CPF question

[Bobbyss]

Hi all. I have read up on the CPF but still am confused. I am trying to help my uncle.

Basically he dont have any more loans to pay.

OA 30k
SA 16k
RA 160k

I am trying to maximize his CPF life payout. He has opted for delayed start. Hes 60 now.

Is it possible to transfer the OA 30k to RA? I understands that FRS RA is 24x k. So basically can top to that amount?

 

[JuniorLion]

Hi all. I have read up on the CPF but still am confused. I am trying to help my uncle.

Basically he dont have any more loans to pay.

OA 30k
SA 16k
RA 160k

I am trying to maximize his CPF life payout. He has opted for delayed start. Hes 60 now.

Is it possible to transfer the OA 30k to RA? I understands that FRS RA is 24x k. So basically can top to that amount?

Yes, he can transfer 30k in his OA to his RA. This will compound at a rate of more than 4% p.a (remember first 30k compounds at a rate of 6% p.a. and next 30k compounds at a rate of 5% p.a, and the remaining 190k-60k=130k compounds at a rate of 4% p.a). Quite attractive I'd say.

 

[BBCWatcher]

Yes, he can transfer 30k in his OA to his RA.

Are you sure about that? It’s achievable, but I don’t think it’s a direct transfer (a single transaction), and SA will have to be used first.

If he has a spouse or partner, it’s certainly worth considering his/her CPF balances before deciding what to do.

 

[Bobbyss]

My aunt doesn’t have much in her account. Probably a few k in each account.

 

[BBCWatcher]

My aunt doesn’t have much in her account.

It’d likely be a smart move if her husband (your uncle) fixed that, at least for bonus interest reasons.

Unfortunately CPF LIFE isn’t a joint/survivor annuity program. It’s strictly individual, with a non-guaranteed bequest feature. Consequently, if one spouse lives a relatively long time and the other lives longer, the second spouse is in a tough spot if he/she doesn’t have his/her own CPF LIFE income stream. This scenario is fairly likely. To combat that risk, it’s preferable if both spouses/partners have some “reasonable” (or “less unreasonable”) CPF LIFE income. The government/CPF encourage some degree of “balancing” across a household with bonus interest. Bonus interest applies to the first $60,000 of CPF balances (with up to $20,000 of that from OA). So if spouse #1 is over $60,000 but spouse #2 is under, there’s some lost interest opportunity there.

Funds that are more balanced across spouses/partners aren’t “lost” if some other scenario occurs. For example, if your aunt were to pass away far too soon (hopefully not!), those transferred funds (with interest, including bonus interest) would be paid out to her nominated heir — her husband/your uncle, presumably. Those funds could then be plowed back into CPF for a higher CPF LIFE payout. And vice versa.

Make sense? It’s something to look at and consider, at least.

Is either your aunt or uncle paying any income tax currently (i.e. earning taxable income)?

 

[culture_counter]

Honest question and discussion about CPF:

Can the CPF system be trustworthy and guaranteed for at least the next 20 years?

 

[BBCWatcher]

Can the CPF system be trustworthy and guaranteed for at least the next 20 years?

The government that operates CPF has a AAA credit rating (S&P, Fitch, Moody's). Only 10 other countries enjoy that top rating (S&P), and it could soon be 9 (Australia might lose its S&P AAA). CPF started operations in 1955, so it's one of Singapore's oldest continuously operating institutions -- older even than Singapore's independence. The odds that your CPF savings will be well protected are much higher than anything else in Singapore with the exception of Singapore bonds and t-bills.

Nobody that I know of recommends you have only CPF savings, but for all intents and purposes the government doesn't allow you to do that if you have some financial means.

 

[cscs3]

Honest question and discussion about CPF:

Can the CPF system be trustworthy and guaranteed for at least the next 20 years?

You should worry about banks and insurance company before CPF.

 

[Bobbyss]

It’d likely be a smart move if her husband (your uncle) fixed that, at least for bonus interest reasons.

Unfortunately CPF LIFE isn’t a joint/survivor annuity program. It’s strictly individual, with a non-guaranteed bequest feature. Consequently, if one spouse lives a relatively long time and the other lives longer, the second spouse is in a tough spot if he/she doesn’t have his/her own CPF LIFE income stream. This scenario is fairly likely. To combat that risk, it’s preferable if both spouses/partners have some “reasonable” (or “less unreasonable”) CPF LIFE income. The government/CPF encourage some degree of “balancing” across a household with bonus interest. Bonus interest applies to the first $60,000 of CPF balances (with up to $20,000 of that from OA). So if spouse #1 is over $60,000 but spouse #2 is under, there’s some lost interest opportunity there.

Funds that are more balanced across spouses/partners aren’t “lost” if some other scenario occurs. For example, if your aunt were to pass away far too soon (hopefully not!), those transferred funds (with interest, including bonus interest) would be paid out to her nominated heir — her husband/your uncle, presumably. Those funds could then be plowed back into CPF for a higher CPF LIFE payout. And vice versa.

Make sense? It’s something to look at and consider, at least.

Is either your aunt or uncle paying any income tax currently (i.e. earning taxable income)?

pretty low income. combined probably like 3.2k

 

[BBCWatcher]

pretty low income. combined probably like 3.2k

OK. Yes, I would certainly encourage them to consider getting some more funds into your aunt's CPF Retirement Account, especially if her combined CPF balances are less than $60,000, which would mean she's not getting the maximum possible bonus interest.

One way is that your uncle could transfer some of his RA funds to his wife's RA. (I'm assuming she is also age 55 or older.) However, there's no tax relief with that transfer. So if your aunt currently pays any income tax then the better way is probably for your uncle to withdraw some CPF funds (if he doesn't have cash to do this) and then for your aunt to deposit cash into her Retirement Account. That way she'd qualify for up to $7,000 of tax relief. Both options work, though, and they can be combined. The immediate objective would be for your uncle to help his wife maximize her bonus interest, if possible.

They could visit a CPF office or roadshow, and a CPF officer should be able to sit down with them and consider the options to maximize bonus interest.

 

[rrr2015]

pls correct me if I'm wrong
but i don't think RA to RA topup/transfer is possible

And for top-up to own, pls take note of the following rules
* For top-up to own Retirement Account (applicable for members 55 and above), Special Account savings will be transferred first, followed by Ordinary Account savings.
https://www.cpf.gov.sg/Members/FAQ/schemes/retirement/retirement-sum-topping-up-scheme

i felt topup to your aunt's earns better interests since she will earn 6% for 1st 30K & 5% for next 30K. whereas topup to self will earns 4%

best still to verify with CPF board before committing to any topup/transfer

.

OA 30k
SA 16k
RA 160k

Is it possible to transfer the OA 30k to RA? I understands that FRS RA is 24x k. So basically can top to that amount?

One way is that your uncle could transfer some of his RA funds to his wife's RA. (I'm assuming she is also age 55 or older.)

 

[BBCWatcher]

pls correct me if I'm wrong
but i don't think RA to RA topup/transfer is possible

It is, but (taking a closer look) I believe the order of fund sources is OA, SA, then RA. In this case the uncle might dig a bit into his RA, if his wife's (the aunt's) CPF balances are rather low.

i felt topup to your aunt's earns better interests since she will earn 6% for 1st 30K & 5% for next 30K. whereas topup to self will earns 4%

To be clear, if the aunt is paying income tax, and if a cash top-up is possible, there is some tax relief available to claim on top of bonus interest.