CPF Top up questions

[henrylbh]

That doesn't really matter, does it? If your CPF Special Account balance is zero today, you (or any generous person) can deposit $171,000 (2018 Full Retirement Sum) into your Special Account, right now, in one go. The CPF Annual Limit does not apply to Special Account or Retirement Account top-ups.

As a separate matter, the government has announced plans to raise compulsory contribution rates for older workers (age 55 and above). Consequently there will be more earnings subject to compulsory contributions, perhaps as soon as January 1, 2019. (The government hasn't announced anything firm yet.) The government is under the impression that employers love older workers so much (or love them enough anyway) that it's OK to shift their contribution rates -- including employer contributions -- at least closer to the contribution percentages that the under 55s experience. Does everyone agree?

It seems a little odd that the government is pursuing that policy change while simultaneously pushing for Singaporeans to stay actively working. Increasing the contribution rate for workers age 55 and older would probably encourage some to leave the workforce, and I have my doubts about how employers will treat older workers who are suddenly "more expensive."

For those who did not meet FRS at 55, perhaps govt should contribute same amount of CPF as employers for those who continue to work.

 

[BBCWatcher]

For those who did not meet FRS at 55, perhaps govt should contribute same amount of CPF as employers for those who continue to work.

That's an interesting idea. Slightly more radically -- but well grounded in economic theory and practice -- Singapore could introduce a negative income tax bracket. The government could start with this sort of formula:

* CPF contribution rates (peak at the wage ceiling, employer plus employee) adjusted from the current 26% (55+ to 60), 16.5% (60+ to 65), and 12.5% (65+) to something like 30%/20%/12.5%. (I'd hold that last one steady, or possibly even knock it down to 10%.)

* Introduce a new tax bracket of -10% for the first $10,000 of earned income, for citizens and PRs age 60 or older. In other words, up to minus $1,000 would be added to the worker's total tax bill, but the full minus $1,000 would require earning at least $10,000 from work. Directors' fees would not qualify as earned income for these purposes.

* Get rid of the existing 20% tax rebate (capped at $500). The new -10% tax bracket would be much better (for citizens and PRs age 60 and older).

As an example, let's suppose a weekday Giant supermarket cashier, age 62, citizen, earns $8.50/hour (current rate on the "help wanted" sign I saw) and works 600 hours/year part-time (about 30% of full-time). His earned income would be $5,100/year. Let's assume he also receives $100/year as interest on some savings bonds, and that's it -- that's his total taxable income ($5,200). Currently he would owe $0 in personal income tax. With this new negative tax bracket he would receive a tax refund of $510 (10% of his $5,100 of earned income). His CPF contributions (his and Giant's) would increase a bit at the same time with the CPF contribution adjustments the government already plans, up until he reaches age 65. Will Giant try to claw back some of his tax refund? Maybe, some, but since labor markets are generally tight he'd end up keeping most of this $510 wage subsidy.

The government could also consider raising the top marginal income tax rate from 22% to 25% (for example), or broaden the tax base particularly in that top bracket, or some of both. That, plus the elimination of the existing 20% tax rebate (capped at $500), would help fund this new -10% tax bracket. If the elimination of the existing 20% tax rebate could allow extending this new -10% tax bracket down to age 57 or 55, I'd do it. And it'd certainly help soften the blow of planned CPF contribution increases on these cohorts, so it'd most likely be politically smart. That doesn't hurt.

 

[testerjp]

I been doing some maths and come to this conclusion that the strategy for a working adult at 30 yo and a kid for 10 yo and below, is different.

I personally feel that for an adult, topping up ma full and let it overflow to SA is more ideal, incase you decide that you wish to pledge your flat and withdraw the excess beyond brs.

But for those planning to help their kids to top up and let the interest roll. This method won't work as the bhs grows at 4.x percent, beyond the interest of the medisave account.
If want to top up for a kid, I think go for SA straight.

 

[BBCWatcher]

I been doing some maths and come to this conclusion that the strategy for a working adult at 30 yo and a kid for 10 yo and below, is different.

