How is my CPF interest computed?

[reddevil0728]

The following is the latest information currently showing on CPFB website in 2022 which does not carry any language about interest being based on the "lowest balance of the month".

It just says any credit and debit earns no interest this month.

How is my CPF interest computed and credited into my accounts?

CPF interest is computed monthly. It is credited to your respective accounts by 1 January of the following year and compounded annually.

CPF balances used for interest computation are affected by the transactions in your account. For instance, contributions (including refunds) received this month start earning interest next month. Withdrawals/deductions in this month will not earn interest from this month onwards.

There are strict procedures in place to ensure the accuracy of members’ CPF accounts and transactions (including interest payments). To further ensure that our system is sound and robust, our statutory auditor performs regular reviews of formulas and computations in our systems for accuracy, and conducts independent verifications of the transactions and account balances.

This was the reply from CPF back in 2017. Illustration 2 is clearly now in conflict with what's show on CPFB website above.

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.

@dork32 has kindly laid out scenarios based on the latest information from CPFB website to show that why the "lowest balance of the month" claim is in conflict with the latest information on CPFB website. See case 4.

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.

And for the avoidance of doubts I have also laid our time sequence of how it will look like when you login to CPFB website to check

For the avoidance of doubts, there are instances where lowest balance of the month is indeed true, but it is not an accurate reflection. I am just saying at no time will you actually see the new low balance in this particular example.

Hence it is more accurate to just following CPFB website language of credit and debit earns no interest.

But acknowledging that 2017 reply contracts that information now hence waiting for the latest reply which @vsvs24 is trying to get.

And to be even more detailed

On 31 Dec 2022 @ 23:59:59, you log into CPF, you see the balance is 10k

Nothing happen in between the second

On 1 Jan 2023 @ 00:00:00, you log into CPF, you see the balance is 10k

Nothing happen in between these 2 timings

On 10 Jan 2023 @ 00:00:00, 1K gets credited

Nothing happen in between the second

On 10 Jan 2023 @ 00:00:01, you log into CPF, you see the balance is 11k

Nothing happen in between these 2 timings

On 20 Jan 2023 @ 00:00:00, 1K gets debited

Nothing happen in between the second

On 20 Jan 2023 @ 00:00:01, you log into CPF, you see the balance is 10k

Nothing happen in between these 2 timings

On 31 Jan 2023 @ 23:59:59, you log into CPF, you see the balance is 10k

Nothing happen in between the second

On 1 Feb 2023 @ 00:00:00, you log into CPF, you see the balance is 10k

At all times, the lowest balance of the month is 10k

However, interest is only payable on 9k because of the following language.

- contributions (including refunds) received this month start earning interest next month.

in other words, the 1k received on 10 jan will only get interest starting from next month

- Withdrawals/deductions in this month will not earn interest from this month onwards.

in other words the 1k withdrew on 20 jan will receive no interest this month

@audeze lets move the discussion here to keep other threads for their original purpose.

 

[tmkedmw]

I just ask cpf cso today and lowest balance is the answer.

Why don't just call and ask and see whether answer is consistent.

 

[reddevil0728]

I just ask cpf cso today and lowest balance is the answer.

Why don't just call and ask and see whether answer is consistent.

firstly calling = no black and white unless they record and then you can dispute by asking them to listening to the recording

secondly can send secure message to CPF after logging in to give them the examples and ask them to deconflict 1) 2017 reply, 2) latest info on CPF website and 3) the example given by dork32.

Anyway there is only 1 fact. doesn't matter you know it now or wait. so why not lets wait for the reply.

 

[tmkedmw]

firstly calling = no black and white unless they record and then you can dispute by asking them to listening to the recording

secondly can send secure message to CPF after logging in to give them the examples and ask them to deconflict 1) 2017 reply, 2) latest info on CPF website and 3) the example given by dork32.

Anyway there is only 1 fact. doesn't matter you know it now or wait. so why not lets wait for the reply.

So many pages written on this. One call to seek clarification is certainly more efficient.
I specifically ask case 4 with numerical example and the answer is lowest balance.

 

[reddevil0728]

So many pages written on this. One call to seek clarification is certainly more efficient.
I specifically ask case 4 with numerical example and the answer is lowest balance.

I agree it is more efficient, but what is uncertain is whether you indeed have asked it in the way it is meant to be asked and if it is interpreted the way it should be interpreted.

Unless you wish to post a recording of your conversation here.

Yes, you might think that is doubting your credibility. That's certainly the case, because you are just any other person behind a pseudonym on a public forum, hence that's the case.

So why not just wait for a reply?

 

[tmkedmw]

I agree it is more efficient, but what is uncertain is whether you indeed have asked it in the way it is meant to be asked and if it is interpreted the way it should be interpreted.

Unless you wish to post a recording of your conversation here.

