Interest rate on CPF savings

Mr. Tan,
From 1 January this year, interest rate for savings in the Special, Medisave and Retirement Accounts (SMRA) is pegged to the 12-month average yield of the 10-year Singapore Government Security (10YSGS) plus 1%. The average yield of the 10YSGS over one year, from 1 March 2007 to 29 February 2008, plus 1% works out to be 3.75%.

According to the news, CPF Board will only provide a floor of 4% for the Special, Medisave and Retirement Accounts rate for 2008 & 2009 only. The 4% will be lifted after 2 years, and the 2.5% floor rate will apply for all CPF accounts thereafter.

In view that the average yield of 10YSGS from Mar 07 to Feb 08 is only 2.75%, I'm kinda worry about this lower rate.

Furthermore, remember that last year, CPF Board encourage members to transfer their OA to SA and earn a 4% steady yearly compound interest seems to be no longer valid after 2010.

Care to share you comments?
http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_10Mar2008.htm

REPLY
I recommend the following:
1. Transfer your OA to SA to earn a higher rate of interest
2. Do not worry that the interest rate will drop below 4% as you still getting 1% higher than the market rate for govt bonds
3. I expect the interest rate to increase, due to higher inflation.
4. If you wish to earn a higher return on your OA, I suggest a low cost diversified fund.

See this FAQ:
http://www.tankinlian.com/faq/savings.html