Singapore Extends 4% CPF Interest Floor: What It Means for Your Retirement & MediSave

Singapore Extends 4% CPF Interest Rate Floor – Boost for Retirement & Healthcare Savings

Introduction & Significance

In mid‑2025, the Singapore government reaffirmed its commitment to securing stable returns on citizens’ CPF (Central Provident Fund) retirement and healthcare savings by extending the 4% interest rate floor for its Special, MediSave, and Retirement Accounts (SMRA). This decision has substantial implications for how CPF balances grow, especially in a low interest environment globally.

For many Singaporeans, CPF contributions form the backbone of retirement and healthcare security. By guaranteeing a minimum floor of 4% per annum for certain CPF accounts, the extension helps preserve the value of these savings, offering confidence and predictability. In this article, we explore what the extension means, how it works, who benefits, comparisons with other CPF account rates, and things CPF members should watch out for going forward.

What Is the 4% CPF Interest Rate Floor & Why It Matters

To understand the extension’s impact, it helps to know how CPF interest rates are determined:

• The Special, MediSave, and Retirement Accounts (SMRA) earn interest returns pegged to the 12‑month average yield of 10‑year Singapore Government Securities (10YSGS) plus 1%.
• However, the government has imposed a floor of 4% per annum on SMRA balances: meaning if the pegged formula yields less than 4%, members still receive 4%.
• This “floor” was introduced historically to protect CPF balances from falling in value when market yields are weak.
• Without the floor, in a low yield environment, the rate might drop below 4%, eroding the real returns on CPF holdings.

Given recent declines in long‑term yields, the floor has become especially relevant — the pegged rate for many quarters has fallen below 4%. Maintaining the floor ensures that CPF members don’t suffer from depressed returns just when they depend most on retirement and healthcare savings.

Latest Extension: What Has Been Announced

In a joint announcement, the Central Provident Fund (CPF) Board and Housing & Development Board (HDB) confirmed that the 4% interest rate floor for SMRA monies is extended for another year from 1 January 2026 to 31 December 2026.

Key points:

• The 4% floor will continue to apply to Special, MediSave, and Retirement Accounts beyond 2025 through 2026.
• For the period 1 October to 31 December 2025, the interest rate on SMRA will remain fixed at 4% since the pegged rate remains below the floor.
• The Ordinary Account (OA) interest rate also remains at its own floor of 2.5%, because the pegged OA rate is still below that threshold.
• The concessionary interest rate on HDB housing loans, pegged to OA plus 0.1%, remains at 2.6% per annum for that same period.

By pushing the floor extension to end‑2026, the government is offering certainty to CPF members amid global monetary fluctuations and lower yield environments.

Current CPF Interest Rates & Mechanics (2025 Context)

To see how the floor plays out in practice, here’s how CPF interest rates have evolved in 2025 and how additional interest is awarded:

SMRA (Special, MediSave, Retirement Accounts)

• From 1 January to 31 March 2025, SMRA interest is at 4%, because the pegged rate fell below that floor.
• For 1 April to 30 June 2025, SMRA continues at 4%, following the same floor mechanism.
• In Q3 2025 (July to September), SMRA interest remains 4% because the pegged rate is still under the floor.
• From October to December 2025, the SMRA interest rate is fixed at 4% because the floor continues to outrank the pegged rate.

The pegged SMRA rate is based on the yield of 10YSGS plus 1%. Since yields have declined, the pegged rate has often fallen below 4%, triggering the floor.

OA (Ordinary Account) and HDB Concessionary Rates

• The OA continues to enjoy its floor rate of 2.5% per annum, since the pegged OA rate remains lower than 2.5%.
• Accordingly, the HDB housing loan interest rate, pegged to OA + 0.1%, remains 2.6% per annum.

Extra Interest (Incentive Interest)

To further support CPF savings, the government also gives “extra interest” on top of the base rates:

• For members below age 55: they receive an extra 1% interest on the first S$60,000 of combined CPF balances (with a cap on the OA portion).
• For members 55 and older: they get extra 2% on the first S$30,000 of combined balances, and an extra 1% on the next S$30,000.
• For those participating in CPF LIFE, extra interest earned on OA balances is moved into the Special or Retirement Account.

Thus, even though the base SMRA rate is stabilized at a floor, CPF members still benefit from bonus interest layers especially if they have lower balances.

Who Stands to Benefit & How Much

The extension matters most to:

1. CPF members nearing or in retirement
   If you rely more on your SMRA (which includes your Retirement Account and MediSave), the floor ensures your savings won’t erode due to low yields.
2. Those with moderate to large SMRA balances
   The floor ensures that any SMRA balance earns at least 4%. The higher your balance (within the capped ranges for extra interest), the greater the absolute benefit.
3. Members aged 55+
   Because of the incentive interest structure, older members receive more “extra interest” — combined with the floor, this can boost returns significantly.
4. Members with lower CPF savings
   The combined effect of floor + extra interest encourages contributions and retention of CPF funds instead of withdrawals, especially ahead of retirement.

