Five changes to CPF rules

[doratch]

No, that's not correct. The CPF Annual Limit already does not apply to SA and RA top ups.

Ok. I will call the CPFB when I am free. I will update here again once I get more information from them!

 

[BBCWatcher]

Ok. I will call the CPFB when I am free. I will update here again once I get more information from them!

Or you can just log onto your CPF account and see how much you can top up to your SA. The CPFB provides that number to you on at least one of the screens. That number is whatever the gap is between the FRS and your current SA balance (inclusive of CPFIS-SA withdrawals). You can also refer to this FAQ. The CPF Annual Limit is never mentioned here because it doesn't apply and has no relevance to the RSTU Scheme.

If you want you can deposit the entire Full Retirement Sum in one go into a newborn Singaporean citizen's Special Account as soon as that newborn has a "T" birth certificate number. (And, starting on January 1, 2022, the entire Basic Healthcare Sum into the newborn's MediSave Account in one go. Before that date the limit is $37,740 per year.)

I wouldn't bother asking the CPF Board questions that they already answer rather well on their Web site and in your online account.

 

[crimsontactics]

Should the top-up to MA be done on 1st Jan or 31st Jan? I seem to have read that in either case, the interest gained will be the same since CPF only computes interest based on the balance at the end of that month.

All top up do end of the month better for the reason that you mentioned.

I think tax relief is calculated based on how much you top on ending 31st Dec the previous year.

 

[reddevil0728]

Where CPF announces its change of rules.

Can you quote which line did you read that says that?

bummer...

here is what common sense is wrong about family members or loved ones for tax relief in IRAS.

I don’t think is about common sense? But rather a policy decision.

 

[a4973]

No, that's not correct. The CPF Annual Limit already does not apply to SA and RA top ups. The CPF Annual Limit does apply to:

* compulsory contributions
* Voluntary Contributions to MA before 2022
* "all three account" Voluntary Contributions

Hi BBCWatcher and all thread posters, how would you optimize the following situation?
1. I'm > 55
2. Retired since mid 2019
3. Have VC3A Max $37740 in January 2020 and January 2021 and will do so for January 2022 and beyond.
4. RA at ERS 2021
5. MA was at 63k 2021 BHS but dropped to 61k+ in Aug 2021 due health shield premium deduction.
6. My wife is still employed full time. (She is 9 years my junior) so also looking at any tax relief scenarios for her.
7. Property fully paid and no intention to change property at all.
Thanks.

 

[Okenba]

Every year top up to ERS in RA. Doesn't matter who does it as you won't get tax relief above FRS. This is just to maximise payouts.

Your wife can top up your MA by $8k and get tax relief from that.
And top up her own SA/MA by another $8k for her own tax relief.
(Also Tax Relief from SRS up to 15.3k every year. If not yet open, best to do so before next year.)

You can still VC3A the full amount if you want. You should only do it after your MA has been topped up by $8k. Otherwise you may not get the full $8k if you VC3A first.

Note that above 55, the allocation rate to SA is small. Abt 13% to SA, 40% to MA, 46% to OA.
MA overflows go into OA, so effectively, 13% SA, 87% OA.
Effective interest rate of 2.7% (This goes down even more as you age.)
If you're okay with 2.7%, go ahead. Personally, I would take the money to invest instead.

 

[BBCWatcher]

Hi BBCWatcher and all thread posters, how would you optimize the following situation?
1. I'm > 55
2. Retired since mid 2019
3. Have VC3A Max $37740 in January 2020 and January 2021 and will do so for January 2022 and beyond.
4. RA at ERS 2021

When the ERS is raised on January 1, 2022, you have the option to top up your RA again to the new ERS. PayNow QR on January 30 works very well for this purpose. Unless the rules change you're allowed to top up your RA every time the ERS is raised, for the rest of your life.

5. MA was at 63k 2021 BHS but dropped to 61k+ in Aug 2021 due health shield premium deduction.

Starting in 2022 you'll be able to make a directed MA contribution up to the BHS. The CPF Annual Limit will no longer apply. January 30 would also be a good day to do that, via PayNow QR. You can continue making Voluntary Contributions to your MA every time it falls below the BHS or the BHS is increased. The BHS will stop increasing when you reach your 65th birthday. But see below....

