CPF savings are primarily designed for your retirement needs. When you use these savings to purchase property, the money stops earning interest in your CPF account. 

 

Accrued interest is the interest your CPF savings would have earned if they had remained in your account rather than being used for property purchase.

 

Refunding both the principal amount and accrued interest ensures your retirement savings are fully restored to what they would have been if they had remained in your CPF account. Without this refund, your retirement funds would be permanently reduced.

 

The calculation of accrued interest runs from the date you first used your CPF savings until you make the refund. It uses CPF's prevailing interest rates, compounded annually throughout this period.