1% extra interest on CPF balances on reaching 55

Come 1 January 2016 (next year), CPF members aged 55 and above get an extra 1% per year interest on their first $30,000 of combined CPF balances.

This extra 1% interest is on top of the existing additional interest to be paid out to all CPF members: “An additional 1% interest is paid on the first $60,000 of a member’s combined balances, of which up to $20,000 comes from the Ordinary Account.”

Therefore members who are 55 years old and above next year, get that 1% extra interest income on first $30,000. The rest of the CPF balances will continue to attract interest income as before. See graphic below sourced from the Straits Times (24 February 2015).

1% on $30,000 works out to $300 per year.

Around 60% of today’s CPF members are aged 55 and above. (Source: Channel News Asia, 23 February 2015)
Total CPF members as at 2014 was 3.59 million. (Source: CPF Statistics)

60% of CPF members works out to 2,154,000 members. $300 per year per member results in potential extra total interest payout of $646million, on assumption that all these members have at least $30,000 in combined CPF balances.

That is a lot of interest payout by the government to these members. Hopefully, the government with its reserves would be able to generate investment income in the future to plug this gap in funding the extra interest payout.

(I stand to be corrected if my analysis and commentary is wrong.)CPF Extra interest

Copyright © 2015, 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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