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I am @ Your Say » Blog Us Register     Login     22 Nov 2008
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Articles from Heman
26/09/2007
CPF Special, Retirement and Medisave Account
By Heman @ 9:56 AM :: 1603 Views :: 1 Comments :: :: The Golden Years : Elderly
I read about a CPF article that says this.

Increasing CPF returns

From 1 Jan 2008, all CPF members will earn an extra 1% interest on the first $60k in their CPF accounts. This includes up to $20k from the Ord account and $40 from the Special, Medisave and Retirement Accounts (SMRA). Or, up to $60k from the SMRA, ir the OA has less than $20k. The additional interest will go into the SMRA to add to retirement or Medisave savings.

Because of the extra interest, restrictions will be placed on funds in the Ordinary and Special accounts. From 1 April 2008, the first $20k in these accounts will not be allowed for use in CPF investment Schemes (CPFIS). They can however still be used for housing and education. Money that has already been invested under the CPFIS will not be affected.

Also from 1 Jan 2008, the interest rate formula for the SMRA will be changed to the yield (or effective rate of interest) of the 10 yr Singapore Government Securities (SGS) plus 1%. If the new SMRA formula had been in place since 1999, the SMRA rate would have average 4.5%. To help members adjust to the floating SMRA rate, the minimum interest rate for the SMRA will remain at 4% for two yrs.

My concern is this.
1) How will the effective rate of interest help our SMRA.
It is more like transferring the risk to the account holder.
There will be a risk of the interest below 4% after 2 years. If I remember correctly, there is a 'rule' that say our SMRA is 1.5% above the Ord account. So I will welcome the SGS plus 1% but if there is a risk of it below 4%, account holder should be given a chance to switch to CPFIS without the cap of the first $20k or can the account holder choose to remain at the current scheme.

2) Maybe the CPF board can share with us the performance of the Singapore Government Securities for the pass years. Looking at the statement 'since 1999, the SMRA rate would have average 4.5%', 0.5% extra for account holder may not be good enough for us to take the risk of having it below 4% after 2 years.

Thanks.
 
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