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Revisit your CPF options to get the best out of them

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There is no better time than the start of a new year to take stock of our finances and evaluate our goals and budget, including running the rule over the low-risk option of Central Provident Fund (CPF) savings.

CPF retirement sums increase annually to keep up with the inflation, so it is worth considering top-ups to boost our nest egg. To help you better plan for your retirement, the CPF Board has outlined the retirement sums applicable to members turning 55 from 2016 to 2020 in advance. The Sunday Times highlights what CPF members can do to optimise their retirement savings.

Members turning 55 this year

When members turn 55, a CPF Retirement Account (RA) is created. Savings from their CPF Special Account (SA) and Ordinary Account (OA), up to the Full Retirement Sum (FRS), will be transferred to their RA to form their retirement sum.

You can withdraw up to $5,000 of your OA and SA savings even if you are unable to set aside your FRS. This will provide monthly payouts when they reach their eligibility age, which can be deferred up to 70.

The higher the retirement sum, the higher the monthly payouts. The FRS for members turning 55 this year is $176,000, which gives them a payout of $1,350 to $1,450.

Members who own a property can choose to set aside the Basic Retirement Sum (BRS). The BRS for members turning 55 this year is $88,000. Any amount above the BRS can be withdrawn after 55.

If you want to receive higher payouts, you can top up your RA up to the prevailing Enhanced Retirement Sum (ERS) of $264,000, which gives you a payout of $1,960 to $2,110.

The above payouts are estimates based on CPF Life Standard Plan computed as of 2019. Do note that payouts may be adjusted to account for long-term changes in interest rates or life expectancy. Such adjustments (if any) are expected to be small and gradual. Top-ups can be done via cash or CPF transfers.

Members who are looking at helping their spouses build up their retirement savings can transfer CPF savings above their BRS of $88,000 to them. When it comes to top-ups for parents and grandparents, members can transfer their balance CPF savings after setting aside their BRS of $88,000, with sufficient property charge/pledge to make up their FRS of $176,000.

This charge is created when you use your CPF savings to pay for your property. It secures the refund of your CPF savings used for the property and the interest you would have earned on those savings when you sell, transfer or otherwise dispose of this real estate.

A CPF property pledge is created on your property when you pledge it to withdraw your Retirement Account savings above your Basic Retirement Sum. The pledge secures the refund of the pledged amount when you sell, transfer or otherwise dispose of the property.

If you are still paying off a mortgage, you can use your retirement savings in excess of the prevailing BRS of $88,000 for this.

You can also use your OA savings to pay for the house.

In addition, members can write in to the CPF Board to request to set aside their OA savings for housing from age 54.

Therefore, these OA savings will not be used to form their retirement sum.

However, members' monthly payouts from age 65 will be reduced with a lower retirement sum being set aside.

Members who are still financing their children's education loan using CPF savings will have to set aside the FRS or the BRS with sufficient property charge/pledge in the RA before they can use their Ordinary Account savings for education purposes, up to the available withdrawal limit under the CPF Education Scheme.

Members who have set aside the FRS or BRS with sufficient CPF property charge/pledge in the RA can consider waiving the education loan repayment. This means the student will not need to repay the outstanding education loan.

Members who are over 55

Members in this age group can still top up their RA up to the prevailing ERS - which is three times the BRS - in their RA. By doing so, they can expect higher monthly payouts.

Note that members over 55 are getting an additional 1 per cent interest on the first $30,000 of their CPF savings, making 6 per cent interest a year. This is on top of the 1 per cent extra interest on the first $60,000 in CPF combined balances, which every member enjoys.

CPF member Cecilia Siow, 61, has been topping up her RA to each year's prevailing ERS since 2016, when ERS was first introduced.

She kicked herself for not doing it early in 2018, and did it at the start of this year, without forgetting again. "As a colleague reminded me, do so at the start of the year and in one lump sum so that the retirement savings can start earning the interest earlier," she says.

Ms Siow also contributes to her three CPF accounts (Ordinary, Special and Medisave) via the CPF Voluntary Contribution Scheme, which is capped at $37,740 each year. This is to boost her nest egg as the mandatory CPF contribution rates from her employer go down after 55.

The maximum amount of voluntary contribution under this scheme is the difference between the cap of $37,740 and the amount of mandatory contribution received for the year. The excess contribution above the cap will be refunded without interest. Note that the voluntary contribution is non-tax deductible.

You can use the CPF Contribution Allocation Calculator on the CPF Board's website to find out how much is allocated to each of the three CPF accounts.

