CPF Easy Info Thread. :)

[Geralt]

Are aware not to self transfer regardless of the day in a month?

I'm aware of having to transfer it myself yes, since I follow the T-Bill forum thread and also looked up how to move it out.

 

[henrylbh]

if you have specific purpose for your OA and you need the funds for the next few months, even 20%pa is not enticing for you.

For the majority of the people, who have no other OA usage, 3.5% is a good rate compared to 2.5%.

3.5% bills or bonds is obviously better than 2.5% sitting idle in OA. But one needs o do calculations to see the end result of the investment instead of just looking at the face value especially if one using CPF.

 

[henrylbh]

I'm aware of having to transfer it myself yes, since I follow the T-Bill forum thread and also looked up how to move it out.

Self transfer is easy via ATM or interbank but choosing the actual day to transfer, not just any day or immediately, as it affects interest calculation and whether you need the fund to stay in CPFIA for the next move. If you transfer to OA near the end of the month and take out in the following month to invest, the move is futile with loss of interest.

 

[Geralt]

Self transfer is easy via ATM or interbank but choosing the actual day to transfer, not just any day or immediately, as it affects interest calculation and whether you need the fund to stay in CPFIA for the next move. If you transfer to OA near the end of the month and take out in the following month to invest, the move is futile with loss of interest.

I'm aware, thanks.

 

[Bam25th]

My CPF SA is almost hitting FRS.

From my understanding, once it exceed FRS, I can no longer make the now $8k/year contribution for tax relief.

Can I withdraw some from CPF SA to invest, and then continue contributing $8k/year? Or will the SA investment amount considered as part of FRS when it comes to this $8k/year voluntary contribution?

 

[Okenba]

My CPF SA is almost hitting FRS.

From my understanding, once it exceed FRS, I can no longer make the now $8k/year contribution for tax relief.

Can I withdraw some from CPF SA to invest, and then continue contributing $8k/year? Or will the SA investment amount considered as part of FRS when it comes to this $8k/year voluntary contribution?

Cannot. But you can contribute to MA for tax relief. Same. Up to 8k.
And you can use your MA to pay for families health insurance.
Parents, spouse, kids. Medishield plans, CAREshield plans.
Plus annual increase in BHS. Should work out to quite a bit.

 

[audeze]

case 1 contribution to cpf
1 jan opening balance 10k
10 jan receive 1k into account. total balance 11k
31 jan closing balance 11k
1 k received no interest. so interest only on 10k so lowest balance is correct.

case 2 withdrawal from cpf
1 jan opening balance 10k
10 jan withdraw 1k into account. total balance 9k
31 jan closing balance 9k
1 k received no interest. so interest only on 9k so lowest balance is correct.

case 3 withdraw then contribute
1 jan opening balance 10k
10 jan withdraw 1k into account. total balance 9k
20 jan contribute 1k into account. total balance 10k
31 jan closing balance 10k
withdrawal and deposit receive no interest received no interest. so interest only on 9k so lowest balance is correct.

case 4 contribute then withdraw
1 jan opening balance 10k
10 jan receive 1k into account. total balance 11k
20 jan withdraw 1k. total balance 10k
31 jan closing balance 10k
withdrawal and deposit receive no interest received no interest. so interest only on 9k so lowest balance is wrong.

Thanks, dork32 for your comprehensive illustration. I think I have to politely disagree - please see below:

For simplicity, imagine there are 2 accounts in your cpf -

1. Account A earns interest
2. Account B does not earn interest

At the end of each month, any money in Account B is transferred to Account A so that all monies can earn interest for the new month.

Now let's look at Case 3 and Case 4.

