Another CPF Hack: The "Medisave Partner Push"

[BBCWatcher]

I guess there will a fine line between topping up the MA now, and earning the overflow interest at 2.5%.

It's not a fine line at all. You will definitely earn less interest if you top-up your Medisave Account and if you then exceed the CPF Annual Limit. There's absolutely no question on this point.

The only way you could rationally justify that cost (lost interest) is if all the conditions I described downthread are true.

 

[The_Davis]

what's the contribution limit this year?

 

[BBCWatcher]

what's the contribution limit this year?

CPF Annual Limit: $37,740 (no change)
2018 Basic Healthcare Sum: $54,500
2018 Full Retirement Sum: $171,000
2018 Enhanced Retirement Sum: $256,500

 

[henrylbh]

$37740 is the CPF Annual Limit. It is the sum total of your employer's contribution + employee's contribution .

When your salary is $6000 and above, you will be getting a $2220 in CPF contribution per month. If you are getting very high variable bonuses (which are eligible for CPF contribution), then those will be counted in.

If by June, you had already gotten $37740, then the following holds:
1) You will no longer be allowed to do a voluntary top up to your CPF; and
2) Any further CPF contribution from employment will continue to flow into your CPF.

Any contribution above annual limit of 37740 will be refunded excluding limited contribution to MA under medical scheme.

Monthly contribution on OW is capped at 6k.

If that month includes AW, contribution on AW can go as high 102k less what has been contributed on OW. In such case, subsequent contributions will be refunded, if contributions continue to flow in.

Please show pic to explain 2).

Mandatory contributions can exceed CPF annual limit but not in the case you have in mind.

 

[henrylbh]

Your claims to (b) is also inaccurate. Wages can be flagged as "BONUS" by employer and the $2220 monthly limit does not hold. As examples from my previous and current employments, bonuses in March/April can hit 4-5k in CPF contribution. Bonuses in December can also hit 4-5k.

12 months at 2220 plus Mar/Apr say 5k plus Dec at 5k on bonuses = 36,640 which is less than annual limit. That doesn't explain (b).

You can still VC 1.1k.

 

[JuniorLion]

yes, on a monthly scale, sure you can exceed $2,220 CPF contribution per month

but looking at it on a yearly scale, the Annual Limit applies, doesn't it? The max CPF you can get from employment (OW + AW) per year is ... $37,740, right?

Let's say you earn $10k a mth (OW) and 50k bonus (AW)
* max annual amount of OW liable for CPF is $6k x 12 = $72k
* max annual bonus that is liable for CPF would be 30k ($102,000 - OW)
* It all adds up to $102k per yr, which results in CPF contrib of $37,740 ($102k x 37%)

No matter what permutation of OW + AW we can come up with, the max amount that is liable for CPF would always be 102k ...

Your earlier post suggested that you managed to get an Annual CPF contribution that was higher than $37,740. Did i misunderstand you? If not, can you perhaps show the working that resulted in that? I'm asking because if what you say is correct, then it means my fundamental understanding of CPF AL is wrong, and i need to rethink several things...

I hope I'm not coming across as being argumentative here. That is not my intention i'm just trying to understand how CPF system works, to the best of my abilities

I have earlier explained that if your employer had flagged a big sum as "bonus", eg 100k, then you can exceed AL.

 

[kehyi4]

I have earlier explained that if your employer had flagged a big sum as "bonus", eg 100k, then you can exceed AL.

... I'm starting to think that you don't understand how the CPF AL works ...

Let's check the CPF FAQ, shall we:
https://www.cpf.gov.sg/Members/Schemes/schemes/other-matters/cpf-contribution-for-employees

Q: What are the CPF contribution ceilings?

Ordinary Wage Ceiling
Ordinary Wages (OW) are wages due/granted wholly and exclusively for your employment in a month and are payable before the due date for payment of CPF contributions for that month. An example of OW is your monthly salary.

The OW Ceiling limits the amount of OW that would attract CPF contributions. The OW Ceiling is capped at $6,000 currently. For example, if you earn an OW of $6,500 in a calendar month, only $6,000 would attract CPF contributions; the remaining $500 would not.

Additional Wage Ceiling
Additional Wages (AW) are wages which are not granted wholly and exclusively for your employment in the month. These payments are usually made at intervals of more than a month. Examples of AW are your annual bonus and leave pay.

The AW Ceiling is the maximum amount of AW that attracts CPF for the year, and can be computed using the following: $102,000 - Total OW subject to CPF for the year

For example, if you joined the company in January 2016 with a monthly wage of $6,000 and was granted a year-end bonus of $35,000 in December 2016, the AW ceiling that is applicable would be $102,000 – ($6,000 x 12) = $30,000. Since the year-end bonus amount is more than the ceiling, only $30,000 would attract CPF contributions; the remaining $5,000 would not.

The AW ceiling is computed on a per employer basis. You may use our Additional Wage Ceiling Calculator to compute this amount and refer to some examples of computation (PDF, 0.6MB).

CPF Annual Limit
The CPF Annual Limit is the maximum amount of CPF contributions that can be credited to an individual's account in a year. It consists of both the mandatory contributions (employer's and employee's share) and voluntary contributions.

 

[JuniorLion]

Kehyi4

All I can say is that I had receive more than AL in 2017 and 2015 (when it was 31450).

I am not about to print screen to show anyone here. I have nothing to prove to anyone in this forums or online.

It is one thing to read FAQs and one thing to see it in the statements

 

[kehyi4]

Kehyi4

All I can say is that I had receive more than AL in 2017 and 2015 (when it was 31450).

I am not about to print screen to show anyone here. I have nothing to prove to anyone in this forums or online.

