Forum: CPF Ordinary Account rate not as helpful in current environment

Many Singaporeans would also like to invest their Central Provident Fund (CPF) Ordinary Account (OA) funds in products that are comparable in terms of security and liquidity, but pay interest rates that are higher than the OA’s 2.5 per cent a year (Let CPF members use Ordinary Account funds to buy Singapore Savings Bonds, Dec 10).

This is particularly relevant for those who are saving up for a Housing Board flat.

The OA rate, which used to be very generous, is not as helpful in a high-interest-rate environment. Rather than tweaking the CPF investment rules further, it is necessary to ensure that the CPF OA rate is aligned and correctly pegged in a way that would be relevant in both high- and low-interest-rate environments, and reflect current reality.

To address concerns about the HDB loan interest rate rising or fluctuating as it is pegged to the OA rate, the two rates could be decoupled.

The interest rates for the Special Account, MediSave account and Retirement Account do not need to be changed as they are appropriately pegged to long-term rates.

Sum Siew Tak

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