CPF interest for 2016

[Mecisteus]

everything makes sense for common banking practice except the divide by 12 part.

Why cannot divide by 12? It is a monthly interest isn't it?

Henry, so far did CPF ever calculate your interests wrongly? I am just wondering if there is a need to calculate ourselves.

 

[henrylbh]

Henry, so far did CPF ever calculate your interests wrongly? I am just wondering if there is a need to calculate ourselves.

Just trust CPF and the banks to calculate the interest correctly. So far no difference from my own calculation of CPF interest except for few cents, most likely due to the way we do rounding off. My calculation of my father RA interest happened to be perfect to the last cent as shown earlier.

Once a while I do counter-check the interest calculation using spread sheet on savings as well as bank loan interest. The latter is the most challenging and tedious as interest is based on daily balance, change in quarterly interest rate, actual date of repayment etc. Earlier got disbursements to take care in calculation.

 

[koja6049]

Why cannot divide by 12? It is a monthly interest isn't it?

Henry, so far did CPF ever calculate your interests wrongly? I am just wondering if there is a need to calculate ourselves.

so far i never encounter any banks doing a simple division by 12. It is always 28/365, 29/365, 30/365 or 31/365

 

[Mecisteus]

so far i never encounter any banks doing a simple division by 12. It is always 28/365, 29/365, 30/365 or 31/365

The 365 comes in because banks calculate on daily basis.

CPF is dealing with monthly balances. So divide by 12 is logical. So some months you lose some, some months you gain some if divide by 12. Depends on number of days in a month.

 

[homer123]

Hi, I got it.. Thanks you very much

Have you received my spreadsheet?

 

[angtc11]

everything makes sense for common banking practice except the divide by 12 part.

The bank I checked with accrue interest payable daily with 5 decimal places. After credit, remaining decimals are brought forward. I was led to understand this is common convention by the bank

 

[angtc11]

The 365 comes in because banks calculate on daily basis.

CPF is dealing with monthly balances. So divide by 12 is logical. So some months you lose some, some months you gain some if divide by 12. Depends on number of days in a month.

It's more convenient for CPF but it also means holders lose 1 day of interest (as compared with the bank) in a leap year like 2016.

 

[henrylbh]

It's more convenient for CPF but it also means holders lose 1 day of interest (as compared with the bank) in a leap year like 2016.

That little is almost nothing.

When your CPF account got credited on say 2nd of the month and it brings up the balance for the month, that credit does not start to earn interest until the start of next month.

 

[angtc11]

That little is almost nothing.

When your CPF account got credited on say 2nd of the month and it brings up the balance for the month, that credit does not start to earn interest until the start of next month.

Agree the additional day of interest is not a lot. For a 100k balance at 4% it's around $10

With regards to your statement of interest credit, it's academic right? Since the interest credit date is shown as 31 Dec, we should earn interest on this amount in Jan. It's only the overflow which is transfered in early Jan meaning holders lose out on the Jan interest for the overflow.

 

[LiteHouse]

For those who do VC to your MA. It has been updated to the new $52k ceiling.

 

[henrylbh]

so far i never encounter any banks doing a simple division by 12. It is always 28/365, 29/365, 30/365 or 31/365

In the first place what makes you think that CPF is using simple division by 12? We use it to get an estimate of what should be our CPF interest for the year. I believe CPF uses the number of days in the month over the year, only it's a bit tedious for us to do the same. You can try checking the interest using number of days.

 

[OngHuatHuat]

In the first place what makes you think that CPF is using simple division by 12? We use it to get an estimate of what should be our CPF interest for the year. I believe CPF uses the number of days in the month over the year, only it's a bit tedious for us to do the same. You can try checking the interest using number of days.

This is what I thought too.

 

[koja6049]

In the first place what makes you think that CPF is using simple division by 12? We use it to get an estimate of what should be our CPF interest for the year. I believe CPF uses the number of days in the month over the year, only it's a bit tedious for us to do the same. You can try checking the interest using number of days.

I didn't say that. angtc11 said that

don't ever put words in my mouth

 

[nautilus]

Since the MA ceiling has been raised from $49800 to $52000, lets say if I make a voluntary contribution to MA of $2200 right now, before my CPF contribution for December is credited, will I be able to enjoy tax relief of $2200? If i do a SA contribution of $7000 later on in the month, does it mean my total tax relief is $9200, assuming that the yearly CPF contribution cap is not reached?

Adding on to this, if my MA is maxed out after I make the $2200 contribution, the subsequent CPF contributions will be rolled into the SA. So is this a loophole to get more than $7K tax relief a year for SA contributions?

 

[henrylbh]

Agree the additional day of interest is not a lot. For a 100k balance at 4% it's around $10

With regards to your statement of interest credit, it's academic right? Since the interest credit date is shown as 31 Dec, we should earn interest on this amount in Jan. It's only the overflow which is transfered in early Jan meaning holders lose out on the Jan interest for the overflow.

Interest at 4% per day on 100k is a lot = 10.96 based on 365 days.

If contribution or top-up is credited on 2nd of the month, it earns no interest in that month i.e. the contribution or top-up will lose interest of 10.96 x 29 days = 317.84, assuming a 30 days month. It only starts earning interest the month after.

But likely the monthly MC or VC or top-up is not so much like 100k in your example Still there is a loss of interest and the amount of loss is the number of days it lies in idle in that month.

 

[henrylbh]

I didn't say that. angtc11 said that

don't ever put words in my mouth

Sorry I misquoted. It's angtc11 who offered a simple way to estimate the interest.

 

[kehyi4]

Since the MA ceiling has been raised from $49800 to $52000, lets say if I make a voluntary contribution to MA of $2200 right now, before my CPF contribution for December is credited, will I be able to enjoy tax relief of $2200? If i do a SA contribution of $7000 later on in the month, does it mean my total tax relief is $9200, assuming that the yearly CPF contribution cap is not reached?

Adding on to this, if my MA is maxed out after I make the $2200 contribution, the subsequent CPF contributions will be rolled into the SA. So is this a loophole to get more than $7K tax relief a year for SA contributions?

It's not a loophole, it's a feature

"VC to MA" and "RSTU to SA" are separate schemes, and yes, they stack

I'd say go ahead and exploit this feature to max out your tax relief if you can

 

[BBCWatcher]

"VC to MA" and "RSTU to SA" are separate schemes, and yes, they stack

Agreed.

You should also be aware that, unlike RSTU contributions to SA/RA, your Voluntary Contribution to MA must fit within the CPF Annual Limit of $37,740. If it doesn't then CPF will return whatever amount exceeded the Annual Limit. You won't get interest or tax relief on the excess. So you should only take advantage of this "loophole" if you are at least reasonably confident you won't exceed the Annual Limit.

 

[angtc11]

In the first place what makes you think that CPF is using simple division by 12? We use it to get an estimate of what should be our CPF interest for the year. I believe CPF uses the number of days in the month over the year, only it's a bit tedious for us to do the same. You can try checking the interest using number of days.

I stated that its divided by 12 as its the only way in which I can get the exact interest amount credited. This divide by 12 method was tested on my interest and your dad's interest and it matched as stated in the post. The sample size is small, hence I requested for feedback if it doesn't work for others.

I tried using day count but couldn't get the exact interest credited.

 

[angtc11]

Sorry I misquoted. It's angtc11 who offered a simple way to estimate the interest.

The method stated isn't just to estimate the interest, it is the way cpf calculates the interest with the caveat that my testing is on a small sample size of 4 accounts, your dad's ra and my 3 accounts