As an illustration:

• Suppose Member A has S$100,000 in SMRA. Without the floor, if the pegged rate dropped to, say, 3.6%, they’d lose ~0.4 pp of interest. With the floor, they get at least 4%.
• If Member B is aged 56 and has S$50,000 in CPF balances, part of which qualifies for extra interest, the floor ensures stability while extra interest compounds on top.

Yet, the marginal benefit is higher when the pegged rate is significantly below 4%. The farther below, the more the floor saves you in forgone interest.

Why the Government Is Extending the Floor & Strategic Rationale

There are several reasons behind the extension:

Mitigating Low Yield Risk
Global interest rates, especially long-term government bond yields, have softened in many developed markets. Since SMRA interest is pegged to 10YSGS yields plus 1%, a drop in yields would directly lower CPF returns. Extending the floor protects members in such environments.

Providing Certainty for Retirement Planning
Retirees and pre-retirees rely on stable, predictable CPF growth for their retirement projections. Knowing that SMRA will not fall below 4% allows financial planning with more confidence.

Promoting Retention of Savings
By making CPF returns more attractive, especially relative to some private investments whose yields are now low or volatile, the policy incentivizes members to keep funds in CPF rather than withdrawing or moving to less secure investments.

Maintaining Public Trust
CPF is a compulsory savings scheme. Ensuring that returns remain reasonable over time is part of preserving public confidence in the system.

Comparisons & Risks

When CPF Pegged Rates Exceed the Floor
There will be times when the pegged rate (10YSGS yield +1%) exceeds 4%. In those periods, CPF members earn the higher pegged rate, not the floor. The floor is a minimum, not a cap.

For example, in Q4 2024, the SMRA rate was adjusted upward to 4.14%, because the pegged rate exceeded the 4% floor.

Thus, the floor is protective but does not limit upside when yields rise.

Opportunity Cost & Inflation
Even 4% real return may feel modest in times of significant inflation. While the floor cushions downside, it does not guarantee real (inflation‑adjusted) gains. If inflation runs higher than 4%, purchasing power could still erode.

Sustainability of the Floor
Continuing the floor in prolonged low yield environments imposes fiscal cost on the government (since the government shoulders the difference between pegged and floor rates). Future decisions may revisit the floor logic if yields stay low for extended periods.

Behavioral Responses
Some members might rely too heavily on the floor and be less motivated to actively manage or top up their CPF balances, assuming the floor carries them. Also, those with large balances might demand more than just floor protection.

What CPF Members Should Do / Check

To maximize benefit from the floor extension, CPF members should:

1. Check their CPF balances & accounts
   Know how much is in your Special, MediSave, and Retirement Accounts, and how that may grow under 4%.
2. Check whether extra interest applies
   For those aged 55 and above, ensure that the extra interest on the first S$30,000 etc is properly credited.
3. Monitor pegged vs floor rate announcements
   Track quarterly CPF interest rate announcements to know whether SMRA is pegged above or forced down to floor.
4. Consider topping up Retirement Account
   For those under 55 or retirees with low RA balances, transferring/OA → RA top-ups may help more of your savings benefit from the 4% floor.
5. Stay informed about future CPF policy changes
   The government may adjust or phase out the floor in future budgets depending on fiscal conditions or yield trends.

Looking Ahead: What to Expect After 2026?

Given that the floor is extended only through end‑2026, the period beyond that may bring uncertainty. Possibilities include:

• Further extensions if global yields remain low
• A phased down floor (e.g. 3.8%) or differentiated floors depending on account types
• More dynamic pegging or use of other benchmarks
• Greater emphasis on active top‑ups, incentives, or adjustments to extra interest layers

CPF members should watch budget announcements, Parliamentary debates, and CPF Board releases for signals about how the policy might evolve.

Conclusion

The extension of the 4% CPF interest rate floor for SMRA until end‑2026 is a meaningful policy move for retirement and healthcare savings in Singapore. In an environment of softer yields worldwide, it protects CPF contributors from losing ground on their savings, ensures more predictability for retirees, and reinforces trust in Singapore’s social security infrastructure.

While the floor doesn’t guarantee inflation beating returns, and the pegged rate may on good occasions exceed it, the floor acts as a crucial safety net. For CPF members, the key is to stay informed, manage top-ups wisely, and monitor how the floor interacts with extra interest and future policy changes.

FAQs