CENTRAL Provident Fund (CPF) members will continue to get an interest rate of 4 per cent on the savings in their Special, Medisave and Retirement accounts for the next three months.

This is instead of the 3.61 per cent they would have got if a new floating rate regime that started in January last year had been applied fully.

The CPF Board highlighted this in its quarterly statement yesterday.

In the floating rate regime, the interest rate for the Special, Medisave and Retirement accounts is pegged to the 12-month average yield of the 10-year Singapore Government Security, plus 1 per cent. It is reviewed every three months.

From January last year till December this year, however, in order to help people adjust to the floating rate, the current rate of 4 per cent will be paid for these accounts even when the market-based rate falls below this.

The floating rate will be applied from January next year, but subject to a minimum rate of 2.5 per cent.

If the market-based rate had been applied now, the interest rate for the July-to-September quarter would be 3.61 per cent, according to CPF Board computations.

This is based on the average yield of the 10-year Singapore Government Security from June last year to last month, which worked out to 2.61 per cent.

The CPF Board also said that an additional 1 per cent interest will be paid on the first $60,000 of a member's combined balances, with up to $20,000 from the Ordinary Account.

The additional interest received on the Ordinary Account will go into the member's Special or Retirement Account to boost his retirement savings.

At current CPF interest rates, this means that the first $20,000 of Ordinary Account savings will earn interest at 3.5 per cent instead of the usual 2.5 per cent, while $40,000 from the Special or Medisave Account will earn 5 per cent instead of 4 per cent.

This article was first published in The Straits Times.