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Tea with EY: Questions for the CPF Board (Part 1)

Friday, December 19, 2014

EY asked the CPF Board some questions.

Q:

At 55 years old, if the member does not intend to withdraw any amount from any of his/her CPF accounts and would like to use the entire MS to participate in the CPF LIFE Basic Plan, how would the savings in each of the accounts be redistributed among the OA/SA/RA/Medisave? Is the following balance distribution and interest rate correct based on prevailing guidelines?

OA – $50,000 (2.5% interest)
SA – $39,000 (4% interest)
RA – $161,000 (1st $60,000 at 5%, balance at 4% interest) Medisave - $48,500 (4% interest)





A:
As in your example, upon reaching age 55, the Board will set aside the Minimum Sum in your CPF Retirement Account (RA) by transferring funds in the following accounts and sequence:

(i) funds in your Special Account (SA);

(ii) if (i) is insufficient to set aside your Minimum Sum in full, funds in the Ordinary Account (OA) will be transferred to your RA to make up the Minimum Sum.

The balance (if any) in excess of your Minimum Sum will remain in the OA/SA and will earn the respective interest rates. 

The CPF interest rate for the OA\SA\MA are reviewed quarterly, while the interest rate for the RA is reviewed yearly.

The extra 1% interest per annum will be paid on the first $60,000 of a member's combined balances. 


The priority of the accounts that make up the $60,000 is as follows:


1st        : Retirement Account (RA), including balances used to pay for the annuity premium under CPF LIFE

2nd        : Ordinary Account (OA), up to $20,000

3rd         : Special Account (SA)

4th         : Medisave Account (MA)

The extra interest received on the OA will go into member’s RA (if he is 55 and above), to enhance his retirement savings.

For a member who has joined CPF LIFE scheme, the extra interest earned will be paid into his RA or the CPF LIFE Annuity Fund.

See also:
Tea with EY: Questions for the CPF Board (Part 2).

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