I don't agree with your logic.

In your example, the child has an additional 20 years of possible Medisave payable medical expenses compared to her 30 year old counterpart. So, in terms of the utility of Medisave funds, the child wins. Medisave funds are still quite useful to the 30 year old, too. Anybody can need Medisave-payable medical care at any age, provided that person is physically in Singapore. Special Account funds, on the other hand, are for age 65 and beyond. Those are useful, too, but Medisave funds can be useful at any/every age.

Yes, the Basic Healthcare Sum increases annually. But it increases for everybody up to age 65, for both the 30 year old and the 10 year old. Assuming the 10 year old stays healthy and starts working at, say, age 23, she'll still have a valuable head start in reaching the then current BHS -- these dollars still work for that purpose, still earning bonus and 4% interest. Moreover, if it was a "once and done" Medisave top-up at age 10, her Medisave cannot hit the Basic Healthcare Sum anyway. One top-up doesn't get that job done. A single Medisave top-up can only be a maximum of $37,740, the CPF Annual Limit. There's always a minimum of two Medisave top-ups across two calendar years to hit the BHS (so far; it might be three if the BHS significantly outstrips the CPF Annual Limit, several years from now).

Anyway, the overflow to SA still happens for both. It'll happen when the 10 year old starts earning income from work and hits the oh-so-reachable BHS, also assuming the 10 year old gets two large Medisave top-ups. If that 10 year old has a child modeling career, so much the better for these purposes.

 

[nexusfanboi]

That doesn't really matter, does it? If your CPF Special Account balance is zero today, you (or any generous person) can deposit $171,000 (2018 Full Retirement Sum) into your Special Account, right now, in one go. The CPF Annual Limit does not apply to Special Account or Retirement Account top-ups.

As a separate matter, the government has announced plans to raise compulsory contribution rates for older workers (age 55 and above). Consequently there will be more earnings subject to compulsory contributions, perhaps as soon as January 1, 2019. (The government hasn't announced anything firm yet.) The government is under the impression that employers love older workers so much (or love them enough anyway) that it's OK to shift their contribution rates -- including employer contributions -- at least closer to the contribution percentages that the under 55s experience. Does everyone agree?

It seems a little odd that the government is pursuing that policy change while simultaneously pushing for Singaporeans to stay actively working. Increasing the contribution rate for workers age 55 and older would probably encourage some to leave the workforce, and I have my doubts about how employers will treat older workers who are suddenly "more expensive."

Yeap I had wanted to add RSTU up to FRS to my "have a choice" point too but forgot about it.

Interestingly the policy change would be an outright pay bump for people above 55 who already have the prevailing FRS in their OA+SA? So whether it encourages or discourages the elderly to leave the workforce (on the employee's side anyway) depends on whether they achieved FRS? Of course they might be forced to leave from the employer side.

 

[LiteHouse]

Still stops at 65 while the 4% i/r continues on and after 65.

So the correct way is to wait till you die then calculate.

Sent from . using GAGT

What Perisher means is while some of you guys relax 1 corner toast to red wine and VC $2,500 to your MA during the first week of Jan 2018 to hit the ceiling of BHS (54,500), the BHS also applies to a new born baby.

So for future generations, a newborn baby until he/she reaches employability age (e.g. 19 or 20 doing partitme job or internship, the BHS is likely to be how much,??

 

[chopra]

I don't agree with your logic.

In your example, the child has an additional 20 years of possible Medisave payable medical expenses compared to her 30 year old counterpart. So, in terms of the utility of Medisave funds, the child wins. Medisave funds are still quite useful to the 30 year old, too. Anybody can need Medisave-payable medical care at any age, provided that person is physically in Singapore. Special Account funds, on the other hand, are for age 65 and beyond. Those are useful, too, but Medisave funds can be useful at any/every age.