6. My wife is still employed full time. (She is 9 years my junior) so also looking at any tax relief scenarios for her.

She has some potential tax relief opportunities. In no particular order:

1. If your annual income is S$4,000 or less then she could make a Voluntary Contribution to your MediSave Account, and she could qualify for up to $8,000 of tax relief. Let's suppose for example that your MA on December 31, 2021 (inclusive of 2021 interest) is $62,200, and that the 2022 BHS (not announced yet) is $66,000. Let's also assume you spend $4,200 from your MA in 2022. She could make a VC to your MA of $3,800 on January 30, 2022, then another VC of $4,200 (to replenish your MA) later in 2022. That $8,000 would then qualify for tax relief assuming again you do not exceed the income limit.

Please refer to this page to understand the definition of this spousal income limit. It's a pretty tight definition.

2. She can make VCs to her own MA (up to the BHS) and/or top ups to her own SA (up to the FRS and if she's under age 55) or RA (if she's 55+, up to the FRS). The combined total of these MA VCs and SA/RA top ups qualifies for tax relief, up to $8,000.

3. If there are other eligible family members (see IRAS's list), same thing: she can qualify for tax relief of up to $8,000 total across all eligible family members (including you if you're eligible).

When she considers herself and family members I suggest she look first at whether any recipient has either Matched Retirement Savings Scheme or bonus interest opportunities -- and grab those opportunities first.

If withdrawals from your MA cannot be replenished with tax relief (you're over the income limit), but withdrawals from her MA can, then it's probably best if she assumes insurance premium payments (and other MediSave drawdowns) on behalf of the household.

7. Property fully paid and no intention to change property at all.

If either or both of you used OA dollars to pay for housing then you can, if you wish, partially or fully repay OA dollars plus accrued interest. OA earns 2.5% interest which is pretty good these days. I would not do this unless and until you've exhausted other options to inject funds into CPF in higher yielding ways.

By the way, congratulations. It's nice to have fat CPF balances, isn't it?

 

[BBCWatcher]

Your wife can top up your MA by $8k and get tax relief from that.

Not necessarily. There's a strict income limit (or handicapped condition).

And top up her own SA/MA by another $8k for her own tax relief.
(Also Tax Relief from SRS up to 15.3k every year. If not yet open, best to do so before next year.)

Everyone who is age 18 or older by June 30, 2022, really ought to open a SRS account with $1 no later than June 30, 2022. If you do that, you'll lock in the age 62 minimum qualified withdrawal age. SRS accounts opened on July 1, 2022, will have a minimum qualified withdrawal age of 63. Now's a good time to open that account for one dollar.

You can still VC3A the full amount if you want. You should only do it after your MA has been topped up by $8k. Otherwise you may not get the full $8k if you VC3A first.

If you're trying to stuff as much into CPF as you can, especially if you're aiming for tax relief, then yes, VC to MA first followed by an "all three account" VC.

Note that above 55, the allocation rate to SA is small. Abt 13% to SA, 40% to MA, 46% to OA.
MA overflows go into OA, so effectively, 13% SA, 87% OA.
Effective interest rate of 2.7% (This goes down even more as you age.)
If you're okay with 2.7%, go ahead. Personally, I would take the money to invest instead.

It's often a close call. ~2.7% is rather good for a bond portfolio, and at age 55+ that might be exactly what you want. Even 2.5% could be attractive. "It depends."

 

[fr33d0m]

Can you quote which line did you read that says that?

I don’t think is about common sense? But rather a policy decision.

The CPF announcement gives the wrong impression that topping up family members' CPF account is eligible for tax relief. Actually, CPF has no authority of tax relief. IRAS has the final say about what CPF topup is eligible for tax relief.

 

[reddevil0728]

The CPF announcement gives the wrong impression that topping up family members' CPF account is eligible for tax relief. Actually, CPF has no authority of tax relief. IRAS has the final say about what CPF topup is eligible for tax relief.

Really? Which sentence?
Yea, but it’s legislated so corresponding changes will be made.

 

[fr33d0m]

Really? Which sentence?
Yea, but it’s legislated so corresponding changes will be made.