Any Medisave contributions in excess of the member's Basic Healthcare Sum (BHS) will be transferred to the SA for members aged below 55 if they do not have the prevailing FRS, and to the RA for members aged 55 and above if they do not have the cohort's FRS or BRS with sufficient property pledge/charge. Otherwise, the excess CPF contribution will be transferred to the OA.

If you want to help your spouse build up his or her retirement savings, you can transfer savings above your cohort's BRS to him or her. Members can make top-ups to parents and grandparents by transferring their balance CPF savings after setting aside their cohort's BRS with sufficient property charge/pledge to make up their cohort's FRS.

Members aged below 55

Members below age 55 are not allowed to top up to ERS but they can top up their SA up to the prevailing FRS of $176,000.

Members looking to help their spouses build up their retirement savings can transfer CPF savings above the prevailing BRS of $88,000 to them. When it comes to transfers to parents and grandparents, members can move balance CPF savings after setting aside the prevailing BRS of $88,000, with sufficient property charge/pledge to make up the current FRS of $176,000.

Tax reliefs

If you use cash (rather than CPF transfers) to top up your SA to FRS, not only do you stand to earn attractive CPF interest, but you also get a tax relief of up to $7,000.

You get an additional tax relief of up to $7,000 if you top up specific family members' CPF via cash. They include spouse, siblings, parents, parents-in law, grandparents and grandparents-in-law.

For spouse and siblings, their annual pay in the year of the top-up cannot exceed $4,000 or they should be handicapped. Note that there is no tax relief for top-ups beyond the prevailing FRS, and tax relief is limited to the $80,000 personal income tax relief cap.

New modes for top-ups

Instead of downloading CPF forms or going for Giro, regular top-ups can be done by using the mycpf mobile app, which offers a convenient avenue, even on the go. You can also make a top-up easily through PayNow QR. The CPF Board said cash top-ups to yourself and your loved ones can be credited in just one working day.

*Join Invest Editor Lorna Tan for her talk on retirement planning via CPF at Agape Village, multi-purpose hall, level 1, 7A Lorong 8 Toa Payoh, from 7.30pm on Feb 22. To register, please e-mail agapevillage@caritas-singapore.org or call 68017400.

Tips on CPF top-ups


Make a top-up earlier in the year to earn more interest and benefit from compound interest.

Let's assume you regularly top up your Special Account by $7,000 a year for 10 years - a total of $70,000. If you had performed the top-up in January, the total interest earned (based on the current SA interest rate of up to 5 per cent per year) over 10 years of $21,574 is higher than the $17,802 interest from topping up in December.

If topping up in a lump sum is too much of a stretch, you can still make small but regular top-ups. Consider allocating a portion of your monthly pay to your CPF account. Do it automatically through Giro so as not to forget and to avoid the year-end rush.

Confused about CPF payout age? All you need to know
The retirement sum you set aside in your CPF Retirement Account will be used to provide you with monthly payouts once you reach your payout eligibility age. This is 65 for those born from 1954.

Recently, some CPF members were confused as to when they could start receiving their monthly payouts.

About six months before you turn 65, the CPF Board will inform you that you can start your monthly payouts by completing an application form with your bank account details or to apply online. Your payouts will start from your birthday month.

Starting from this year - for those who turn 65 - you will also be invited to attend a CPF Retirement Planning Service session where you can learn about the options you have upon reaching payout eligibility age, such as how you can start your payouts as well as how you can increase the payouts.

If you are still working or have other sources of income, you may not want to start your payouts at 65. So you can choose to begin the payouts at any time between ages 65 and 70.

Do note that if you do not submit your application to the board between the ages of 65 and 70, your payouts will automatically start at the age of 70.

Members who defer the start of their payouts will benefit from getting more retirement savings with the attractive interest that they earn on their CPF savings. In fact, for every year that you defer, your CPF Life payouts will increase by up to 7 per cent.

Lorna Tan


How are CPF rates computed?
The interest rates for Ordinary Account, Special Account (SA) and Medisave Account (MA) are reviewed quarterly.

It will earn either the legislated minimum interest of 2.5 per cent per year, or the three-month average of major local banks' interest rates, whichever is higher.

Savings in SA and MA earn either the current floor interest rate of 4 per cent a year or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1 per cent, whichever is higher.

The interest rate for RA is reviewed annually. RA funds credited each year will be invested in newly issued Special Singapore Government Securities (SSGS) which will earn a fixed coupon rate equal to either the 12-month average yield of the 10YSGS plus 1 per cent computed for the year, or the current floor rate of 4 per cent a year, whichever is higher.

The floor interest rate of 4 per cent is extended until Dec 31 this year in view of the continuing low interest rate environment.

Lorna Tan