Fixed Deposit using CPF OA is a waste of time!

Fixed Deposit using CPF OA is a waste of time!

By Kelvin Tan

CPF pays out 2.5% pa for the ordinary account. Putting CPF OA into a fixed deposit that draws 2.8% does not make any sense at all. Out of this exercise, earning 0.3% is not worth the transfer fees and bank charges. Bearing in mind the next GST rate hike is going to be 7% up a solid 2%! Going for a mere 0.3% is a joke.

Feb 7, 2007 STI

CPF fixed deposit paid less than OA on maturity

I MAINTAIN my CPF investment account with one of the local banks. Ten to 11 months ago, in a printed one- liner at the bottom of the monthly statement, the bank invited account holders to place their CPF funds in fixed deposit for six or nine months at a 'promotional' rate of 3 per cent per annum.

As this was more than the CPF Ordinary Account (OA) interest rate of 2.5 per cent, I went down to the branch and opened a nine-month FD, with instructions to roll over the sum upon maturity.

On Jan 29, I received a renewal statement from the bank, advising me that my CPF FD had been renewed for a further nine months at the rate of 1.8 per cent.

Even the CPF monies kept in the special account which draws 4% interest won’t be able to match the GST rates the Government is intending to impose. In order to better perform the inflation rates, is to make your money work harder for you! Of course nothing comes without risk. It is how you manage that risk which brings in the big bucks.

You should ask yourself, “Are my investments making me money?” “Is it above water?” “What is the rate of returns?” If those questions are in the negative, you should seriously consider talking to a reliable need based financial planner, who can advice you on how to maximise your returns.