1. Case 3

i) 1 Jan - Ac A has bf bal of 10k, Ac B has zero bal. Total 10k
ii) 10 Jan - 1k withdrawn from Ac A. Ac A has bal of 9k. Total 9k
iii) 20 Jan - 1k credited into Ac B. Ac A has 9k. Total 10k
iv) 31 Jan - Ac A has 9k. Ac B has 1k. Interest paid on 9k in Ac A only. At midnight, the 1k in Ac B is moved into Ac A

Summary: per cpf rules, 1k withdrawn on 10 Jan does not earn any interest, 1k deposited on 20 Jan does not earn interest. Effect is - interest is only paid on 9k, the lowest balance in the account during the month

2. Case 4

i) 1 Jan - Ac A has bf bal of 10k, Ac B has zero bal. Total 10k
ii) 10 Jan - 1k credited into Ac B. Ac A has bal of 10k. Total 11k
iii) 20 Jan - 1k withdrawn from Ac B. Ac A has bal of 10k. Total 10k
iv) 31 Jan - Ac A has 10k. Ac B has zero balance. Interest paid on 10k in Ac A only.

Summary: per cpf rules, 1k credited on 10 Jan does not earn any interest, 1k withdrawn on 20 Jan does not earn interest. Effect is - interest is paid on 10k, the lowest balance in the account during the month

Hence, cpf rules and lowest balance is Not incompatible.

The difference between my Case 4 scenario above and your scenario is that u assumed that the withdrawal on 20 Jan comes from Ac A whereas my argument is that, because Ac B has money, it has to be emptied first before any money can be taken from Ac A

 

[dork32]

Thanks, dork32 for your comprehensive illustration. I think I have to politely disagree - please see below:

For simplicity, imagine there are 2 accounts in your cpf -

1. Account A earns interest
2. Account B does not earn interest

At the end of each month, any money in Account B is transferred to Account A so that all monies can earn interest for the new month.

Now let's look at Case 3 and Case 4.

1. Case 3

i) 1 Jan - Ac A has bf bal of 10k, Ac B has zero bal. Total 10k
ii) 10 Jan - 1k withdrawn from Ac A. Ac A has bal of 9k. Total 9k
iii) 20 Jan - 1k credited into Ac B. Ac A has 9k. Total 10k
iv) 31 Jan - Ac A has 9k. Ac B has 1k. Interest paid on 9k in Ac A only. At midnight, the 1k in Ac B is moved into Ac A

Summary: per cpf rules, 1k withdrawn on 10 Jan does not earn any interest, 1k deposited on 20 Jan does not earn interest. Effect is - interest is only paid on 9k, the lowest balance in the account during the month

2. Case 4

i) 1 Jan - Ac A has bf bal of 10k, Ac B has zero bal. Total 10k
ii) 10 Jan - 1k credited into Ac B. Ac A has bal of 10k. Total 11k
iii) 20 Jan - 1k withdrawn from Ac B. Ac A has bal of 10k. Total 10k
iv) 31 Jan - Ac A has 10k. Ac B has zero balance. Interest paid on 10k in Ac A only.

Summary: per cpf rules, 1k credited on 10 Jan does not earn any interest, 1k withdrawn on 20 Jan does not earn interest. Effect is - interest is paid on 10k, the lowest balance in the account during the month

Hence, cpf rules and lowest balance is Not incompatible.

The difference between my Case 4 scenario above and your scenario is that u assumed that the withdrawal on 20 Jan comes from Ac A whereas my argument is that, because Ac B has money, it has to be emptied first before any money can be taken from Ac A

we are tokking about cpf taking the lowest balance to calculate interest. in maths, as long as you can come up with one counter example, then the theory falls

we are tokking basically about oa. not acct a and b

 

[oceanicmanta]

i think just email CPF to ask for answer is the BEST !

 

[audeze]

we are tokking about cpf taking the lowest balance to calculate interest. in maths, as long as you can come up with one counter example, then the theory falls

we are tokking basically about oa. not acct a and b

This is not about theory. It is about what cpf actually does. You say cpf will pay interest on 9k only in Case 4. I say cpf will pay interest on 10k which is the lowest balance for the month

Using the terms Ac A and Ac B is just a way to make it simpler to understand. I can say Amt A and Amount B or Stack A and Stack B etc etc

 

[audeze]

i think just email CPF to ask for answer is the BEST !

Exactly!