Givers to benefit from tax relief from top ups to loved ones’ MediSave



With effect from 1 January 2022, members who top up their loved ones’ MediSave will enjoy tax relief. Currently, tax relief is given to recipients of MediSave top-ups.
Tax relief of up to $8,000 a year for top-ups to self and loved ones respectively



From 1 January 2022, members can enjoy $8,000 tax relief, up from $7,000, when they top up their own CPF account in cash. They can enjoy another $8,000 tax relief when they top up for their loved ones. This cap in tax relief is applicable for top-ups to Special, Retirement and MediSave accounts.

children are loved ones in common sense. at least CPF announcement should add "subject to IRAS tax relief requirements"

 

[reddevil0728]

children are loved ones in common sense. at least CPF announcement should add "subject to IRAS tax relief requirements"

Language has been used quite consistently leh.

https://www.cpf.gov.sg/member/growi...s/top-ups-for-loved-ones-employees-and-others
but I agree they can probably be more precise with the language.

but it’s a balance between precision and ease of communication

 

[fr33d0m]

Language has been used quite consistently leh.

https://www.cpf.gov.sg/member/growi...s/top-ups-for-loved-ones-employees-and-others
but I agree they can probably be more precise with the language.

but it’s a balance between precision and ease of communication

the actual language used in the bill is "in respect of the individual’s eligible family members".

much more precise than "loved ones"

 

[reddevil0728]

the actual language used in the bill is "in respect of the individual’s eligible family members".

much more precise than "loved ones"

The headline

 

[eAtNeAt]

Does it mean that amp additional monthly payout is abolished?

 

[BBCWatcher]

Does it mean that amp additional monthly payout is abolished?

Yes, and it looks like that particular rule change is somewhat retroactive. With this rule change it's very simple: when funds are added to the Retirement Account of a CPF member who's receiving CPF LIFE payouts, the CPF Board will recompute and increase the member's CPF LIFE monthly payout (for life) starting from the next July. The CPF Board will not pay a separately computed classic Retirement Sum Scheme-like Additional Monthly Payout. (Except for a few "grandfathered" members who are already getting AMPs.)

There's an interesting little quirk in this rule change from an actuarial point of view. Currently the CPF Board does not allow anyone to join CPF LIFE later than age 80, and most members join CPF LIFE no later than age 70. This is to prevent "moral hazard" sort of scenarios where members in good or excellent health try to "game" the system too much. But you can game the system a little. One way (that I keep pointing out over and over, for I write the truth) is to defer payouts to age 70 (the default) if you're able. That gives you 5 more years of information about your own health status. But another potential option is to make RA top ups after you get more knowledge about your own longevity. That's not how I would play the game -- the core interest rate on RA is too attractive, and it's best to take that great deal up front -- but some people could play the game that way. For example, you could do this:

1. Let your RA be funded to the FRS at age 55, and leave it be.

2. Start CPF LIFE payouts at age 70. (Escalating or Standard Plan probably in this scenario, if you're in good health.)

3. When you hit age 90 (for example), deposit a relatively large amount of cash in your RA up to the current ERS.

This scenario is allowed, and maybe it would be "interesting" from a game playing point of view. Maybe it would even work. I think it's pretty silly, but I can imagine some silly game playing.

 

[eAtNeAt]

Hope it's not retroactive. There are some who deposits via amp effectively treating RA as a safe 4% fixed deposit that matures when they are 85/90.

Don't understand your last point to deposit into ers when one is so old.

 

[dork32]

Another sweep of SA and OA to RA (up to FRS) after 55 at payout start age??

This one i dont understand garmen. why must wait till 65 for the sweep. why does it not sweep immediately when there is money? like that can earn even more interest

 

[dork32]

Hope it's not retroactive. There are some who deposits via amp effectively treating RA as a safe 4% fixed deposit that matures when they are 85/90.

Don't understand your last point to deposit into ers when one is so old.

I think the analogy to fd is not quite right. cpf life does not mature at all, even if you are 85 or 90. it only matures if you die.

to me, whether to top up to ers does not depend on when i can finish withdrawing the sum.

i believe when i die, i will have something left for my kids. so i will look for some place with good returns and low risk to park money. cpf life is definitely one of the options.

and if i cannot die, ers will give me a higher payout throughout my life.

 

[luvpraline]

Hi BBCWatcher & all posters,

If the aim were to build up the homemaker spouse's retirement income while getting tax relief at the same time, which is better, VC to MA $8k or cash top up to SA $8k?

From what I've read, most employed ones prefer topping up MA to the BHS so that excess contribution overflows to SA. But in the case of the homemaker spouse, this might not be so relevant?

Also VC to MA can it be done $8k to MA only, at one shot, or must be to 3 accounts?

Thanks!