Earn 2.9% p.a. with Maybank fixed deposit for CPF funds. Is it worthwhile?

What happened?

There’s now another option to consider if you are looking to deploy your CPF savings.

Maybank became the first foreign bank in Singapore to offer fixed deposits for CPF funds. 

The bank is offering an interest rate of 2.9% p.a. for a 12-month fixed deposit for CPF funds, with a minimum deposit of S$20,000.

If you have been investing your CPF savings into T-bills, you might be wondering if you should put your money into fixed deposits instead. 

Let us learn more about Maybank’s fixed deposit offering for CPF funds, and find out if it might be worth considering.

What you need to know about putting your CPF savings into fixed deposit

#1 – Loss of CPF interest

Here’s what you need to know before you put your CPF-OA savings into fixed deposit: You will lose at least one additional month of CPF interest payment for putting your CPF funds into fixed deposit, on top of the maturity period of the fixed deposit. 

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

What this means is that the CPF interest payment is computed based on the lowest balance for the month, rather than the average balance of the month.  

For example, if you put your CPF OA funds into a 12-month fixed deposit on 28 January 2024, your may only receive your funds back in your CPFIS account on 27 January 2025. 

Depending on how quickly you transfer back the funds from your CPFIS into your CPF OA, you may not receive your CPF interest rate of 2.5% p.a. for 13 months from January 2024 to January 2025.

In the event where it takes longer to transfer your funds back into your CPF OA, you may even lose your CPF OA interest for 14 months from January 2024 to February 2025. 

#2 – Fees and charges applicable

There are no fees and charges imposed by Maybank for your CPF fixed deposit account.  

However, your Agent Bank may impose charges on your CPFIA.

Charges for CPFIA imposed by Agent Banks vary from bank to bank. According to the latest fee schedule by DBS, the current quarterly service charge for fixed deposits is S$2.18 (inclusive of GST) per counter per quarter. 

This would mean that over the 13 months, you may incur a service fee from your agent bank of S$10.90.

Is it worthwhile putting your CPF funds into Maybank fixed deposit?

Let us consider a few illustrative examples to find out if it is worthwhile putting your CPF funds into fixed deposit. 

Illustrative example 1 - Putting S$100,000 in the 12-month fixed deposit at 2.9% per annum using our CPF OA with loss of one additional month of CPF interest

If we put S$100,000 of our CPF OA funds into the 12 month fixed deposit and earn an interest rate of 2.9% per annum, we will receive an interest of S$2,900 for 12 months. 

However, we will lose out on approximately S$2,708.33 of interest payment on our CPF OA, based on the current CPF OA interest rate of 2.5%. 

In addition, we would have to incur service fees of S$10.90 from the agent bank. 

This would mean that we would have a potential net gain of about S$180.77 by putting S$100,000 of our CPF OA funds into the Maybank 2.90% p.a. fixed deposit for 12 months.

Illustrative example 2 - Putting S$20,000 in the 12-month fixed deposit at 2.9% per annum using our CPF OA with loss of one additional month of CPF interest

If we put S$20,000 of our CPF OA funds into the 12 month fixed deposit and earn an interest rate of 2.9% per annum, we will receive an interest of S$580 for 12 months. 

However, we will lose out on approximately S$541.67 of interest payment on our CPF OA, based on the current CPF OA interest rate of 2.5%. 

In addition, we would have to incur service fees of S$10.90 from the agent bank. 

This would mean that we would have a potential net gain of about S$27.43 by putting S$20,000 of our CPF OA funds into the Maybank 2.90% p.a. fixed deposit for 12 months.

Illustrative example 3 - Putting S$20,000 in the 12-month fixed deposit at 2.9% per annum using our CPF OA with loss of two additional months of CPF interest

If we put S$20,000 of our CPF OA funds into the 12 month fixed deposit and earn an interest rate of 2.9% per annum, we will receive an interest of S$580 after 12 months. 

