How does CPF Board derive Basic Healthcare Sum increments?

As of Jan 1 this year, the Central Provident Fund (CPF) Board's Basic Healthcare Sum (BHS) has been revised upwards to $54,500 from $52,000. That is an increase of 4.8 per cent.

The previous adjustment, from 2016 to last year, was 4.4 per cent.

According to the CPF Board, the BHS applicable to a member "will be adjusted yearly to account for increasing life expectancy and healthcare costs" until the year the member turns 65.

Based on an increment of 5 per cent per year, as healthcare costs and ageing concerns are likely only to rise, the BHS would be close to $185,000 for a CPF member who is 40 years old today, when he turns 65.

BHS has a direct impact on one's CPF savings, particularly for retirement, as excess contributions above one's BHS are automatically transferred to his other CPF accounts.

Can the CPF Board share how the increments are derived? Can this measure be used as a guide when planning the budget for Singapore's healthcare costs?

Yah Jun Yang

A version of this article appeared in the print edition of The Straits Times on January 31, 2018, with the headline 'How does CPF Board derive Basic Healthcare Sum increments?'. Print Edition | Subscribe