CPF SA

[mr_beanz]

The CPF Board is ... delightful. They don't actually say that, unfortunately. They use the word "contributions" but omit the word "interest."

Interestingly a couple other individuals who don't work within the CPF Board offered this explanation late last year (2019): "For members who have met the Full Retirement Sum in their SA or RA, the savings in excess of the BHS will be transferred to the Ordinary Account (OA). Savings in the OA can be used for other purposes such as housing repayment." (Emphasis mine.) That's a little better, but is interest "savings"? That's not the greatest word to use for clarity.

OK, so "silly me" for trusting what the CPF Board wrote. It looks like you have to dig into the regulations to see what's going on. There's a regulation called (what else?) the "Central Provident Fund (Medisave Account Transfers) Regulations 2016" which came into force on January 1, 2017. It's available here. The regulation uses the word "amount," and it defines this term: "'excess amount in a member’s medisave account' means the amount standing to the credit of a member in the member’s medisave account that is in excess of the basic healthcare sum." The regulation makes no distinction between contributions and interest, so it's fairly clear "excess amount" is interest inclusive.

Now, wasn't that "fun"?

May I seek further clarification on this? Does it mean that when my MA is maxed out, the annual interest that it earns will overflow to my SA if my SA is still below FRS? And, if my SA already hits the FRS, the interest will overflow to my OA instead? Thank you.

 

[yokine3a]

May I seek further clarification on this? Does it mean that when my MA is maxed out, the annual interest that it earns will overflow to my SA if my SA is still below FRS? And, if my SA already hits the FRS, the interest will overflow to my OA instead? Thank you.

Before 55, if SA haven't reached FRS, yes overflow to SA. If reached FRS, goes to OA.

 

[yokine3a]

There is no such Jan statement or any monthly statement. Statement is given only once a year for the year.

It's safe enough to used the statement for the year 2019. Based on OA/SA balances on 31 Dec/1 Jan you can estimate the monthly accrued interest (assuming no in and out) to be withdrawn. But in Jan itself, there is no interest to be withdrawn as Dec's interest has been capitalised as principal amount at the beginning of the year.

I have colourful printed statement from cpf every Jan, this is the paper I refering to.
So are you suggesting I should withdraw my accrued interest on end Dec instead?

 

[mr_beanz]

Before 55, if SA haven't reached FRS, yes overflow to SA. If reached FRS, goes to OA.

Thank you.

 

[henrylbh]

I have colourful printed statement from cpf every Jan, this is the paper I refering to.
So are you suggesting I should withdraw my accrued interest on end Dec instead?

I don't suggest. I merely state the rules that I think I know

 

[blankies]

Hihi.
If sa is above frs and ma is full. Any other trick in timing to enjoy topup and income tax relief

 

[zumaba]

Both RA topup $5000 and MA topup $2800 (for Year 2020) are tax deductable, right?

My understanding is MA topup $2800 is counted towards CPF Annual Limit of $37K, while RA topup $5000 is not. Is this correct?

 

[yokine3a]

I don't suggest. I merely state the rules that I think I know

Hahaha, no problem, thanks for sharing, I will see what's best for me when I reach 55.

 

[beefjerky]

Why doesn't CPF pay interest on interest? ie. interest is only paid at the start of the next year. So the interests from Jan, Feb etc. are all not gaining any interest. This could be pretty substantial right? Compared to traditional banks which pay out monthly?

 

[Tiger9119]

Why doesn't CPF pay interest on interest? ie. interest is only paid at the start of the next year. So the interests from Jan, Feb etc. are all not gaining any interest. This could be pretty substantial right? Compared to traditional banks which pay out monthly?