Yes, you might think that is doubting your credibility. That's certainly the case, because you are just any other person behind a pseudonym on a public forum, hence that's the case.

So why not just wait for a reply?

You are casting doubt on people's ability to ask question accurately and understanding the answer given.
On what basis u think is reasonable to do that. I have a lousy reputation and don't know what I am talking about?

My last post.

 

[reddevil0728]

You are casting doubt on people's ability to ask question accurately and understanding the answer given.

and is there anything wrong about that?

On what basis u think is reasonable to do that.

On the basis that i am doing it respectfully while stating my opinion.

I have a lousy reputation and don't know what I am talking about?

nope, but rather you are just any other person behind a pseudonym on a public forum

and i don't know you to know whether you are indeed logical and detailed enough to ask the questions and hence provide the answer.

in fact you are just providing your conclusion which is after-all your conclusion, which may not be reflective of what's the actual fact.

 

[dork32]

You are casting doubt on people's ability to ask question accurately and understanding the answer given.
On what basis u think is reasonable to do that. I have a lousy reputation and don't know what I am talking about?

My last post.

i am with reddevil of this point. there are so much info on the cpf site. most of the teller gals will not know everything there.

we have some many instances that forum people are given rubbish answers by the phone people.

info on website cannot be fake.

replies through email have to be properly checked and crafted.

 

[reddevil0728]

i am with reddevil of this point. there are so much info on the cpf site. most of the teller gals will not know everything there.

we have some many instances that forum people are given rubbish answers by the phone people.

info on website cannot be fake.

replies through email have to be properly checked and crafted.

Some people are just too trusting and not cynical to understand the nuances and implications of black and white vs what's verbally communicated unless recorded.

 

[tmkedmw]

i am with reddevil of this point. there are so much info on the cpf site. most of the teller gals will not know everything there.

we have some many instances that forum people are given rubbish answers by the phone people.

info on website cannot be fake.

replies through email have to be properly checked and crafted.

In my first post, I did say more people can call to check consistency in answer. But mm culture is like writing multi pages without bothering to call or write till @vsvs24 comes along. Spending time to post but don't want to spend time to write/call to cpf.

 

[reddevil0728]

In my first post, I did say more people can call to check consistency in answer. But mm culture is like writing multi pages without bothering to call or write till @vsvs24 comes along. Spending time to post but don't want to spend time to write/call to cpf.

More people calling doesn’t make it any more credible than having a written reply.

and you are assuming people haven’t already sent cpf a written message.

 

[dork32]

yeah, now i come and tell you another person on the phone say interest is not given for the month for the month that it is deposited. who the forum people want to believe?

i quoted a site that explains the calculation from cpf. there is no more argument

 

[reddevil0728]

This is from Dork32 example

"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."


And below is illustration from CPF:

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.


My comment:

Just compare the 2 above. It is obvious that dork32 was wrong to say that interest would be paid on only 9k in his Case 4 example. The correct figure is 10k which is the LOWEST BALANCE in the month

A reply from 2017 vs information on CPF website in 2022 which are obviously in conflict. hence the need to clarify with CPF.

 

[tmkedmw]

yeah, now i come and tell you another person on the phone say interest is not given for the month for the month that it is deposited. who the forum people want to believe?

i quoted a site that explains the calculation from cpf. there is no more argument

When there are conflicting versions, one can go direct to source, which is cpf board and that's what I did.

 

[reddevil0728]

When there are conflicting versions, one can go direct to source, which is cpf board and that's what I did.

Yep. So let’s wait for a black and white.

 

[Geralt]

When there are conflicting versions, one can go direct to source, which is cpf board and that's what I did.

I get where you're coming from, as I too also went direct to the source to ask about CPFIA and T-bills to three different banks, but I also understand their hesitation to take it at face value, because sometimes even people working for the organization can get the facts of their company's rules wrong.

Examples
1. UOB CSO via hotline said T-bills can only be applied at the main branch (at Raffles Place), but Goh Eng Yeow shared on his facebook that he applied for his at Parkway Parade, so clearly it can be at any branch.
2. OCBC bank staff forwarded my questions to some dept that should have been familiar with the process, and then told me that OCBC doesn't charge any fees for CPFIS T-bill application nor quarterly fees, despite the fact that we have people share on this forum that they did pay fees and how much they were.
3. DBS thought that the way they deducted the money from CPF for T-bill application was in-line with the other banks and that it was on auction day, so I had to produce my CPF statement that said otherwise. To their credit, they did say they'll change the process. I shared this on the forum, but I don't hold it against those who prefer to wait for actual confirmation that the change will indeed take place starting with this week's T-bill, because ultimately proof is all that matters.

Sometimes people can be mistaken. It happens. Being able to produce a written statement from the source is the best way to quell doubts, or at least hold them accountable when it directly contradicts another actual source. DBS wasn't willing to entertain my questions that their ways were different from other banks until I provided proof for one of them, while the other (CDP affirmation fee that only they seem to charge and no other bank) remains unaddressed since I haven't been able to produce a printout showing that the other banks don't charge it and they can't act solely on what forum users say was their experience alone.

