CPF interest for 2016

[havetheveryfun]

Each year's interest is credited at beginning of the following year. It has got nothing to do with which month's salary it is. As long as CPF contribution is made it will be taken into account for interest calculation. Example, if your employer has not paid CPF for the last one year, there will be no interest on the contributions due. But finally if he paid all the arrears years down the road, then interest will start to accrue from the time the contributions are credited into your account. In this case, you will lose interest on the due contributions during the year. However, CPF Board will recover, if successful, the loss of interest and credit your accounts with the contributions and loss of interest.

I think what he means is:

e.g
-Interest for year 2016 contributed on 1st Jan 2017
-But your employer pays December 2016 CPF contribution on the last available date - i.e. 16 January 2017
-So when will the Dec 2016 contribution interest be reflected?

 

[OngHuatHuat]

Lowest balance for that month.
December salary will give you zero interest.

I think what he means is:

e.g
-Interest for year 2016 contributed on 1st Jan 2017
-But your employer pays December 2016 CPF contribution on the last available date - i.e. 16 January 2017
-So when will the Dec 2016 contribution interest be reflected?

 

[BBCWatcher]

I am not looking at this one.

Well why not? If you're going to look at the governmental cost of CPF, then look at the cost.

FYI, the government has just raised the personal income tax rates starting with Year of Assessment 2017 (2016 income). That means CPF costs more in lost tax revenues, because the average dollar contributed to CPF in 2016 and after will attract that much more tax relief.

 

[OngHuatHuat]

You must be a high income earner.

Well why not? If you're going to look at the governmental cost of CPF, then look at the cost.

FYI, the government has just raised the personal income tax rates starting with Year of Assessment 2017 (2016 income). That means CPF costs more in lost tax revenues, because the average dollar contributed to CPF in 2016 and after will attract that much more tax relief.

 

[dork32]

That 3.65% did look odd to me, but I was too polite. The correct APY figure with monthly compounding is 3.5567%. The highest APY you can get from a nominal 3.5% is 3.562% with continuous compounding.

wat yywin did was daily compounding, not continuous compounding.

 

[dork32]

The math is incorrect.
Ask him to show the calculation.

3.56 %

0.035 / 365= ?

0.035 / 365 + 1 =

(1 + 0.035 / 365) ^ 365 = 1.0356

Difference in interest rate = 0.0356 - 0.035 = 0.0006
0.06 %

0.0006 x 1 million = 600 sgd

you are right, i missed typed. i am comparing 3.6% with 3.65% with quarterly compounding.

 

[dork32]

what i am trying to say is, the effects of compounding is very small. you argue like xiao for the miniscule difference.

the effects of compounding will be big if the interest rate is very high

 

[dork32]

I did the calculation myself before and show clearly the difference between compounding daily, weekly, monthly and yearly. The difference not big. Unless you are putting 10 plus million into cpf, then yeah, it will make a huge difference. If you have that kind of money, perhaps 1 million is just 1000 dollars for you?

this is exactly what i am trying to drive at

 

[henrylbh]

Calculate RA interest more complicated:
4% base rate,
1% extra for 1st 60k (with 20k from OA) and 1% additional extra for 1st 30k for those over 55.
Can share how u calculate?

Calculating RA interest is the simplest compare to OA especially, with in and out for those with other outgoings.

I prepared myself a simple excel worksheet to do and project the interest for my father's RA with topping up and payout that I can vary.

For 2016, I calculated the interest to be $3,999.15 while CPF credited him only $3,924.15. I am certain this amount will be finalised in the next few day.

I am still thinking whether to top up his RA to the max in Jan and ask for enhanced payout.

 

[elnewbie]

Even for the govt, $86.4 million is nothing.

You go count the number of ERP gantries all over the island, X 300+ days a year. I believe it's easily $1 billion a year.

Perhaps I should rephrase it, the percentage difference isn't too big and not much impact on individuals.

 

[Darkzi0n]

Even for the govt, $86.4 million is nothing.

You go count the number of ERP gantries all over the island, X 300+ days a year. I believe it's easily $1 billion a year.

it was ard 150m each year a few years back.

 

[Mecisteus]

Well why not? If you're going to look at the governmental cost of CPF, then look at the cost.

FYI, the government has just raised the personal income tax rates starting with Year of Assessment 2017 (2016 income). That means CPF costs more in lost tax revenues, because the average dollar contributed to CPF in 2016 and after will attract that much more tax relief.

You are diverting the topic.

My original statement was about monthly and annually compounding. About how the former will cost more if to be implemented.

 

[culture_counter]

I think what he means is:

e.g
-Interest for year 2016 contributed on 1st Jan 2017
-But your employer pays December 2016 CPF contribution on the last available date - i.e. 16 January 2017
-So when will the Dec 2016 contribution interest be reflected?

What I meant was, interests for year 2016 will likely be reflected in cpf online statement on 3jan17 i.e. tomorrow, and cpf contributions from salary for the month of Dec 2016 will likely be reflected in cpf online statement on 6jan17.
Hope this clears the earlier doubt.

 

[havetheveryfun]

What I meant was, interests for year 2016 will likely be reflected in cpf online statement on 3jan17 i.e. tomorrow, and cpf contributions from salary for the month of Dec 2016 will likely be reflected in cpf online statement on 6jan17.
Hope this clears the earlier doubt.

but employers have up till 16th of the next month to pay CPF for the month of December 2016 - that is the confusion.

 

[dork32]

Well why not? If you're going to look at the governmental cost of CPF, then look at the cost.

FYI, the government has just raised the personal income tax rates starting with Year of Assessment 2017 (2016 income). That means CPF costs more in lost tax revenues, because the average dollar contributed to CPF in 2016 and after will attract that much more tax relief.

you really sound like a garmen supporter.

when garmen raise tax rates, garmen lose more in tax revenues??

 

[BBCWatcher]

you really sound like a garmen supporter.

I support basic math.

 

[cscs3]

you really sound like a garmen supporter.

when garmen raise tax rates, garmen lose more in tax revenues??

What is your logic?

 

[dork32]

I support basic math.

i like your maths,

by increasing taxes, govt revenue decreases.

the opposite stands i believe.

you should tell our garmen to reduce tax to 0.1%. in this way the cost of their cpf is close to 0.

 

[dork32]

What is your logic?

this is not my logic. i am paraphrasing what bbc says

 

[BBCWatcher]

Here's the basic math.

Before: The tax rate is 10%, except for 0% on CPF contributions. If CPF takes in $10 billion (tax advantaged) then the cost of that lost tax revenue is $1 billion (10%). That's called a tax expenditure in fiscal parlance.

After: The tax rate is 20%, except for 0% on CPF contributions. If CPF takes in $10 billion then the cost of that lost tax revenue is now $2 billion (20%). The higher the general tax rate, the greater the cost of tax expenditures. (Tax expenditures of this basic form, anyway.)

And this is exactly what just happened in Singapore, starting in 2016 (Year of Assessment 2017). The general personal income tax rates went up (although by much less than a factor of two), so the value/cost of the CPF tax exclusions also went up. General tax revenues also went up, but that doesn't mean that the cost of CPF tax exclusions didn't increase. They did, and it's just basic math.

As another example, let's suppose DBS has a $20/month account fee but waives it for DBS Aluminum status customers. DBS raises the fee to $30 but keeps the same waiver. Has fee revenue to the bank increased? Yes, probably. ("Probably" here because customers could leave. That's less true with sovereigns.) Has the cost to the bank of the fee waiver increased? Yes, definitely. This is also basic math.