Speaking at the NUS forum yesterday (Jan 12), NUS economist Associate Professor Chia Ngee Choon called for the Singapore government to return profits made from CPF funds to be returned to CPF account holders.

“Interest on OA funds is adjusted quarterly. It is either the legislated minimum 2.5 per cent a year or the average three-month rates at the three local banks, whichever is higher. GIC publishes five-, 10- and 20- year returns for all its investments of government assets, including CPF funds. The annualised 20-year real rate of return for the year ended March 31, 2014, was 4.1 per cent.

The returns CPF members get are not pegged to GIC’s returns.

This could be re-thought. One option is to explore including the returns of GIC in the peg, instead of just pegging the formula to the average of banks’ rates. However, there is a need to work out the appropriate weight. This could possibly lead to a higher OA rate.”

The Finance Professor also suggested that CPF account holders be given the flexibility to transfer funds between the Special Account (SA) and Ordinary Account (SA) so Singaporeans can save faster with the extra interest rate given by SA and when there is a need to purchase a HDB, SA funds can be returned to OA funds to buy a house.

Related article:
NUS economist: Minimum CPF payout of S$450 to S$600 is required