CPF SA Shielding hack - RIP (Obsolete)

[lyndonmaxewell]

Meaning after shielding dont need to care whether remaining balance in OA and SA meet BRS/FRS? Then wouldnt RA end up with less than BRS/FRS?

Factually, I am saying that there is not rules to how much you can shield besides the first $40K of SA cannot be invested.

Overall you would have to look at the bigger picture. The main purpose of shielding is so that you can treat the SA monies like a higher interest rate account, and readily withdrawable. However, to be able to withdraw, you must meet FRS amount in RA or pledge property to meet BRS amount in RA.

 

[lyndonmaxewell]

TS talks alot of rubbish here!

It's up to individuals' assessment.

 

[maple96]

My entire balance are in SA and MA, don’t think I have any benefit.

U are a self employed person, u "create" your own CPF account balances. It is up to u whether u want to do it or not to exploit this CPF SA Hack to benefit yourself in the future. Whether u will continue to remain in SG, whether u want to own CPF Life, etc

U too can benefit from it

 

[maple96]

Factually, I am saying that there is not rules to how much you can shield besides the first $40K of SA cannot be invested.

Overall you would have to look at the bigger picture. The main purpose of shielding is so that you can treat the SA monies like a higher interest rate account, and readily withdrawable. However, to be able to withdraw, you must meet FRS amount in RA or pledge property to meet BRS amount in RA.

Now he decides to correct himself

 

[whizzard]

What about this scenario:

Wife not working. She has $176,000 in her SA and 0 in her OA. She turns 55 in Nov 2019.

Can she:

(1) Prior to her birthday, invest $136,000 from her SA in eligible investments and the balance $40,000 remains in her SA;

(2) Upon her birthday in Nov 2019, her RA is created with $40,000 transferred from her SA;

(3) She then tops up her RA subsequently with (cash of) $136,000 (preferable in one lump sum) to form her FRS for her RA;

(4) She then divests the earlier $136,000 investment which goes back to her SA and keeps it there to earn 4% p.a. interest, for withdrawal at will subsequent to her turning 55 years old.

 

[fr33d0m]

Not against the interest of the Govt cos the higher contribution does not come from GIC or the govt budget.

the higher contribution comes from employers and self.

My assertion is simple.
This government can do the good and right things but NEVER at the expense of itself.

Government itself owns nothing. It owns on behalf of its citizens. Any leakage from the government is a direct expense to the taxpayers.

 

[lyndonmaxewell]

Government itself owns nothing. It owns on behalf of its citizens. Any leakage from the government is a direct expense to the taxpayers.

That is correct. Any expenses using govt funds is our very own taxpayers money. Simple but not everyone realises that.

 

[lyndonmaxewell]

What about this scenario:

Wife not working. She has $176,000 in her SA and 0 in her OA. She turns 55 in Nov 2019.

Can she:

(1) Prior to her birthday, invest $136,000 from her SA in eligible investments and the balance $40,000 remains in her SA;

(2) Upon her birthday in Nov 2019, her RA is created with $40,000 transferred from her SA;

(3) She then tops up her RA subsequently with (cash of) $136,000 (preferable in one lump sum) to form her FRS for her RA;

(4) She then divests the earlier $136,000 investment which goes back to her SA and keeps it there to earn 4% p.a. interest, for withdrawal at will subsequent to her turning 55 years old.

(1) Yes she can
(2) correct, whatever remaining will form the RA
(3) Can lump sum. Since she doesn't work, tax reliefs is not relevant for her. People have also done like lump sum RSTU top up to their kids SA from young, like a hundred K.
(4) Yes, can

 

[ocs_woodlands]

Government itself owns nothing. It owns on behalf of its citizens. Any leakage from the government is a direct expense to the taxpayers.

THEORETICALLY a leakage from the govt is a direct expense to taxpayers. However in the case of SG, paying higher interest on cpf,in this case due shielding, is NOT.

Lemme explain.if additional interest payable due to shielding comes from the govt budget, yes.

BUT the additional interest payable is from RETAINED earnings of GIC which uses SGSS to make money. Hence additional interest paid due to shielding is NOT at the expense of taxpayers but at the expense of GIC.

AND NOT forgetting that every single cpf contributor is a taxpayer since to be a taxpayer, one would have to earn an income and contribute to cpf.

so higher than expected interest on cpf is to the benefit of cpf contributors ie citizens and PRs and tax contributors BUT detrimental to GIC.

 

[ocs_woodlands]

That is correct. Any expenses using govt funds is our very own taxpayers money. Simple but not everyone realises that.

not true in the case of cpf
THEORETICALLY a leakage from the govt is a direct expense to taxpayers. However in the case of SG, paying higher interest on cpf,in this case due shielding, is NOT.

Lemme explain.if additional interest payable due to shielding comes from the govt budget, yes.

BUT the additional interest payable is from RETAINED earnings of GIC which uses SGSS to make money. Hence additional interest paid due to shielding is NOT at the expense of taxpayers but at the expense of GIC.

AND NOT forgetting that every single cpf contributor is a taxpayer since to be a taxpayer, one would have to earn an income and contribute to cpf.

so higher than expected interest on cpf is to the benefit of cpf contributors ie citizens and PRs and tax contributors BUT detrimental to GIC.

 

[assiak71]

(1) Yes she can
(2) correct, whatever remaining will form the RA
(3) Can lump sum. Since she doesn't work, tax reliefs is not relevant for her. People have also done like lump sum RSTU top up to their kids SA from young, like a hundred K.
(4) Yes, can

The purpose of this is because cannot top up directly to SA using cash? But can top up RA?

