facebookDo you think the CPF interest rates will increase or decrease in the next 20 years? Currently OA is 2.5%, SA is 4%? - Seedly

Anonymous

18 Apr 2019

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Do you think the CPF interest rates will increase or decrease in the next 20 years? Currently OA is 2.5%, SA is 4%?

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Victor Chng

21 Feb 2019

Co-Founder at Fifth Person Pte Ltd

Hi,

It is hard to predict where the rate will go in the next 20 years because anything can happen in this time period.

The OA will not decrease. 2.5% is the legislated minimum rate. The rate will be the legislated min or the 3-month local bank interest rate whichever is higher. I do not see the local bank rates will ever exceed 2.5% barring extreme situation. Take note the rate is based on interets rate local bank pay depositers, not the interbank rate. Blood sucker banks will not raise deposit rates to so high unless the interbank rate is much much higher.

The SMA will also be unlikely to decrease. 4% is the current floor. But there is chance for the rates to increase, as it is based on the higher of the floor rate or 10yr sgs + 1%. Current 10year sgs is 2.3+%. That makes it about 3.3+%. In a higher inflationary environment, the 10yr has a good chance to reach 3%. In the 90s, 10yrs were in the 4% plus, but since the turn of millenium, they went under 3% since. Only briefly hitting above 3% in the early 2000.

It will be political suicide to reduce the rates I do not forsee that happening. There also isnt a need to reduce (if political power is prime consideration). If it were to really be lowered, there would likely be very strong reasons to do that. And that will take a brave politician to do that in the interest of the nation.

I think it's hard to say. who knows, another party might win in the next election and CPF might be g...

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