The Special, Medisave and Retirement Accounts (SMRA) will be pegged to the yield of the 10-year Singapore Government Securities (10Y SGS).

Manpower Minister Ng Eng Hen revealed this in Parliament on Monday when he revealed further details to the CPF changes.

Prime Minister Lee Hsien Loong had first announced the changes during his National Day Rally.

Dr Ng said the key thrusts to the new CPF system is to help Singaporeans 'work longer, improve CPF returns and make CPF savings last for life'.

About half of CPF members today have less than $60,000 in their combined accounts.

This group will benefit most from the policy changes.

Increasing CPF returns

To up CPF returns, interest rates will be raised by one per cent from January 2008.

This will apply to the first $60,000 in combined accounts, which includes not more than $20,000 from the Ordinary Account.

This means that at least $40,000 or all $60,000 can come from the CPF SMRA.

The additional interest earned will be ploughed into the Special or Retirement accounts to add to retirement savings.

Another key change - a floating interest rate for the SMRA, which will be pegged to the 10Y SGS.

Taking into account the SGS benchmark for the past 12 months, the interest rate is 4%.

To maintain some stability to this floating rate, the Government will keep the 4per cent base rate for the SMRA for the first two years, up till 2009.

The 4 per cent floor will also apply to the extra interest tier, in the unlikely event that the 10Y SGS rate falls below 2 per cent.

Coupled with the additional 1 per cent interest rate for this amount, CPF members can look forward to a total average of 5 per cent interest for their SMRA balances under $60,000.

After two years, the 2.5 per cent floor rate will apply for all accounts as prescribed under the CPF Act.

Dr Ng said under the new system all CPF members will receive higher interest payments.

'The new interest rate system is more than fair since it is still essentially risk-free. The extra interest is structured so that it will benefit all, but those with small and middle-sized balances will benefit more,' the minister added.

The Government will review the exact formula for CPF interest again in 5 years time.

D-Bonus & V-Bonus

As Singaporeans are living longer, the draw-down age will gradually be raised - from the current 62 years to 63 in 2012, 64 years in 2015 and 65 years in 2018.

This will eventually be raised to 67 years of age.

To help older members cope, the Government is giving a one-off deferment bonus (D-Bonus).

This will be paid out for every year of voluntary deferment of the CPF Minimum Sum draw-down up till age 65.

The amount will be based on up to $30,000 on the Retirement Account.

Members aged 54 to 63 this year, who have not started their draw-down are eligible. The older you are, the more you get.

For example,if you have $30,000 in your Retirement Account and you are between 54 and 57 years old, you will get a 5 per cent bonus - which works out to $1,500.

Those aged 52 and 53 will receive 4 per cent on their Retirement Account balance while those aged 50 and 51 will get 3 per cent.

Those above 55 will receive their D-Bonus in May 2008.

The rest will receive it when they turn 55.

CPF members can choose to defer their draw-downs so their retirement sums can last longer.

To encourage Singaporeans to do so, there's the Voluntary Deferment Bonus (V-Bonus), for each year of voluntary deferment up till age 65.

Members will earn 2 per cent bonus for each year of deferment, on balances of up to $30,000 in their Retirement Account.

Helping workers work longer

Other changes to the CPF include -

From 2012, employers are required to offer re-employment to those who reach the age of 62 so they can work till 65.

This will eventually increase to 67

There will also be a higher Workfare Income Supplement (WIS) for older workers - up from the current $100.

Employees aged 55 to 60 may get a maximum of $150 a month.

Those above 60 years old may get up to $200 a month.

Self-employed persons and informal workers will get two-third the rate for employees.

The first WIS payment will be made in January 2008, for work done in the first half of 2007.

More than 50 per cent of older workers are likely to receive WIS payments.

Longevity insurance

To cover those who live beyond 85 years, the Government is putting in place a 'longevity insurance' to 'provide income for life'.

A commitee made up of unions, academia, grassroots leaders and social workers has been set up to look into this matter.

The group is tasked with recommending a plan that is affordable and flexible to meet the needs of CPF members

Current Chairman of the National Wage Council and Bioethics Committee Professor Lim Pin will chair the task force.

Dr Ng said the committee's report should be out within six months.

The Government is spending $1.1 billion each year to support changes to the CPF system.

The one-off D and V Bonuses will cost a further $1.2 billion.