Yes, the Basic Healthcare Sum increases annually. But it increases for everybody up to age 65, for both the 30 year old and the 10 year old. Assuming the 10 year old stays healthy and starts working at, say, age 23, she'll still have a valuable head start in reaching the then current BHS -- these dollars still work for that purpose, still earning bonus and 4% interest. Moreover, if it was a "once and done" Medisave top-up at age 10, her Medisave cannot hit the Basic Healthcare Sum anyway. One top-up doesn't get that job done. A single Medisave top-up can only be a maximum of $37,740, the CPF Annual Limit. There's always a minimum of two Medisave top-ups across two calendar years to hit the BHS (so far; it might be three if the BHS significantly outstrips the CPF Annual Limit, several years from now).

Anyway, the overflow to SA still happens for both. It'll happen when the 10 year old starts earning income from work and hits the oh-so-reachable BHS, also assuming the 10 year old gets two large Medisave top-ups. If that 10 year old has a child modeling career, so much the better for these purposes.

can a under 21yo medisave be used to pay hospital bill of the grandparents? wondering if i can top my toddler MA to pay for any parent/grandparent hosp bill *touch wood*

 

[BBCWatcher]

Interestingly the policy change would be an outright pay bump for people above 55 who already have the prevailing FRS in their OA+SA?

Yes, and at the Basic Healthcare Sum (BHS) too, I'd say. That's a fabulous combination: age 55+, employed and earning, at FRS and BHS, more tax free funds streaming into CPF, and perhaps even the opportunity to get some tax relief topping up other qualified members' accounts. You've cracked the code!

....Of course they might be forced to leave from the employer side.

That's the problem, plus everyone (most people) age 55+ who hasn't hit FRS/BHS yet. There are also some fairly rare cases when the $80,000 overall tax relief limit might bite harder as CPF contribution rates are raised, in the working years when SRS contributions make the most sense.

Nonetheless, in my view the government ought to try nudging up the CPF contribution rates, a little, for workers age 55 to 65 (I'd leave 65+ as-is) and see how it goes. Something like 30%/20%/12.5% would be a good trial (age 55+ to 60/60+ to 65/65+). That's 3.5 to 4 percentage points higher for the first two cohorts and level for the third. Give the employer about 1.5 percentage points of responsibility. All that should be enough of a change to get a good read on the labor market effects. If that works out OK, try going up to 33%/23%/13% and stick with that.

 

[BBCWatcher]

can a under 21yo medisave be used to pay hospital bill of the grandparents? wondering if i can top my toddler MA to pay for any parent/grandparent hosp bill *touch wood*

Yes, as long as the grandparent is a citizen or PR. MOH's Medical Claims Authorisation Form, the form to request a qualified Medisave withdrawal (among other purposes), specifically includes a signature block for the parent or guardian to authorize the distribution of his/her minor child's Medisave funds to the patient.

But why would you do that?

 

[chopra]

Yes, as long as the grandparent is a citizen or PR. MOH's Medical Claims Authorisation Form, the form to request a qualified Medisave withdrawal (among other purposes), specifically includes a signature block for the parent or guardian to authorize the distribution of his/her minor child's Medisave funds to the patient.

But why would you do that?

jus wanting to know my options to serve as contingency

 

[BBCWatcher]

jus wanting to know my options to serve as contingency

It's an interesting way to grab more bonus interest for the family.

 

[Jazzbie]

Hi,

My mum is 61 this year. She has a substantial amount in OA and much lesser in SA and the FRS in RA. Can I check if she can withdraw funds from her OA account as and when she likes now (based on withdrawal after age 55)? Any implications other than interest lost from OA?

Can she also transfer her OA to SA to earn higher interest and still retain flexibility to withdraw the funds if the above is possible?

I'm thinking of the viability of topping up her SA for tax rebate, before withdrawing from her OA in lieu of household allowance.

Appreciate advice as I'm not sure on the CPF withdrawal process after 55.

 

[kehyi4]

Hi,

My mum is 61 this year. She has a substantial amount in OA and much lesser in SA and the FRS in RA. Can I check if she can withdraw funds from her OA account as and when she likes now (based on withdrawal after age 55)? Any implications other than interest lost from OA?

