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3 great reasons to top up your CPF

Some of the benefits of topping up your CPF include enjoying attractive interest rates and some tax relief.
Some of the benefits of topping up your CPF include enjoying attractive interest rates and some tax relief.PHOTO: GETTY IMAGES

Top up your CPF to build a nest egg for your retirement and reap other benefits. Here are the top three reasons to do so now.

1. Attractive interest rates

You get much higher interest rates by topping up your CPF Special Account (if you are below 55) or Retirement Account (if you are 55 and older) than by leaving the money in a bank account.

If you are under the age of 55, you can get up to 5 per cent in interest on the first $60,000 of your combined CPF savings.

If you are 55 and older, you can get up to 6 per cent on the first $30,000 of your savings, and up to 5 per cent on the next $30,000.

With the effect of compound interest, your CPF savings will grow exponentially year on year. The earlier you make these top-ups, the more time they have to compound and grow for your benefit.

If you save $100 a month for 15 years in your piggy bank, you would get $18,000. With compound interest, if you top up $100 a month to your Special or Retirement Account for 15 years, you would get over $24,000¹. By topping up for another 15 years, the amount would grow further to over $68,000¹.

2. CPF savings are safe

CPF monies are guaranteed by the Government. This gives the assurance that your CPF savings will be paid back regardless of financial market conditions.

Furthermore, the guaranteed floor on CPF interest rates shields members from the risk of low interest rates when markets are weak. All CPF savings earn a legislated minimum of 2.5 per cent per annum, while the current floor rate for Special, MediSave and Retirement Account monies is 4 per cent. Hence, topping up your CPF is a safe and attractive alternative to investing your money in stocks and other financial instruments.

3. Tax savings you enjoy

By making cash top-ups to your own CPF account and that of your loved ones, you can get up to $14,000 in income tax relief per year.

  • Cash top-ups that you make to your own CPF account will earn you the same amount in tax relief, up to $7,000 per year.
  • Cash top-ups that you make to CPF accounts belonging to your spouse, siblings, parents, parents-in-law, grandparents and grandparents-in-law will also net you the same amount in tax relief, up to $7,000 per year.

Topping up your own or loved ones’ CPF accounts is an easy way to make your money work harder, ensure peace of mind in your retirement years, and even give you some tax relief on your road towards better retirement adequacy, all at the same time.

Click here for more information on the Retirement Sum Topping-Up Scheme.

¹Estimated figures are for illustrative purposes, and are computed using the base interest of 4 per cent per annum on your Special or Retirement Account.

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