Misleading advert on transferring CPF OA to SA?
Amendment: My apologies. SMRA floor rate of 4% is applied for 2 years from 01 Jan 08 to 31 Dec 2009 instead of 2010. Thanks B yee for highlighting
There has been frequent advertisement by the CPF Board on transferring CPF OA to SA recently. One of the ‘advantages’ of doing so is that you get to ‘enjoy up to 5% interest’. Before you go ‘WOW’, here’s some things to consider:
- A additional 1% will only apply to the first $60,000 from the OA and SMRA, of which up to $20,000 will come from the OA. The OA rate for the first $20,000 is 3.5%. Thus, most likely, the 5% will be applied to the first $40,000 in the SMRA
- This 5% is calculated based on the current minimum floor rate of 4% for the Special, Medisave and Retirement Accounts (SMRA) + 1%. This floor rate will only last for 2 years starting from 01 Jan 2008 to 31 Dec 2009. Beyond that, it will be based on the (10 Year Singapore Government Securities (10YSGS) yield + 1%) + 1%. The floor rate will be revised to 2.5% from 2011 onwards. Meaning in the worst case, the interest will be just 3.5% for the first $60,000 in OA and SMRA and 2.5% for the rest. However, there remains a good chance that the future SMRA interest rates may go higher than what is available now as it is pegged to the floating 10YSGS yields. The rates may be reviewed in 5 year’s time
- The transfer is a one way ticket and is irreversible
It is common to find financial institutions promoting products with the ‘up to XX% returns’ gimmick. Now CPF Board has joined the bandwagon. I’ve always frowned on such ‘up to’ advertisements as people tend to ignore the words ‘up to’ and focus on the interest rates/returns and thus getting a wrong picture in the process. Furthermore, CPF savings are meant to be conservative in nature, is there a need to emphasize on a potentially higher interest?
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Tags: CPF
yes, but I think that contrary to the private institutions the CPF board is quite clear on the conditions and there is very little fine print.
Hi Charles,
To a certain degree, I agree with you on the fine prints part.
However, what I dun like is the fact that they are trying to entice people through such ‘gimmick’.
Being a trusted stat board, people would naturally put even more faith in what they say. As the CPF system gets more complicated, its becoming harder for layman to understand their policies. Although the complexity is unlikely to reach the level of those ‘minibombs’, it will still lead to people getting the wrong idea.