askST: How is extra 1 per cent interest earned on CPF distributed among Special and Retirement accounts?

Reader Fong Sauyee wrote in to askST about CPF interest rates: "To quote from the CPF website, ' CPF members aged 55 and above will also earn an additional 1 per cent extra interest on the first $30,000 of their combined balances (with up to $20,000 from the OA) from January 2016. This is paid over and above the current extra 1 per cent interest that is earned on the first $60,000 of their combined balances.'

"I would like to ask what are the deciding factors on whether the extra interest goes to the Special Account (SA) or Retirement Account (RA).

"After the first $20,000 in Ordinary Account (OA), what are the accounts that will receive the 1 per cent extra interest (in descending priority) ?"

Invest editor Lorna Tan answered.

The extra interest earned on OA will go into the member's SA if he is below age 55. If he is 55 and above, this extra interest will go into his RA.

RA will take priority before the OA. Here is the priority of the accounts that make up the $60,000 and $30,000 which earn the extra interest:

1st - RA, including balances used to pay for the annuity premium under CPF LIFE

2nd - OA, up to $20,000

3rd - SA

4th - MA

For more information about CPF interest rates, click here.

More askST stories here.