Medisave and Retirement Central Provident Fund (CPF) accounts for another year until the end of 2014, the CPF Board said on Friday.
The board said the decision was in view of the uncertainty in the global economy and interest rate environment. The current 4 percent floor rate is due to expire at the end of this year.
Savings in the Special, Medisave and Retirement Account have been invested in Special Singapore Government Securities which earn an interest rate pegged to the 12-month average yield of 10- year Singapore Government Securities plus 1 percent since Jan. 1, 2008.
This is a market-based rate for instruments of comparable risk and duration, and will ensure that members receive fair and reasonable interest rates, the CPF Board said.
To help members cope with the transition, the Singapore government had committed to providing a 4 percent floor rate for two years up to December 2009. It was subsequently extended in light of global economic conditions and the fact that interest rates had been exceptionally low.
Therefore, from Oct. 1 to Dec. 31 this year, Singapore's CPF members will continue to enjoy a risk-free interest rate of 4 percent on their Special and Medisave Accounts, as the 12-month average yield of 10-year Singapore Government Securities plus 1 percent from Sept. 1 last year to Aug. 31 this year works out to be 2.68 percent, which is below the current floor of 4 percent.