 

[dork32]

This is not about theory. It is about what cpf actually does. You say cpf will pay interest on 9k only in Case 4. I say cpf will pay interest on 10k which is the lowest balance for the month

Using the terms Ac A and Ac B is just a way to make it simpler to understand. I can say Amt A and Amount B or Stack A and Stack B etc etc

we are tokking about cpf paying interest on the lowest amount vs amount being withdrawn/deposited does not earn interest. are the two the same

if i can give one counter example. the two are not the same.

 

[dork32]

i think just email CPF to ask for answer is the BEST !

email maybe. but if you talk to the teller, you get all sorts of lousy answers.

 

[dork32]

This is not about theory. It is about what cpf actually does. You say cpf will pay interest on 9k only in Case 4. I say cpf will pay interest on 10k which is the lowest balance for the month

Using the terms Ac A and Ac B is just a way to make it simpler to understand. I can say Amt A and Amount B or Stack A and Stack B etc etc

and for your info, we are tokking about investing using oa. no need to talk about the fictitious account a and account b.

 

[audeze]

and for your info, we are tokking about investing using oa. no need to talk about the fictitious account a and account b.

Just go to Treasury Bills thread. Vsvs22 (24?) posted an official reply from cpf. Look at Illustration 2 and u will understand that cpf pays interest on the LOWEST BALANCE in the month, period!

 

[audeze]

and for your info, we are tokking about investing using oa. no need to talk about the fictitious account a and account b.

See vsvs24 post 4417 in Singapore Treasury Bills on how cpf REALLY calculates interest I.e. based on LOWEST BALANCE IN THE MONTH

 

[audeze]

See vsvs24 post 4417 in Singapore Treasury Bills on how cpf REALLY calculates interest I.e. based on LOWEST BALANCE IN THE MONTH

Sorry I mean 4117

 

[audeze]

i think just email CPF to ask for answer is the BEST !

Apparently already done b4. See post 4117 by vsvs24 in Singapore Treasury Bills thread for response by cpf. Proves that cpf pays based on lowest balance

 

[vsvs24]

Apparently already done b4. See post 4117 by vsvs24 in Singapore Treasury Bills thread for response by cpf. Proves that cpf pays based on lowest balance

That is a 2017 reply.

Wait for their latest reply.

 

[audeze]

This was the reply in 2017. Lets see if I get the same reply this time.

Thank you for your email of 3 September 2017.

Yes, your CPF interest is computed monthly. It is then credited and compounded to your account balances yearly.

You can refer to the following formula to compute interest:

Monthly interest earned = [Monthly eligible balance* x interest rate per annum] ÷ 12 months

*The following three illustrations show how the monthly eligible balance is derived.

Illustration 1 – Only deduction transaction takes place in the month
Amount
Month Beginning Balance $2,000.00
Deduction $50.00___
Month Ending Balance $1,950.00

In illustration 1, the eligible monthly balance used to compute interest is $1,950.00.


Illustration 2 – Deduction transaction occurs after contribution transaction
Amount
Month Beginning Balance $2,000.00
Contribution $500.00
Deduction $50.00____
Month Ending Balance $2,450.00

In illustration 2, the eligible monthly balance used to compute interest is $2,000.00.

As the deduction of $50 occurred after the $500 contribution was credited to the account, this deduction did not impact the eligible monthly balance used for interest computation, and thus, interest is computed based on $2,000.00.


Illustration 3 – Deduction occurs before a contribution in the month
Amount
Month Beginning Balance $2,000.00
Deduction $50.00
Contribution $500.00___
Month Ending Balance $2,450.00

In illustration 3, the eligible monthly balance used to compute interest is $1,950.00.

This amount is derived from the month’s beginning balance of $2,000.00 less the deduction of $50.00. As contributions credited to members’ accounts start earning interest in the following month, the $500.00 credited does not form part of the eligible monthly balance used to compute interest.

This is official reply from cpf.

It proves that cpf pays BASED ON LOWEST BALANCE in the month.

In Illustration 2, interest is paid on $2000 and Not $1950 as per dork32 method of calculation