How to increase interest income in CPF?

Current interest rate for CPF Ordinary Account (OA) is 2.5% and for Special Account (SA) is 4.00%. The interest rate for Special Account is reviewed quarterly. Between Ordinary Account and Special Account the interest rate differential is 1.5%. This is significant difference in current low interest rate environment.

Central Provident Fund (CPF) allows member to transfer money from his Ordinary Account to his Special Account subject to a maximum amount he can do so. The amount allowed to be transferred is based on the formula:

Special Account top-up =
Prevailing Minimum Sum – Special Account Balance – Amount withdrawn from SA under CPFIS scheme.
Current Prevailing Minimum Sum = $139,000

Let’s take an example.
SA balance = $59,000
Amount withdrawn under CPFIS = $20,000
Special Account Top-up = $139,000 – $59,000 – $20,000 = $60,000

You can transfer $60,000 (max) from your Ordinary Account to Special Account using CPF On-line or through a CPF Form which can be downloaded from CPF web-site. It is easy if you do it on-line. The on-line portal even tells you the exact maximum a person can transfer.

The extra top-up amount of $60,000 can now work harder in Special Account and earn extra 1.5% (p.a) instead of leaving it in Ordinary Account.

Note: When doing top-up to SA, one cannot use the amount for monthly housing instalment (for properties bought after 2003). Refer for more information in CPF web-site.

If you do not need CPF money for property purchase, why not put your CPF money into Special Account and earn higher interest? Using money in Ordinary Account for other investments under CPFIS scheme may not guarantee a return of more than 4.00% p.a.

Copyright © 2013, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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