However, we will lose out on approximately S$583.33 of interest payment on our CPF OA, based on the current CPF OA interest rate of 2.5%. 

In addition, we would have to incur service fees of S$10.90 from the agent bank. 

This would mean that we would have a potential net loss of about S$14.23 by putting S$20,000 of our CPF OA funds into the Maybank 2.90% p.a. fixed deposit for 12 months.

How does the Maybank fixed deposit for CPF funds compare to other fixed deposit rates?

Only four banks in Singapore are permitted to accept CPF OA funds as fixed deposits. They are DBS, UOB, OCBC and Maybank.

Apart from Maybank, OCBC is the only other bank offering fixed deposit for CPF funds currently.

OCBC is currently offering a promotion interest rate of 3.10% p.a. for a 6-month fixed deposit using CPF OA funds for applications through the OCBC Digital app.

For applications in an OCBC branch, the interest rate for a 6-month fixed deposit using CPF OA funds is at 2.70% p.a..

The minimum placement amount for the OCBC fixed deposit is S$30,000. 

To find out the best fixed deposit interest rates, check out our guide to the best fixed deposit accounts in Singapore. 

How does the Maybank fixed deposit rate compare to T-bills?

Many investors might be familiar with investing their CPF-OA funds in Singapore Treasury Bills (T-bills).

The closing yields on the 1-year and 6-month Singapore T-bill are currently higher than fixed deposit options for CPF account holders. 

The cut-off yield on the previous 1-year Singapore T-bill was at 3.7% p.a., above the interest rate of 2.9% p.a. offered by the Maybank 12-month fixed deposit.

There will be an upcoming 1-year Singapore T-bill auction on 25 January 2024, and we shared that the closing yield on the 1-year T-bill was at 3.75% as of 12 Jan 2024. 

Likewise, the cut-off yield of the 6-month Singapore T-bill remains elevated at 3.74% in the auction on 4 January 2024. 

Compared to the T-bill, the advantage of fixed deposit is that you will know the interest rate you will receive upfront. However, the cut-off yield for the T-bill auction is dependent on the demand and supply of the T-bill in each auction.

Fixed deposits are insured by the SDIC up to S$75,000 per depositor, but T-bills are guaranteed by the Singapore government. 

The minimum investment in the T-bill is S$1,000, but the minimum deposit into the Maybank fixed deposit is S$20,000.

Learn more about investing in the T-bill using your CPF funds here.

What are the eligibility requirements for Maybank fixed deposit for CPF funds?

To be eligible to apply for the Maybank fixed deposit for CPF funds, you will first need to meet the requirements of the CPF Investment Scheme. 

You can invest under CPFIS if you meet the following eligibility criteria:

• You must be 18 years or older
• You must have a bank account
• You cannot be an undischarged bankrupt
• You have more than S$20,000 in your OA and/or
• You have more than S$40,000 in your SA

To learn how to open a CPF Investment Account, refer to our guide here. 

In addition, you must meet the following requirements to be eligible for Maybank fixed deposit for CPF funds.

• Singaporean and Singapore PR
• Minimum age of 18 years old
• Must be a CPF member with existing CPFIS Account
• Single name only

The full terms and conditions can be found here.

To apply for Maybank fixed deposit, you will have to do so at a Maybank Branch.

What would Beansprout do?

It’s good to see more options available to make our CPF OA savings to work harder. 

In considering whether we should put our CPF OA funds into fixed deposits, we can compare the interest earned.

Here, it is important to take into consideration the loss of at least one additional month of CPF interest when calculating how much more interest we can potentially earn by putting our CPF OA funds into fixed deposits. 

Also, the cut-off yield of the previous 1-year T-bill of 3.7% is higher than Maybank’s 12-month fixed deposit rate of 2.9% p.a.

To learn more about investing in T-bills, check out our comprehensive guide here. 

To understand more about how to start investing using your CPF funds, click here.

To explore the various options available for SA shielding, find out more here.