It is one thing to read FAQs and one thing to see it in the statements

ok, I'm glad to see that you were able to earn a large enough sum to exceed AL (i wish i could too! )

You are right, you don't have to prove anything, just that it would have been educational to see how the sums worked out

peace

btw, did i mention that it is possible to exceed AL through non-wage contributions from employer? that might have been the source of the confusion...

 

[JuniorLion]

ok, I'm glad to see that you were able to earn a large enough sum to exceed AL (i wish i could too! )

You are right, you don't have to prove anything, just that it would have been educational to see how the sums worked out

peace

btw, did i mention that it is possible to exceed AL through non-wage contributions from employer? that might have been the source of the confusion...

I was trying to tell you that:
a) wages flagged as bonus attracted cpf contribution. Happebed to me, I just didn't want to print screen

Also, another possible way to exceed is if you receive extra $5000 from NS Rewards.

 

[doody_]

Kehyi4

All I can say is that I had receive more than AL in 2017 and 2015 (when it was 31450).

I am not about to print screen to show anyone here. I have nothing to prove to anyone in this forums or online.

It is one thing to read FAQs and one thing to see it in the statements

I can guarantee you that there is no way to breach the AL, if the employer is doing his job properly. In your case, it seems your employer(s) have messed up the CPF calculation somehow, and unknowingly paid more to you than they are legally obliged to.

CPF is unable to question each and every contribution made by employers, the onus is on employer and employee to flag out if they have overcontributed accidentally and apply for a refund.

 

[doody_]

I was trying to tell you that:
a) wages flagged as bonus attracted cpf contribution. Happebed to me, I just didn't want to print screen

Also, another possible way to exceed is if you receive extra $5000 from NS Rewards.

If you are referring to bonuses only, then the AW limit is calculated on a per employer basis. If you managed to exceed the AL, then the second employer probably screwed up their AW calculations, because AL still cannot be exceeded from just OW and AW contributions.

 

[BBCWatcher]

Also, another possible way to exceed is if you receive extra $5000 from NS Rewards.

I believe you're referring to the NS HOME Rewards. My understanding is that these rewards are like the Additional Medisave Contribution Scheme (AMCS) in that none of the ordinary limits (BHS, Annual Limit) apply.

 

[henrylbh]

... I'm starting to think that you don't understand how the CPF AL works ...

More likely he misunderstood contributions from OW and AW and the limits for the year. He needs to give actual numbers or pic to clarify.

 

[kehyi4]

cpf medisave contribution ceiling has increase to $54,500 this year. I don't see any papers publishing this news. Last year CPF secretly increase to $52k without informing also.

Firstly, MCC has been replaced by BHS (Basic Healthcare Sum). This happened in Jan 2016.

Secondly - if you didn't see it, does that mean it didn't happen?
* CPF Announcement dated 16 Nov 2017: https://www.cpf.gov.sg/members/News/news-categories-info/news-releases/2342
* News report on CNA dated 16 Nov 2017: https://www.channelnewsasia.com/news/singapore/cpf-interest-rates-to-remain-unchanged-from-january-to-march-9412574

* CPF Announcement dated 29 Nov 2016: https://www.cpf.gov.sg/members/News/news-categories-info/news-releases/2327
* News report on Straits Times dated 29 Nov 2016: http://www.straitstimes.com/business/cpf-to-continue-with-same-interest-rates-on-ordinary-special-and-medisave-accounts-in-2017

 

[henrylbh]

I believe you're referring to the NS HOME Rewards. My understanding is that these rewards are like the Additional Medisave Contribution Scheme (AMCS) in that none of the ordinary limits (BHS, Annual Limit) apply.

I have seen cpf statements where government medisave top-ups go into OA as recipients has reached limit of BHS and FRS. For those who have not reached FRS, MA overflowed to SA/RA.

 

[Retribution]

Hi,

Can I find out if I can do a V.C to my spouse account of 37740 and then also do RSTU of 7000?

Spouse has no cpf contribution from anyone.

Is that possible?

Regards.

 

[Perisher]

Firstly, MCC has been replaced by BHS (Basic Healthcare Sum). This happened in Jan 2016.

Secondly - if you didn't see it, does that mean it didn't happen?
* CPF Announcement dated 16 Nov 2017: https://www.cpf.gov.sg/members/News/news-categories-info/news-releases/2342
* News report on CNA dated 16 Nov 2017: https://www.channelnewsasia.com/news/singapore/cpf-interest-rates-to-remain-unchanged-from-january-to-march-9412574

* CPF Announcement dated 29 Nov 2016: https://www.cpf.gov.sg/members/News/news-categories-info/news-releases/2327
* News report on Straits Times dated 29 Nov 2016: http://www.straitstimes.com/business/cpf-to-continue-with-same-interest-rates-on-ordinary-special-and-medisave-accounts-in-2017

Actually, such news quite low key, don't look for it, won't notice.

 

[henrylbh]

Hi,

Can I find out if I can do a V.C to my spouse account of 37740 and then also do RSTU of 7000?

Spouse has no cpf contribution from anyone.

Is that possible?

Regards.

Why not top up 37740 + 7000 to SA/RA or MA if you can afford not to see your funds for many years to come.

 

[Retribution]

There are two things I am trying to do.

1) RSTU 7000 to get tax benefits.

2) Top up my spouse CPF with 37740 to SA that the amount gets 4% and grows.

Is that possible? I ask the question because if the CPF Limit per year is 37740 then I cannot RSTU 7000 and get tax benefit right?

Because 37740 + 7000 = 44740

Thats my confusion.

Why not top up 37740 + 7000 to SA/RA or MA if you can afford not to see your funds for many years to come.