On 4 November 2022, 3 working days after OCBC rolled out their new interest rate on their flagship 360 accounts, DBS followed up with an email that the DBS Multiplier has increased from 3.5% to 4.1%. The balance cap amount is also increased to S$100,000
The Multiplier account has always been proportioned by the transaction amount.
S$2,000 to below S$2,500
S$2,500 to below S$5,000
S$5,000 to below S$15,000
S$15,000 to below S$30,000
The next layer of categories to fulfil will be the number of categories. They are known to be:
The Salary portion has to be a GIRO transaction with code “SAL” or “PAY”, which seems pretty strict given that there are increasing numbers of the next generation in the ‘gig economy’
For dividend crediting, these eligible dividend has to be from CDP, DBS Vickers Securities, DBS Online Equity Trading, DBS Unit Trusts, DBS Online Funds Investing and Invest-Saver (Promotion their own eco-system)
Connecting and sharing financial information from SGFinDex to NAV Planner (I would think one needs to do this on a monthly basis
2. Credit Card Spend
For the monthly card spend, it has to be on any DBS credit card and has to be eligible spending. Eligible will be the usual suspects and it will be very much dependent on the MCC codes.
3. Home Loan Installment
Home Loan financing has to be from DBS or POSB (New or Refinancing). The eligible amount will be from the monthly home loan instalment amount.
Similar to my previous post on insurance and investment in these high-yield accounts. These are usually valid for a limited period and interest rates are always subject to changes. Further, only selected insurance are eligible.
Nothing much to comment on here. This section will be pretty hard for most people to fulfil.
Additional option: The PayLah! Retail Spend. Honestly, don’t seem like a good deal to me.
The ideal interest rate will be between 0.9% to 2,5%. Frankly, nothing much has changed though and I don’t think it is even worth announcing via their communication channels. I feel like there wasn’t even much thought placed into it. I just felt like it isn’t any effort to compete with these changes. With the most recent 0.75 bps increase by the US Feds, this is not anything competitive and not quite worth looking into for now.
The week has been intercepted by headline interest rate hike news and OCBC 360 certainly did take out their competition with a banging headline. As of the 1st of November 2022, the entire suite of the OCBC 260 flagship account will revise its interest rate across the board.
As of their online quote, “The OCBC 360 Account has six bonus interest categories – Salary, Save, Spend, Wealth (Insure), Wealth (Invest) and Grow. By tapping on just three of these categories – Salary, Save and Spend – customers will be able to earn interest of 4.65% p.a. on the first S$100,000 in their bank account.”
Prior to this due to the interest rate environment, the first S$100,000 could get you 1.85% p.a. The biggest update is that for their spending options, you can use the OCBC 365 credit card, OCBC Titanium Rewards credit card, OCBC 90°N Visa card and OCBC 90°N Mastercard.
There are a total of 6 categories:
Salary, Save, Spend, Insure, Invest and Grow.
The basic of the high-yield account is to fulfil the following – Salary, Saving (Keeping the average daily balance by $500 increment monthly) and spending S4500 to the above-mentioned OCBC credit card each month. Quite simply put, by fulfilling these three options, your interest yield is 4.65% p.a. for up to $100,000. (technically 4.64962903% p.a.)
Over 365 days, the interest earned is S$4,649.63
You need to credit at least S$1,800 of your salary to fulfil the Salary Category. That is if your HR allows that or if you are not employed in another rival or financial institution.
You need to have an incremental S$500 in your monthly balance. However, if this is your transaction account then it might be an issue. But as long as it is an incremental (Average daily balance)
You need to spend S$500 on selected OCBC credit cards. You can use the OCBC 365 credit card, OCBC Titanium Rewards credit card, OCBC 90°N Visa card and OCBC 90°N Mastercard.
Insure & Invest
Forget about the insurance and Investment portion, there’s probably no way around those.
For the Grow category, if you have an additional S$100,000 to keep the average daily balance of S$200,000, the first S$100,000 will get an additional 2.40% p.a. while your remaining S$100,000 remain at the 0.05% p.a.
To illustrate, the interest over this S$200,000 will be S$7,099.60 hence the yield for this amount will be 3.55% p.a. (technically 3.54980161% p.a.
This is very interesting indeed. Because competitors will drastically make these changes as well. The interest rate hike might be a good and bad thing. However, take note that these rates are never confirmed or fixed. They follow the current market conditions. By taking on investments or insurance, these interest rates might change fast and furious. Overall, valiant effort and quite good timing as well. In the next few weeks, we might see revisions to compete with this increase in interest rate.
Whenever we touch on the topic of CPF, also known as Central Provident Fund (Pension Fund – The Europeans and Americans call it), people get kind of edgy and upset. What I do observe is that mostly a certain group of people is really anti CPF. The first group is those who are anti-government, not fueling anything here but just a general consensus. The second group is the retirees or about to retire folks who didn’t have a decent education (At that point in time, it wasn’t necessary to have the paper qualifications) and the last group is the self-proclaimed Warren Buffet who claims to beat the market.
The Central Provident Fund
The CPF in my opinion, is something of a great system. There are certainly flaws to it but in my view it is the perfect, AAA grade, higher yield returns that can supplement all our retirement fund. There are certain risks but There are no investment tool has no risk in reality. I finally conclude that as a result of these 3 group of people, these are the reason why so many people dislike the CPF system.