TLDR: Thanks for sharing that you asked CPF, but please also understand people's hesitation in accepting it at face value since it wasn't a written source.

 

[tmkedmw]

I am disappointed that this drag on and on with so many posts and a new thread with no one except vsvs writing in. So at least I call cpf and share. One can cast doubt on the sharing but on the other hand, why dont bother to share what they had done to bring clarity and finality to the solution by querying cpf the source.

It doesn't bode well for the mm forum if that is how problem are solved.

Written source has its weakness as well as it is only as strong as the vetter.

Telephone call one can choose to challenge the cso and ask to confirm the answer with the supervising manager, which I often do, say with hsbc. So there's some vetting as well.

Eg I did the escalating challenge with the "no limit" competitive bid with mas and the manager call me back to confirm.

Anyway, I had said enough. Ultimately, it's the individual who have to decide and if in doubt, they can reach out to the source.

 

[reddevil0728]

I am disappointed that this drag on and on with so many posts and a new thread with no one except vsvs writing in.

i am not sure how you managed to conclude only vsvs writing in. only vsvs saying that he/she is writing in does not mean others aren't writing in.

this is an example of why i say what you interpret and conclude might differ from others

So at least I call cpf and share. One can cast doubt on the sharing but on the other hand, why dont bother to share what they had done to bring clarity and finality to the solution by querying cpf the source.

thanks for sharing that you have just done so by calling in.

but that doesn't mean others must share that they have written in and waiting for a reply. So i don't understand how you conclude nobody else has done it

It doesn't bode well for the mm forum if that is how problem are solved.

Written source has its weakness as well as it is only as strong as the vetter.

yes so when you have more pairs of eyes on it comparing different written source, e.g., 2017 reply vs latest cpf info, and is assessed by different parties that it contradicts, then you can bring the written source from CPF from one person back to CPF to ask why is there a deviation in reply (assuming all facts remain the same)

whereas, for a summary conclusion of a verbal conversation, we can't tell whether if it is the summary that is the issue, or if it is the advice given that is the issue.

it is very distinct to me if you don't see the difference

Telephone call one can choose to challenge the cso and ask to confirm the answer with the supervising manager, which I often do, say with hsbc. So there's some vetting as well.

oh definitely nobody say cannot. but can you provide audio recording of your conversation?

And why can't written source be challenged?

Eg I did the escalating challenge with the "no limit" competitive bid with mas and the manager call me back to confirm.

Anyway, I had said enough. Ultimately, it's the individual who have to decide and if in doubt, they can reach out to the source.

of course. forum is good for bringing awareness. it is up to an individual to decide whether they want to do their own due diligence or just blindly accept whatever that is written on a public forum.

 

[Geralt]

I am disappointed that this drag on and on with so many posts and a new thread with no one except vsvs writing in. So at least I call cpf and share. One can cast doubt on the sharing but on the other hand, why dont bother to share what they had done to bring clarity and finality to the solution by querying cpf the source.

It doesn't bode well for the mm forum if that is how problem are solved.

Written source has its weakness as well as it is only as strong as the vetter.

Telephone call one can choose to challenge the cso and ask to confirm the answer with the supervising manager, which I often do, say with hsbc. So there's some vetting as well.

Eg I did the escalating challenge with the "no limit" competitive bid with mas and the manager call me back to confirm.

Anyway, I had said enough. Ultimately, it's the individual who have to decide and if in doubt, they can reach out to the source.

Yeah, I agree with you that it was frustrating to read all that when it would have been much easier to ask the source and just produce that instead, so thanks for actually reaching out to CPF to ask. I also get wanting black and white proof; as I've shared, people can get it wrong about how their company operates. Like for the OCBC example, no matter how many times I told her that what she said about there being no fees directly contradicted other OCBC customers' experience, she insisted that it was the official reply and that was final. She believed her source was correct and I was wrong and refused to entertain the possibility that the person who gave her that answer was mistaken.

You've shared what the CPF CSO told you, which is great. You've done your part. Now just wait for others to verify whether their answer is the same as yours. Don't take it personally that it's not readily accepted yet; people just want to be sure.

 

[yiron]

Now I'm confused

"CPF balances used for interest computation are affected by the transactions in your account. For instance, contributions (including refunds) received this month start earning interest next month. Withdrawals/deductions in this month will not earn interest from this month onwards."
My interpretation is:
If there's a credit (i.e. money comes in), the inflow is recognised starting next month.
If there's a debit (i.e. money goes out), the outflow is recognised immediately for the current month.
If there's both credits and debits during the month, interest is accrued on the starting balance minus the total debits. The credits are ignored since they are recognised only next month?