WITH the payment of an additional one percentage point in interest on CPF funds, subject to a maximum of $60,000, from Jan 1 next year, $20,000 have to be set aside in both the Ordinary (OA) and Special (SA) accounts. If this rule had been implemented earlier, I would have lost out on some spectacular gains.

In January 2001, I withdrew $10,000 of the $15,000 in my SA and bought a total of 3,142 units of NTUC Income Prime Fund @ $3.18 each. By this month, the $10,000 investment had grown to $19,134.

Similarly, in January 2001, I invested $10,000 from my OA in 3,142 units of the Prime Fund.

My modest $20,000 investment has achieved an annual rate of return of 13.09 per cent thus far, much to my surprise.

This is quite spectacular considering that if the $20,000 had been in my SA earning interest of 4 per cent, it would have returned only $25,306.38, instead of $38,268.

The reality is that this was possible only because CPF Board allowed me to invest my first $60,000 under the CPF Investment Scheme, and thanks to the hard work by fund managers of NTUC Income.

One should note that rising inflation and higher cost of living will render the proposed 5 per cent interest rate for the SA insufficient or even meaningless in the future.

Ironically, the new requirement to set aside $60,000 before any investment can be made could harm CPF members more than it protects.

Tay Han Seng