Five changes to CPF rules

[reddevil0728]

Hi all and especially BBC Watcher who helped me a long way to understand cpf rules when I was a newly minted PR 3 years ago and enjoy significant tax rebates by maxing out my MA. Of course, the new rules will now prevent newly minted PR to enjoy such rebate going forward. But beyond new PR, all cpf savy people who are yet to reach FRS are penalised by this new rule. Since BHS increase every year, the VC to MA will be deducted from the cap of 8k, leaving only maybe around 4k to top up our SA. I am surprised there is no mention of this anywhere online whether on news side or bloggers side… Am I missing something here?

I think because not many people are looking at injecting more money into CPF and that the savvy ones are the minority.

in any case it wouldn’t be rolled back. So nothing can be done

 

[BBCWatcher]

For newly minted PRs there are still potential ways to inject more dollars into CPF during the first 24 months and enjoy tax relief. One way is to flip to self employment. "All three account" Voluntary Contributions are then eligible for tax relief. Another way is to negotiate with your employer to pay the standard contribution rates starting right away. The employer might not be too eager to do that without some sort of deal that keeps the employe's outflow much the same as it would be for a newly minted PR with 24 months of reduced contributions.

 

[hwmook]

For newly minted PRs there are still potential ways to inject more dollars into CPF during the first 24 months and enjoy tax relief. One way is to flip to self employment. "All three account" Voluntary Contributions are then eligible for tax relief. Another way is to negotiate with your employer to pay the standard contribution rates starting right away. The employer might not be too eager to do that without some sort of deal that keeps the employe's outflow much the same as it would be for a newly minted PR with 24 months of reduced contributions.

I am not sure how the reduced contributions is actually implemented. My wife got her PR many years ago and from the first month her company paid full rate and she changed job a few months after that and also got paid full rate. You have to ask to be paid reduced rate?

 

[balagan]

I am still fuzzy on this.

1. Is the 2nd sweep@age65 up to one's FRS@55 or the prevailing FRS@65?

2. If there was a property charge/pledge between age 56-64, will there be a 2nd sweep to FRS?

3. If there is a withdrawal PEA lump sum@65, will there be a 2nd sweep too?

 

[dork32]

I am not sure how the reduced contributions is actually implemented. My wife got her PR many years ago and from the first month her company paid full rate and she changed job a few months after that and also got paid full rate. You have to ask to be paid reduced rate?

1st year PR only 5 + 4%
2nd year PR only 15 + 9%
3rd then get full 20 + 17%

 

[hwmook]

1st year PR only 5 + 4%
2nd year PR only 15 + 9%
3rd then get full 20 + 17%

I know and this is what I expected but actual is not like that, every company just pay 20 + 17% without asking.

 

[BBCWatcher]

I am not sure how the reduced contributions is actually implemented. My wife got her PR many years ago and from the first month her company paid full rate and she changed job a few months after that and also got paid full rate. You have to ask to be paid reduced rate?

If she and her employer actually paid full rate (20%+17% on income up to the limits) that was allowed but optional. It's good news if it happened, so congratulations to her.

1. Is the 2nd sweep@age65 up to one's FRS@55 or the prevailing FRS@65?

The second "sweep" attempt now occurs (if it needs to occur) just before you start CPF LIFE payouts, and that can be as late as age 70. It'll be prevailing FRS.

2. If there was a property charge/pledge between age 56-64, will there be a 2nd sweep to FRS?

A property pledge/charge is only relevant if you actually withdraw funds from a CPF Retirement Account to drive it below the Full Retirement Sum or if you want to withdraw from SA/OA and haven't funded your RA to the FRS. If you have a sufficient pledge/charge in place, and if your RA is funded "well enough" (generally at least the BRS), then there's no second sweep attempt.

3. If there is a withdrawal PEA lump sum@65, will there be a 2nd sweep too?

I don't quite understand this question. Are you referring to the up to 20% withdrawal from RA (inclusive of any age 55 withdrawal)? If you are, this withdrawal/these withdrawals would not trigger a sweep attempt.

You have a LOT of questions about RA withdrawals! Do you have any questions now about adding funds to your CPF Retirement Account and/or making sure your RA is funded at least to the FRS on your 55th birthday?

 

[BBCWatcher]

I know and this is what I expected but actual is not like that, every company just pay 20 + 17% without asking.

Certainly not every company!

 

[balagan]

The second "sweep" attempt now occurs (if it needs to occur) just before you start CPF LIFE payouts, and that can be as late as age 70. It'll be prevailing FRS.

If it is prevailing FRS, based on $6K yearly increase, that will be a $60K added to one's FRS@55. This 2nd sweep is indeed hefty.

A property pledge/charge is only relevant if you actually withdraw funds from a CPF Retirement Account to drive it below the Full Retirement Sum or if you want to withdraw from SA/OA and haven't funded your RA to the FRS. If you have a sufficient pledge/charge in place, and if your RA is funded "well enough" (generally at least the BRS), then there's no second sweep attempt.

My SA has meet FRS so the RA will at least have FRS.