Can she also transfer her OA to SA to earn higher interest and still retain flexibility to withdraw the funds if the above is possible?

I'm thinking of the viability of topping up her SA for tax rebate, before withdrawing from her OA in lieu of household allowance.

Appreciate advice as I'm not sure on the CPF withdrawal process after 55.

wow, your mum is in a good position :thumbsup:

She can withdraw money from CPF anytime she wants, yes, but the funds will be withdrawn from SA first, then OA, ie she will need to empty her SA before she can withdraw from OA

Also, after 55, transfer from OA to SA is not allowed. Similarly, she will not be able to top up SA, so your plan won't work

More info available at CPF FAQ:
https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/withdrawals-of-cpf-savings-from-55

 

[BBCWatcher]

My mum is 61 this year. She has a substantial amount in OA and much lesser in SA and the FRS in RA. Can I check if she can withdraw funds from her OA account as and when she likes now (based on withdrawal after age 55)? Any implications other than interest lost from OA?

She can withdraw funds at any time, as often as she wants, in any increment up to her balances (less her retirement and Medisave set asides). Unfortunately the first dollars she withdraws must come from her higher yielding Special Account. Then, when her Special Account is drained, her withdrawals will pull from her Ordinary Account.

Logically that makes sense from the government's point of view. They don't want to be too generous, so withdrawals come from the higher yielding funds first.

There's a CPF "hack" available to work around this behavior, but it only really works if your mother wants to make a single, fairly sizable withdrawal as a one-time event (basically) and will then allow her Special Account funds to keep earning interest for at least a while. The hack involves using the CPF Investment Scheme (Special Account) to buy a safe outside investment. A Singapore T-Bill works well for this purpose. With most of the Special Account funds tucked away in the T-Bill, withdrawals then come predominantly from the Ordinary Account. Then you return the funds from the T-Bill to the Special Account. If you time this very well and get a good T-Bill offer on the secondary market (of a T-Bill maturing "soon"), you don't lose too much Special Account interest. But it's a tough hack to pull off, really.

Can she also transfer her OA to SA to earn higher interest and still retain flexibility to withdraw the funds if the above is possible?

No, I'm afraid that opportunity ended on her 55th birthday. And it was only an option as long as her Special Account was below the then current Full Retirement Sum.

I'm thinking of the viability of topping up her SA for tax rebate, before withdrawing from her OA in lieu of household allowance.

Not viable at all. If you (or anybody) wants to top up her account(s), you only have three choices at this point: Medisave, Retirement Account, or "all three."

1. Anybody can top up her Medisave Account if she has not reached the current Basic Healthcare Sum (BHS) already and as long as that top-up fits within her (not the giver's) CPF Annual Limit. (If the top-up exceeds her CPF Annual Limit, it will be refunded back to the giver, without interest.) She would qualify for tax relief on her own tax return for that top-up, if she's eligible, but nobody else can.

2. Anybody can top up her Retirement Account if she has not reached the current Enhanced Retirement Sum (ERS). However, since she has already reached the Full Retirement Sum (FRS), nobody gets any tax relief for that RA top-up.

3. Anybody can top up her accounts using an "All Three" top-up. This type of top-up does not qualify for tax relief, for anyone. It must fit within her CPF Annual Limit ($37,740). Exactly how those funds flow into her various accounts is a little complicated, but they are allocated (and spill over, if applicable) exactly the same way compulsory contributions from employment would flow.

I think that covers all her top-up options.

 

[Jazzbie]

BBC and kehyi4, thanks very much for the details. You guys have been very helpful and clear. Perhaps more so than thrawing through the CPF website.

Cheers.

 

[kehyi4]

BBC and kehyi4, thanks very much for the details. You guys have been very helpful and clear. Perhaps more so than thrawing through the CPF website.

Cheers.

Hi, I thought you might want to know: your mum can withdraw her CPF (OA+SA) interest only, without touching the capital.

If she's keen on that, what she can do is head to a CPF office, tell the counter that she wants to withdraw interest only, they'll calculate the amount and tell her. The best time to do this is in Dec, when she'll be able to withdraw the accumulated interest from Jan to Nov

she can treat her CPF OA as a roughly 2.5% fixed deposit this way...