The AAA rating
a. Unfortunately, it is a complex system – You need to read up and understand how it works to appreciate the system
b. Inflation rate is here to stay hence the increase in the minimum sum yearly
c. No one is taking your money away.
d. No. There is no crystal ball. Statistically, it is proven that you can never win 100% of the time. Anyone who have tried or attempted to invest their monies will know that there is no clear strategy out there but a lot of hard work so you will not be able to beat the benchmark all the time.
e. Good quality investments and yields are hard to find these days. Perhaps it is a reality check and time to reflect about strategies as well as accepting facts and the markets
Understanding what CPF is about
When I first explored CPF, it was when I was out of school into my first job. At that time, CPF seems like a Goliath – You think you know but eventually, you slowly find out stuff which you never know before and for a long period of time I put off reading up more about them. It was many years back that I started reading financial blogs and it became like a ritual. I’ll do that almost any other day.
Back in those days, there were less bloggers so you will still need to dig deep to find out how stuff works. Then came Technology advancements, social media and super apps/content apps. I also discovered a few more bloggers who actively shared about CPF. One one those whom I follow really closely is 1M65. His is a well-known blogger for CPF and he developed his own strategies around what the CPF has been doing for many years.
1M65 is really about having a million in your CPF by 65 years old. Depending on how you look at it, he is preaching a 4M65 these days and base on his concept – I do think that is possible if you start really young. Anyway, his idea about have these sum of money is really to get you thinking about your own retirement early, not just when you are in your mid stage or even late stage of your life cycle.
Everyone is different
Most importantly, everyone is different. There is no need to look at it in the form of a showboat or saying that it is impossible. Being open and understanding how these people are doing do help yourself to be ready for retirement – You are doing your next generation a favour so that they will not fall into the sandwich class or fall in the same cycle again and again. Of course, teaching the value of money to the next generation is something that needs to be worked on as well. It’s not like they were given a sum of money to deal with in life.
Some people actually worked two jobs or even saved excessively so that they can put all their money into retirement. Again, lifejourney preaches about having your own quality of life. If you need to feel like you have to give up everything just to be thrifty (It is a really thin line to term it as miserly), then you would most likely have to re-think your strategy.
The Practical Approach
There are a lot of concepts that you can read about but most of them come from a theory. Personally, I don’t really like to dissect those as they are so technical and heavy. Most importantly, it is extremely boring to put them down in words and executing them is really the best way to practice
As 1M65 says, you can hate who or whatever but don’t hate free money. Initially, it sounded like a money grubber statement but eventually I came to realise that, it is really free money. If you have no plans to be an entrepreneur, there is a few things you have to take note of in CPF. Yes, I am sorry but everything has to start from the basics.
My View on CPF
a. My biggest take on CPF is to compound the interest. The more you have, the greater the growth. The younger you fill up your CPF account to accumulate interest, the faster and bigger your pension fund will grow.
bi. If you are below 55 years of age – Your first $60k in CPF will gain an extra 1% p.a. (This is capped at S$20k in your OA) The current base Ordinary Account (OA) is 2.5% (3-month average of major local banks’interest rates, whichever is higher)
bii. For most people, the next S$40k will most likely be in your Special Account (SA). For others who are still building your SA, that will be whatever that is in your MediSave Account (MA). The base rate for your SA and MA is at the current floor of 4% p.a. (which is also the 12 month average yield of 10-year Singapore Gov Securities – 10YSGS)
Your CPF interest is computed monthly based on the lowest balance for the month. This means that for interests paid out on your CPF accounts in Year 2020, the interest amount is based on what was captured monthly, compounded and only paid out to you in full before 1st Jan of 2021.(This is subjected to changes if you have transactions every month)
c. As much as possible, you have to try your best to hit the minimum sum as early as you can. (Combined OA and SA) Once you manage to do that, you do not need to worry about the annual increase in minimum sum that is subjected to inflation.
Don’t lose faith if you have not or still very far from this. Everyone starts from $0. Let the small actions and do up your checklist one by one in order to build the financial confidence. Everyone is different – it is the end goal that matters.
d. Depending on your circumstances, you can choose to invest your CPF OA money after the S$20k accumulation. Similar to cash, have a long term goal and build your portfolio. Good companies and investment ideas doesn’t come easy. You have to make sure what you invest is more calculated risk. There is a risk to everything.
Don’t be affected by market noise. My tip is to buy when there is a price drop if the investment moat for the company still makes sense. (but always do your own diligence) You can also have different pockets of funds so that when there are opportunities or if there is a correction, you can be ready to enter the market. The rule is to always stay invested.
In Summary, CPF is not the perfect solution but a supplement of your retirement goals. In this aspect, we are responsible for our own money and retirement. No one else will take care of your money as much as you will do. Only you will know your own financial situation. The question is to ask to meet these financial goals is that if you can cut back on your lavish lifestyle or even saving more to add to your pool of funds. No one can coerce you to do what you do not wish to.
This is not a sponsored post. This is purely my own opinion about CPF and retirement. If you like what you are seeing, do remember to check them out and do your diligence. There is no one size fits all investment strategy as usual