I don't quite understand this question. Are you referring to the up to 20% withdrawal from RA (inclusive of any age 55 withdrawal)? If you are, this withdrawal/these withdrawals would not trigger a sweep attempt.

You have a LOT of questions about RA withdrawals! Do you have any questions now about adding funds to your CPF Retirement Account and/or making sure your RA is funded at least to the FRS on your 55th birthday?

I prefer to have as little as possible in my RA (yes, CPF Life payout will correspondingly be much lower).

The problem now is with the 2nd sweep to prevailing FRS@65, the SA/OA monies has "shorten" in terms of say monthly withdrawals after age55 and beyond.

Thank you for your replies as usual...

 

[zoneguard]

I prefer to have as little as possible in my RA (yes, CPF Life payout will correspondingly be much lower).

The problem now is with the 2nd sweep to prevailing FRS@65, the SA/OA monies has "shorten" in terms of say monthly withdrawals after age55 and beyond.

@BBCWatcher : Is there a 2nd sweep to RA at start of LIFE payout if at 55, FRS has already been set aside in RA?

You can raise SA shield and/or OA shield a second time before LIFE payout starts if the above question's answer is a Yes.

$60K is the bare minimum for CPF LIFE if that's your desire and you understand the impact on LIFE payout.

 

[DriftKing]

A quick qns, after the new changes, means if based on normal employment contribution during the year has already hit the annual CPF contribution cap of $37,700, there's nothing more you can do to get tax relief?

 

[eAtNeAt]

The confusing thing is no where was the term AMP mentioned in all the communications. Why not simply state that AMP is no longer applicable.

 

[BBCWatcher]

If it is prevailing FRS, based on $6K yearly increase, that will be a $60K added to one's FRS@55. This 2nd sweep is indeed hefty.

Sorry, I misunderstood your question. It's the prevailing Full Retirement Sum at your 55th birthday. But this point appears to be moot for you, or fairly moot.

My SA has meet FRS so the RA will at least have FRS.

Under current rules you have the option to "shield" most Special Account dollars and then fund your Retirement Account from your Ordinary Account and/or cash.

I prefer to have as little as possible in my RA (yes, CPF Life payout will correspondingly be much lower).

Because you've found something better?

$60K is the bare minimum for CPF LIFE if that's your desire and you understand the impact on LIFE payout.

Yes, but I think we're exploring current RA withdrawal rules. Which isn't an attractive idea to me, but I suppose your mileage may vary.

A quick qns, after the new changes, means if based on normal employment contribution during the year has already hit the annual CPF contribution cap of $37,700, there's nothing more you can do to get tax relief?

No. The 2022+ $8K+$8K (self+eligible family members) tax relief opportunities are in addition to your compulsory contribution (or voluntary contributions if self-employed) tax relief opportunities.

 

[BBCWatcher]

The confusing thing is no where was the term AMP mentioned in all the communications. Why not simply state that AMP is no longer applicable.

I guess they could have done that, but many people don't know what AMPs are (were).

 

[balagan]

Sorry, I misunderstood your question. It's the prevailing Full Retirement Sum at your 55th birthday. But this point appears to be moot for you, or fairly moot.

Thanks for the clarification....

 

[dork32]

I know and this is what I expected but actual is not like that, every company just pay 20 + 17% without asking.

my wife company stick to the the law

 

[DriftKing]

No. The 2022+ $8K+$8K (self+eligible family members) tax relief opportunities are in addition to your compulsory contribution (or voluntary contributions if self-employed) tax relief opportunities.

For 2021, is topping up of MA include within the $37700 annual limit?

 

[BBCWatcher]

For 2021, is topping up of MA include within the $37700 annual limit?

The CPF Annual Limit is $37,740, and yes, Voluntary Contributions to MA in 2021 must fit within the CPF Annual Limit (and Basic Healthcare Sum). Although for reasons I've explained in another post it can be a smart idea in certain cases to go ahead and exceed the CPF Annual Limit, get a refund (without interest) from MA, in order to expand 2022 tax relief opportunities. In certain cases.

 

[Value.Matrix]

Hi all and especially BBC Watcher who helped me a long way to understand cpf rules when I was a newly minted PR 3 years ago and enjoy significant tax rebates by maxing out my MA. Of course, the new rules will now prevent newly minted PR to enjoy such rebate going forward. But beyond new PR, all cpf savy people who are yet to reach FRS are penalised by this new rule. Since BHS increase every year, the VC to MA will be deducted from the cap of 8k, leaving only maybe around 4k to top up our SA. I am surprised there is no mention of this anywhere online whether on news side or bloggers side… Am I missing something here?

CPF tax relief automatically applied for self employed and employed. Last time the tax relief for MA is fitted into the $37,740 annual limit.

Now it is shared with RSTU limit. Up to you to think what is better or not.

 

[andyhtc]

A quick qns, after the new changes, means if based on normal employment contribution during the year has already hit the annual CPF contribution cap of $37,700, there's nothing more you can do to get tax relief?

On the 1st day of the new year, there should be an upward revision of the MA limit.

I intend to top up to the new limit to enjoy tax relief i.e. I get the first bite of the cherry before my company tops up my MA further