 

[Jazzbie]

Not viable at all. If you (or anybody) wants to top up her account(s), you only have three choices at this point: Medisave, Retirement Account, or "all three."

2. Anybody can top up her Retirement Account if she has not reached the current Enhanced Retirement Sum (ERS). However, since she has already reached the Full Retirement Sum (FRS), nobody gets any tax relief for that RA top-up.

I think that covers all her top-up options.

Hi BBC,

To further clarify, if her RA account is less than the current RS ($171,000). Will my top up to her RA still get tax relief? I get the impression that this can be done from IRAS website below:

"However, to keep tax benefits focused on supporting basic retirement needs, there is no tax relief for any amount of cash top-up which exceeds the limit on cash top-up amount for computing tax relief (i.e. Current Full Retirement Sum (FRS) – Retirement Account (RA) savings)."

I think her RA could be less than the current FRS. I will need to check later.

 

[Zapper]

Hi, is it better if one meets the ERS to topup the spouse (homemaker) below BRS at 55yrs old?

 

[a4973]

i'll be 55 in end 2019
i have met my cohort's FRS in SA & 2018 BHS in MA & will continue to work till at least my 55th.
my objective is to get my poorly performing cash into preferably SA or OA to earn the higher interest & still be able to call on the funds on demand under the Withdrawal at 55 framework.
i gather that i can either do Capital Repayment and / or VC to all 3 a/cs

please share the pros & cons for using cash for each

(1) Capital Repayment - PROS = , CONS =
(2) VC to all 3 a/cs - PROS = , CONS =

 

[andyhtc]

She can withdraw funds at any time, as often as she wants, in any increment up to her balances (less her retirement and Medisave set asides). Unfortunately the first dollars she withdraws must come from her higher yielding Special Account. Then, when her Special Account is drained, her withdrawals will pull from her Ordinary Account.

Logically that makes sense from the government's point of view. They don't want to be too generous, so withdrawals come from the higher yielding funds first.

There's a CPF "hack" available to work around this behavior, but it only really works if your mother wants to make a single, fairly sizable withdrawal as a one-time event (basically) and will then allow her Special Account funds to keep earning interest for at least a while. The hack involves using the CPF Investment Scheme (Special Account) to buy a safe outside investment. A Singapore T-Bill works well for this purpose. With most of the Special Account funds tucked away in the T-Bill, withdrawals then come predominantly from the Ordinary Account. Then you return the funds from the T-Bill to the Special Account. If you time this very well and get a good T-Bill offer on the secondary market (of a T-Bill maturing "soon"), you don't lose too much Special Account interest. But it's a tough hack to pull off, really.


No, I'm afraid that opportunity ended on her 55th birthday. And it was only an option as long as her Special Account was below the then current Full Retirement Sum.


Not viable at all. If you (or anybody) wants to top up her account(s), you only have three choices at this point: Medisave, Retirement Account, or "all three."

1. Anybody can top up her Medisave Account if she has not reached the current Basic Healthcare Sum (BHS) already and as long as that top-up fits within her (not the giver's) CPF Annual Limit. (If the top-up exceeds her CPF Annual Limit, it will be refunded back to the giver, without interest.) She would qualify for tax relief on her own tax return for that top-up, if she's eligible, but nobody else can.

2. Anybody can top up her Retirement Account if she has not reached the current Enhanced Retirement Sum (ERS). However, since she has already reached the Full Retirement Sum (FRS), nobody gets any tax relief for that RA top-up.

3. Anybody can top up her accounts using an "All Three" top-up. This type of top-up does not qualify for tax relief, for anyone. It must fit within her CPF Annual Limit ($37,740). Exactly how those funds flow into her various accounts is a little complicated, but they are allocated (and spill over, if applicable) exactly the same way compulsory contributions from employment would flow.

I think that covers all her top-up options.

I will test out (2) this year as my mother has not reached the FRS. Thanks.