The CPF interest timing trap (and why your projection looks off)
Short answer: In Singapore, CPF interest is computed monthly but credited once a year, on 1 January, so it compounds annually rather than monthly. New contributions start earning interest only from the month after they arrive. A spreadsheet that compounds monthly from the day money lands will overstate your CPF balance, and the gap grows the longer you project.
If you've ever built a spreadsheet to project your CPF balance, you've probably ended up with a number that's a little too rosy. The culprit is almost always timing. CPF interest doesn't work the way a simple monthly-compounding formula assumes, and the difference compounds over the years. Here's what actually happens.
The headline rates
Your Ordinary Account (OA) earns 2.5% a year. Your Special Account (SA), MediSave (MA), and Retirement Account (RA) earn 4% a year. On top of that, there's an extra 1% of interest on the first S$60,000 of your combined balances, with at most S$20,000 of that coming from the OA. These are the floor rates, and they're the numbers most people plug into a spreadsheet.
The rates aren't the trap. The timing is.
Computed monthly, credited yearly
CPF interest is calculated every month, but it isn't added to your account every month. It accumulates and is credited as a single lump sum on 1 January of the following year. That one detail breaks the naive spreadsheet.
A simple monthly-compounding model earns interest on interest every month: January's interest joins the balance and itself earns interest in February, and so on. CPF doesn't do that within a year. Your interest for the whole year is computed on your balances as they stand through the year, then dropped in once at the start of the next year. You don't earn interest on this year's interest until next year. Over a single year the gap is small. Over twenty or thirty years of compounding, a monthly-compounding model can drift meaningfully high.
The short version: CPF interest compounds once a year, not once a month. A spreadsheet that compounds monthly will overstate your balance, and the error grows with your time horizon.
New contributions wait their turn
There's a second timing detail. A contribution that lands in a given month generally starts earning interest from the following month, not the month it arrives. So the salary contribution that hits your OA in, say, March isn't earning interest for March. A projection that immediately starts compounding every fresh contribution from the day it lands will, again, run slightly hot.
Put the two together, annual crediting and contributions earning from the next month, and you have the reason careful CPF projections look more conservative than a quick spreadsheet. The careful version isn't being pessimistic. It's matching what CPF actually credits.
Why the BHS matters too
One more thing that trips up projections: MediSave has a ceiling called the Basic Healthcare Sum (BHS). Once MA hits it, the overflow is redirected, typically to the SA before 55, or the OA if the SA is already at its own limit. A projection that lets MA grow past the BHS unchecked will misattribute interest, because the overflowed money is now sitting in a different account earning a different rate. The BHS is revised at the start of each year, so it's a moving target worth updating annually.
Getting it right without the spreadsheet
Modelling all of this by hand is fiddly: prior-month balances, annual crediting, the extra interest tiers, contributions earning from the next month, and the BHS overflow. It's very easy to get one of them subtly wrong and not notice. That's exactly the kind of bookkeeping a tool should handle for you.
Merlio's CPF projection models the January interest credit the way CPF Board does, applies the extra interest tiers, and respects the BHS cap, so the curve reflects what you'd actually be credited rather than a smoothed-over approximation. You can also try the simplified version on our free calculator.
And if the question behind your projection is really "am I where I should be?", we've worked the Full Retirement Sum backwards into age-by-age yardsticks in how much CPF should you have at 35, 40 and 45.
Common questions
When is CPF interest credited to my account?
CPF interest is computed every month but credited to your CPF accounts once a year, on 1 January of the following year. Because of this, CPF interest compounds annually, not monthly.
When do new CPF contributions start earning interest?
A CPF contribution received in a given month starts earning interest from the following month. Withdrawals and deductions stop earning interest from the month they are made.
What are the CPF interest rates in 2026?
In 2026 the Ordinary Account earns a floor rate of 2.5% a year, and the Special, MediSave and Retirement Accounts earn a floor rate of 4% a year. Members below 55 also earn an extra 1% on the first S$60,000 of combined balances, with at most S$20,000 of that from the Ordinary Account.
Why does my CPF projection not match my actual balance?
Most spreadsheet projections compound interest monthly and start paying interest on contributions straight away. CPF credits interest once a year on 1 January and only pays interest on a contribution from the month after it arrives, so a monthly-compounding model runs slightly high and the error grows over long horizons.
What happens to MediSave savings above the Basic Healthcare Sum?
The Basic Healthcare Sum (BHS) is S$79,000 in 2026 for CPF members below 65. MediSave contributions above it flow to the Special Account below age 55 or the Retirement Account from 55, and to the Ordinary Account once the Full Retirement Sum has been set aside, where they earn that account's interest rate.
Project your CPF the way it's actually credited
Annual interest crediting, the extra interest tiers, and the BHS cap, all handled.
Try the CPF calculatorThis article is general educational information about how CPF interest is calculated, based on publicly available CPF Board rules. It is not financial advice. CPF rates, the extra interest tiers, and the BHS are set by the authorities and revised periodically, so verify current figures before relying on them. For personalised advice, speak to a MAS-licensed financial adviser.