Currently, the CPF Special Account
and Retirement Account both receive an interest
rate premium of 1.25 per cent over and above the
Ordinary Account. From 1 July 1998, the Government
will raise the interest rate premium for these
two accounts by a quarter percentage point, to
1.5 per cent, above the Ordinary Account interest
rate. This is to enable CPF members to achieve
a higher rate of saving in these two accounts.
In addition, from 1 July 1998,
CPF members will be given the option of transferring
their savings from the Ordinary Account to the
Special Account. These transfers will be on a
voluntary basis. The amount that can be transferred
will be subject to a cap of $40,000 in the Special
Account, that is, a CPF member can only transfer
up to the difference between $40,000 and his Special
Account balance at the time of the transfer. The
$40,000 limit is equal to the eventual cash component
of the CPF Minimum Sum.
The transferred funds will form
part of the Special Account and will enjoy the
higher interest rate applicable to the account.
However, the transferred funds will be subject
to all existing CPF rules on the Special Account,
including the restrictions on the use and withdrawal
of funds from the account. Also, all such transfers
from the Ordinary Account to the Special Account
will not be reversible. CPF members should therefore
consider carefully before making such transfers
to the Special Account to earn higher interest.
These two changes to the CPF
will help CPF members enhance their retirement
cash savings. They are estimated to cost the Government
more than $100 million per year.