Your CPF Special Account Pays 4% Because of a Decision Made Every September. This Year's Hasn't Come.

Almost every retirement plan built around a Singapore property makes the same silent assumption: sell the flat, move the proceeds into CPF, and let them compound at 4%. It is the number that makes right-sizing arithmetic work, and it is quoted as though it were a property of the universe.

It is not a rate. It is a floor — and it expires on 31 December 2026. The pegged rate sitting underneath it currently computes to roughly 3.3%. The floor has been extended every year for a very long time and will very probably be extended again. But a plan that depends on a discretionary annual decision is a different object from a plan that depends on a statute, and most households holding the first believe they hold the second.

A floor is not a peg

CPF publishes the mechanism plainly, and it is worth reading the sentence rather than the headline number. From the Board's own release:

The SMRA interest rate will remain unchanged at the floor rate of 4% per annum … as the SMRA pegged rate remains below the floor rate of 4%. The SMRA interest rate is pegged to the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%.

Two things follow. The 4% is what you receive because the formula produces less. And the formula is a bond yield, which moves.

The 10-year SGS cut off at 2.30% at its 27 August 2026 auction. Using that as a proxy for the 12-month average — CPF does not publish the running average in real time, so this is an approximation and the true figure will differ somewhat — the pegged rate computes to about 3.30%. The floor is therefore doing roughly 70 basis points of work right now. That is the size of the thing being renewed each year.

The asymmetry almost nobody mentions

Here is the part that changes how you should think about the two halves of your CPF.

The Ordinary Account's 2.5% is a legislated minimum, written into the CPF Act. It is computed off the three-month average of major local banks' rates, subject to that statutory floor. Changing it requires changing the law.

The SMRA's 4% is not. It has been extended by government decision, repeatedly, since it was introduced in 2008 — most recently for calendar year 2026. Each extension is an announcement, not an amendment. That is why there is an expiry date at all: statutory minimums do not expire.

So the account you use to buy the flat sits on a statute. The account your retirement sits on does not. That is a strange asymmetry to discover late, and it is the entire point of this article.

What 70 basis points is worth

Take the standard right-sizing case: a household sells a larger flat, and part of the proceeds goes into the Retirement Account to compound until it is drawn. Here is the same principal at the 4% floor and at a 3.30% pegged rate.

Compounded annually on the headline rate. Excludes the extra-interest tiers below, contributions, withdrawals and CPF LIFE premium deduction.

Read the last column rather than the dollar columns. Over five years the difference is 4% of principal — a rounding item against the cost of moving house. Over twenty it is 27.7%, which is not a rounding item; it is more than a quarter of the sum you sold a home to raise. The floor is cheap insurance over a short horizon and load-bearing over a long one, and right-sizing plans are long-horizon by construction.

One offset worth stating, because it cuts the other way: members aged 55 and above earn an extra 2% on the first S$30,000 of combined balances and an extra 1% on the next S$30,000. At the floor that makes the first tranche 6%; at the pegged rate it would be 5.30%. The extra-interest layer is unaffected by any of this — it is added on top of whatever the base rate turns out to be, so the smaller your balance, the less the floor matters to you.

Why this is a property article

Because for a large number of Singaporean households the flat is the retirement plan, and the sale is the funding event. We have worked that case from several directions — the 62-year-old couple in an executive maisonette, what happens when the lease was the plan, and what actually happens to Ordinary Account savings at 55.

Every one of those calculations discounts future CPF balances at a rate. If you have been running them at 4% — and almost everyone does, including us — you have been assuming the floor holds for the whole horizon, not for the sixteen weeks it is currently guaranteed for.

The correction is not to panic. It is to run the plan twice. If a right-sizing decision survives at 3.30%, the floor is a bonus and you can stop thinking about it. If the decision only works at 4%, you have found something worth knowing: the plan's viability depends on an announcement rather than on the property, and you should size the sale accordingly.

The honest base case

The floor will very likely be extended. It has been renewed continuously since 2008, and it is not politically plausible that a government that has just raised housing income ceilings to support families allows retirement returns to fall on the same watch. Recent extensions have landed in the third week of September, so an announcement inside the next three weeks would be entirely routine. Nothing here is a prediction that the floor lapses.

The claim is narrower and, we think, more useful. A 4% return that requires an annual decision is not the same asset as a 2.5% return written into law, even when the 4% has never once failed to arrive. Treat the difference as what it is: not a risk to trade around, but a reason to know which of your assumptions are guaranteed and which are merely reliable.

The next few weeks will tell you which one you were holding. It costs nothing to check the announcement when it comes — and if you are within a few years of selling a flat to fund a retirement, the arithmetic above is worth running at both rates before you commit to the move.

Methodology published. No spin.