The interest is compounded monthly and credited on 1st Jan of the following year.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192131&folderid=13726

 

[beefjerky]

The interest is compounded monthly and credited on 1st Jan of the following year.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192131&folderid=13726

yeah what I am saying is, this interest itself doesn't earn any interest. compared to a traditional banks which pay out your interest monthly, this interest would then thus earn interest. Let's say your interest for one year is about 25k sgd, that means you lose out on about 6 months of interest on this 25k sgd (12 months for jan, 11 months for feb.... 1 month for dec) you get the idea?

btw as per your link, its not compounded monthly. its computed

 

[Tiger9119]

yeah what I am saying is, this interest itself doesn't earn any interest. compared to a traditional banks which pay out your interest monthly, this interest would then thus earn interest. Let's say your interest for one year is about 25k sgd, that means you lose out on about 6 months of interest on this 25k sgd (12 months for jan, 11 months for feb.... 1 month for dec) you get the idea?

btw as per your link, its not compounded monthly. its computed

I know what you meant, my understanding is that the interest for Jan, Feb and so on, still get interest, just that they credit the interest on 01 Jan the following year.

https://www.cpf.gov.sg/eSvc/Web/Sch...lculated monthly,of $6,000 for Ordinary Wages.

 

[beefjerky]

I know what you meant, my understanding is that the interest for Jan, Feb and so on, still get interest, just that they credit the interest on 01 Jan the following year.

https://www.cpf.gov.sg/eSvc/Web/Sch...lculated monthly,of $6,000 for Ordinary Wages.

yes i know that. my question is, why isn't the interest credited monthly in order to earn interest on that interest? for banks they do so right? in a way for someone who supposedly gains interest of 25k annually, he is losing out about 1k of interest on interest (assuming 4% as average for the whole account)

 

[Tiger9119]

yes i know that. my question is, why isn't the interest credited monthly in order to earn interest on that interest? for banks they do so right? in a way for someone who supposedly gains interest of 25k annually, he is losing out about 1k of interest on interest (assuming 4% as average for the whole account)

You are right. Just checked my annual statement, it seems that the interest is not earning any interest.

 

[celtosaxon]

Appreciate if someone can verify my understanding...

For one’s own CPF account, are there only two ways to get tax relief for cash top ups under 55:

1. If MA is below BHS, can top up the difference between MC and $37,740 to MA using VC.

2. If SA is below FRS, can top up $7,000 to SA using RSTU.

And both of these can be done provided total tax relief does not exceed $80,000.

 

[henrylbh]

The interest is compounded monthly and credited on 1st Jan of the following year.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192131&folderid=13726

CPF interest is computed monthly. It is then credited to your respective accounts and compounded annually.


No interest is not compounded monthly.

To be more correct, interest is accrued monthly as in accounting usage and credited at the end of the year and only compound thereafter. Interest is computed on the lowest balance in the month.

Similarly, most financial institutions pay daily interest, but it is accrued and credited to the account at the end of the month and compound thereafter. Interest is computed on the lowest balance in the day.

 

[BBCWatcher]

Appreciate if someone can verify my understanding...
For one’s own CPF account, are there only two ways to get tax relief for cash top ups under 55:
1. If MA is below BHS, can top up the difference between MC and $37,740 to MA using VC.
2. If SA is below FRS, can top up $7,000 to SA using RSTU.
And both of these can be done provided total tax relief does not exceed $80,000.

A third way is that self-employed individuals can make “all three account” voluntary contributions with tax relief.

 

[henrylbh]

A third way is that self-employed individuals can make “all three account” voluntary contributions with tax relief.

Irrelevant answer, if he is asking as an employee.

As a self-employed individual, the answer is not complete

 

[beefjerky]

CPF interest is computed monthly. It is then credited to your respective accounts and compounded annually.


No interest is not compounded monthly.

To be more correct, interest is accrued monthly as in accounting usage and credited at the end of the year and only compound thereafter. Interest is computed on the lowest balance in the month.

Similarly, most financial institutions pay daily interest, but it is accrued and credited to the account at the end of the month and compound thereafter. Interest is computed on the lowest balance in the day.

Henry so why is cpf not compounding it monthly? Wouldn't we be losing out on interest of interest in such a manner?

 

[celtosaxon]

A third way is that self-employed individuals can make “all three account” voluntary contributions with tax relief.

Thanks for completing the picture. Will keep this in mind too... circumstances can always change!