The link was made on Jan 1 this year when the CPF rate was set at the SGS rate plus 1 per cent.
This extra interest is paid on the first $60,000 in a member's combined CPF accounts, with up to $20,000 from the Ordinary Account (OA). That means the Government has guaranteed a 3.5 per cent annual return for the first $20,000 in the OA, and 5 per cent a year for the $40,000 in the Special, Medisave and Retirement Accounts (SMRA) for this year and the next.
The floor rate for the SMRA will be kept at 4 per cent for the first two years, beginning this year. After that, the 2.5 per cent rate will apply to all accounts.
But with the SGS bond rate now at 3.6 per cent, this means CPF's rate should actually be 4.6 per cent, said Dr Chua Hak Bin, the Asian strategist at Deutsche Private Wealth Management.
He added that the CPF would have to revise its rate upwards to match this figure, if it holds, when the two years are up.
'This is good news because we haven't seen this level of yield since September