CPF: How you can benefit from enhancements to the system

In the first of a two-part series, The Sunday Times focuses on how you can help your loved ones via the Central Provident Fund Topping-Up Scheme.

Many Central Provident Fund (CPF) members have benefited from the recent enhancements to the CPF system.

The improvements include a raised CPF salary ceiling of $6,000 from $5,000, and an increase in contribution rates for those aged 50 and above.

According to the CPF Board, more members are topping up to their own and their family members' accounts via the Retirement Sum Topping-Up Scheme. Last year, 49,000 members - up 27 per cent from 2015 - received cash top-ups of $860 million in total.

RETIREMENT SUM TOPPING-UP SCHEME

In a nutshell, this scheme allows you to build your retirement savings by topping up your own CPF accounts or those of your loved ones, or anyone else. You can opt to top up your own or your loved ones' Special Accounts (below age 55) or Retirement Accounts (RA) for those aged 55 and above.

  • Many ways to do it

    Q How can I do a top-up?

    A By any of the following:

    •Log on to the CPF website using your SingPass under My Requests.

    •Through the e-cashier facility on the CPF website.

    •At any AXS station.

    •Download and complete the Retirement Sum Topping-up (RSTU) form on the CPF website; mail the completed form and cheque to CPF Board.

    •Monthly/yearly Giro deductions

    Q When should I top up?

    A You are encouraged to make top-ups early in the year to facilitate timely processing.

    If you are topping up with a cheque, your application must reach the board by Dec 31 at 10am, to enjoy tax relief for the following year's tax assessment.

    If Dec 31 falls on a weekend, your application should reach the CPF on the last working Friday of the year at 10am. This is to allow sufficient time for the cheque to be cleared.

    Topping up early will help you earn more interest throughout the year.

    Note that all top-ups under the RSTU are irreversible. This means that the savings transferred to your/your loved ones' accounts cannot be transferred back to your originating CPF account.

    Lorna Tan

You can make a cash top-up for anyone but it may not result in a tax relief as certain conditions have to be met. In total, you may enjoy tax relief of up to $14,000 per calendar year if you make cash top-ups for:

•Your parents, parents-in-law, grandparents, grandparents- in-law, spouse or siblings. To qualify, your spouse/siblings must either be handicapped or have income that did not exceed $4,000 in the preceding year.

•Yourself (or your employer makes a cash top-up for you). Note that you can enjoy tax relief for cash top-ups to your own or your recipient's RA only up to the current Full Retirement Sum (FRS) which is $166,000 for those who turned 55 from Jan 1. Cash top-ups beyond the current FRS will not be eligible for tax relief. Your employer will receive an equal amount of tax deduction.

HELPING YOURSELF AND PARENTS IN RETIREMENT

You can top up your RA or your parents' RA to enjoy higher monthly payouts. This can be done via regular monthly and/or yearly top-ups to your own or loved ones' CPF accounts through Giro, which can be monthly and/or yearly arrangements.

This makes it convenient for members to do top-ups on a regular basis to benefit from the Retirement Sum Topping-Up Scheme, without the hassle of having to complete forms or make cheque payments. You can earn more interest by topping up earlier in the year. So don't wait till the end of the year to do a top-up.

ENHANCED RETIREMENT SUM (ERS)

Introduced in January last year, the ERS is an additional retirement sum option aimed at boosting our nest egg so we can enjoy more retirement income in our golden years.

Recipients aged 55 and above can receive cash top-ups or CPF transfers to their RA up to the current ERS, which is three times the Basic Retirement Sum (BRS) of $83,000. The prevailing ERS is $249,000.

Of the 49,000 that received cash top-ups last year, 9,000 members exercised the ERS option. Those with ERS at age 55 will receive about $1,900 per month for life when they reach the Payout Eligibility Age (PEA) of 65.

 
 
 
 

HOW A TOP-UP IMPACTS A RECIPIENT'S PAYOUT

Members on the national annuity scheme CPF Life can use the top-up monies to buy an extra CPF Life annuity by writing to the CPF Board. Most people would rather leave the money in their RA and earn the interest. During the yearly review of your monthly payout in July, the top-up monies will be disbursed to you as an additional monthly payout. For members on the Retirement Sum Scheme (formerly Minimum Sum Scheme):

•If you receive top-ups below the FRS applicable to the cohort: The top-ups will go towards increasing the payouts, which will be adjusted automatically and capped at the full payout for the cohort.

•If you receive top-ups beyond the FRS in cash applicable to the cohort: The top-ups will go towards extending the payout duration. However, the recipient may apply to the CPF Board for an increased payout level, computed to last for 20 years from the recipient's PEA or five more years from application date, whichever ends later.

WHAT HAPPENS TO TOP-UP MONIES IF RECIPIENT DIES ?

Will they be refunded? Cash top-ups made on/after Nov 1, 2008 will be treated as cash gifts to the recipient. Any remaining cash top-ups will be paid to the recipient's nominees based on his CPF nomination or will be transferred to the Public Trustee for distribution according to the intestacy laws if there is no nomination.

For CPF top-ups made on/after Nov 1, 2008, any remaining top-up monies will be returned to the giver's CPF account, capped at the principal top-up amount, that is, minus earned interest.

For cash and CPF top-ups made before Nov 1, 2008, the remaining top-up monies will be returned to the giver's Ordinary Account (OA), capped at the principal top-up amount. If the giver dies before the recipient, then upon the death of the recipient, the topped-up monies returned to the giver's CPF accounts will be paid to the giver's appointed nominees.

WHAT ELSE CAN YOU DO?

It is important to review our parents' healthcare insurance policies and ensure they are adequately covered. You may wish to consider a personal accident policy for your parents, which covers outpatient charges in case of a fall as well.

Hold conversations with your parents on estate planning which includes matters like wills, and the Lasting Power of Attorney as well as the Advanced Medical Directive.

If they want to distribute their CPF savings according to their wishes, help them to arrange an appointment with CPF Board to make a CPF nomination.

Encourage your parents to stay healthy by staying active and keeping a healthy diet.

A version of this article appeared in the print edition of The Sunday Times on April 02, 2017, with the headline 'Benefit from enhancements to CPF system'. Print Edition | Subscribe