Latest CPF figures: On rising interest rates, property costs, and the gender gap in savings

New highs in CPF account balances and top-ups

Fresh yearly statistics from the Central Provident Fund (CPF) Board showed that members’ balances had soared past the half-trillion-dollar mark as of the end of 2021.

Total CPF members’ balances grew by 9.4% on the year to hit an all-time high of $505.7 billion, the board’s latest annual report noted. Voluntary top-ups to CPF Special Account (SA) and Retirement Account (RA) also rose 60% to a record $4.8 billion in 2021.

Meanwhile, about $17.1 billion of Ordinary Account (OA) savings have been invested by 977,000 CPF members. Under the CPF Investment Scheme, OA balances can be invested in a range of products including stocks, bonds and unit trusts.

Here are a few articles delving into the other key details of the annual report.

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Will CPF interest rates change after recent rate hikes?

CPF interest rates, be it for OA, SA, MA or RA, have stayed at the floor rates of 2.5% per annum (p.a.) and 4% p.a. for more than two decades — but this does not mean they will always be fixed.

In particular, although the minimum interest rate for OA is legislated, the SA, MA, and RA floor rate is subject to an annual revision. Their current floor rate of 4% is due to expire at the end of 2023. Based on historical trends, we can usually expect an announcement on SA, MA, and RA floor rates to be made in late September each year.

On 29 May 2023, it was announced that the SA and MA interest rate will increase to 4.01% for the period from 1 July 2023 to 30 Sept 2023. CPF Board and the Housing Board said that this is due to a rise in the 12-month average yield of the 10-year Singapore Government Securities. It is the first time the CPF SA and MA rates have exceeded 4% since 2008.

This takes place against the backdrop of overall higher interest rates in Singapore, driven by aggressive rate hikes in the US. The current 4% floor rate had been maintained since 2008, reflecting global economic conditions and exceptionally low interest rates.

Find out how the CPF interest rates are calculated, and how an increase in any of the rates could affect you.

Why homeowners in Singapore should invest their CPF savings

As the prices of HDB resale flats, condominiums, and landed housing in Singapore continue to climb, more CPF OA funds have been withdrawn for property purchases.

Some $21.9 billion in OA monies financed housing needs last year. However, remember that when homeowners sell their property, they must refund the full amount of CPF monies used plus the accrued interest, which currently stands at 2.5% p.a.

For example, if you used $100,000 in CPF monies for a downpayment to buy a flat, you will need to pay back roughly $185,000 after 25 years. That is assuming you did not use CPF for monthly mortgage repayments.

Read on to learn how homeowners can beat the 2.5% OA rate and why you should diversify your investments beyond illiquid assets such as property.

Why women in Singapore should look closer at CPF investing

Across older age groups, women tend to have far lower CPF account balances than men.

This is why there is room for women to consider investing their OA savings, by taking on some risk and aim for returns greater than the 2.5% interest rate.

Starting on this path can help to ensure that women have sufficient savings over their longer lifespans, as well as make up for the gap in the retirement funds’ runway as compared with men.

Here are further details about the gender gap in retirement savings, and other ways women can build their nest egg to meet their long-term financial goals.

CPF is an important part of our retirement goals, and we should be cautious with managing and investing it. Endowus has been an advocate for Singaporeans to manage their CPF better. Invest now for better peace of mind in your retirement years.

Learn about our options on CPF investments, watch this webinar on supercharging your CPF investments, or read more on CPF on Endowus Insights.

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