Seems like a good way to put cash into SA with 4% which you are free to withdraw

 

[lyndonmaxewell]

THEORETICALLY a leakage from the govt is a direct expense to taxpayers. However in the case of SG, paying higher interest on cpf,in this case due shielding, is NOT.

Lemme explain.if additional interest payable due to shielding comes from the govt budget, yes.

BUT the additional interest payable is from RETAINED earnings of GIC which uses SGSS to make money. Hence additional interest paid due to shielding is NOT at the expense of taxpayers but at the expense of GIC.

AND NOT forgetting that every single cpf contributor is a taxpayer since to be a taxpayer, one would have to earn an income and contribute to cpf.

so higher than expected interest on cpf is to the benefit of cpf contributors ie citizens and PRs and tax contributors BUT detrimental to GIC.

Small correction, not every CPF contributor is a tax payer. Adults topping up for kids, retirees topping up their CPF, voluntary contribution to spouse etc.

 

[lyndonmaxewell]

The purpose of this is because cannot top up directly to SA using cash? But can top up RA?

Seems like a good way to put cash into SA with 4% which you are free to withdraw

After 55 can only cash top up to RA, not possible to top up SA directly.

 

[ocs_woodlands]

Saying this is a loophole is like saying transferring all your money from OA to SA to earn more interest is a loophole. Eitherway, CPF lose nothing from this "loophole".

There is a difference

Lemme explain.
GIC will be ok with the govt promoting OA to SA transfers to say a 30 yo guy because:

1) the amounts in SA are locked down till 55. With no possibility of withdrawal, GIC can use these funds to generate higher returns over a longer time horizon of 25 years. Also with less CPF funds in OA, GIC can keep less funds in shorter term lower yielding assets. CPF OA is a bit like on demand savings account since anyone can use it to pay for housing, education etc.

So OA to SA transfers are not a loophole. it is a scheme that is advantageous to GIC and just happen to be also good for common man...

2) At 55, it is extremely disadvantageous to GIC to have thousands of folks doing shielding because the amount of funds they get is the same ie FRS x no of 55 year olds with that money. BUT the amount of interest they have to pay out 1.5% higher interest to balance in SA.... At 55, OA and SA are no longer locked down and hence they would want as small a balance in SA as possible. RA can give 4, 5 or even 6% does not matter since it is gonna lock down for another 30 years easily to 85....

so in short, shielding is indeed a loophole.

Just like HDB decoupling which caused the govt to be unable to extract 7% ABSD from the additional pre property purchased, the loophole will be closed within a few years if not months...

 

[highsulphur]

Saying this is a loophole is like saying transferring all your money from OA to SA to earn more interest is a loophole. Eitherway, CPF lose nothing from this "loophole".

There's a 1.5% difference in interest for two accounts which are essentially the same post 55 years old....

 

[fr33d0m]

THEORETICALLY a leakage from the govt is a direct expense to taxpayers. However in the case of SG, paying higher interest on cpf,in this case due shielding, is NOT.

Lemme explain.if additional interest payable due to shielding comes from the govt budget, yes.

BUT the additional interest payable is from RETAINED earnings of GIC which uses SGSS to make money. Hence additional interest paid due to shielding is NOT at the expense of taxpayers but at the expense of GIC.

AND NOT forgetting that every single cpf contributor is a taxpayer since to be a taxpayer, one would have to earn an income and contribute to cpf.

so higher than expected interest on cpf is to the benefit of cpf contributors ie citizens and PRs and tax contributors BUT detrimental to GIC.

You talk as GIC does not belong to Singapore. GIC belongs to all citizens of Singapore, past, current and future.

 

[whizzard]

You talk as GIC does not belong to Singapore. GIC belongs to all citizens of Singapore, past, current and future.

To answer the question on CPF funds, we have to look at what the CPF funds are invested into. CPF funds are invested solely in Special Singapore Government Securities (“SSGS”). SSGS are issued by the Singapore Government and is therefore the obligations of the Singapore Government.

The proceeds from the SSGS, along with some other government assets, are pooled and invested by the Singapore Government through MAS and GIC. During periods where the investment returns by MAS or GIC are below the coupon rates of the SSGS, it is the government of Singapore who has to ensure the coupon (and principal on any maturing SSGS) are paid on time and in full. Hence, any investment risks from the proceeds of the SSGS are insulated from CPF holders as the government has assumed those risks.

Hence, it is the government of Singapore that has to service the SSGS, the returns of which will be used to support redemptions and interest to CPF account holders.

 

[henrylbh]

Back door is likely to be closed.

May be there is no back door when the rules were made. But the rules may be bypassed to benefit of those in the circle and some smart Alex. Same for CPF annual limit.

The maximum amount that you can transfer from your OA to your SA is the difference between the FRS and the sum of your SA savings and net SA withdrawn under the CPF Investment Scheme (CPFIS-SA) for investments that have not been completely disposed of.


Based on above, it appears that OA should not be used to meet FRS at 55 if balance in SA plus net SA withdrawn under CPFIA in aggregate already met FRS. Shortfall should be taken from OA (if any left ) only after the investment has been fully returned to RA.

 

[henrylbh]

Lorna Tan even talked about this CPF SA shield today in the Sunday Times. So the government is already aware there are people doing it.

https://www.straitstimes.com/business/invest/four-ways-to-optimise-your-cpf-savings

How can the government not aware when some staff manning the phone on public queries are also aware?

 

[henrylbh]

Is this an error in the article? The article didnt make sense to me due to this sentence:

Upon reaching Age 55, your Retirement Account (RA) is created with monies from your OA account, then SA account in that order of priority.

If that's what's written, then wrong.