Forum: Why make self-employed top up shortfall CPF Board is creating?

Facade of the CPF Bishan Building
Facade of the CPF Bishan BuildingPHOTO: ST FILE

The Contribute As You Earn (CAYE) scheme will start early next year and apply to freelancers working directly for the Government and public sector agencies (Help for freelancers on Medisave contributions, Nov 5).

However, this is only half the problem solved, in particular for those who have sufficient Medisave funds and have reached their Basic Healthcare Sum (BHS) limits.

While I agree with the idea of Medisave contributions to address healthcare needs, I question the practice by the Central Provident Fund (CPF) Board of automatic transfers of amounts above the BHS at the beginning of each calendar year out of the Medisave account to other accounts.

The BHS has been increasing yearly and the rationale is increasing healthcare costs.

This may be so, but transferring money out of Medisave and simultaneously increasing the BHS creates a problem of a shortfall immediately, and this affects the self-employed significantly, who must carve out a portion of their earnings to contribute to Medisave.

If there is an excess over the BHS and the automatic transfer does not take place, the Medisave contribution need not be that much, or maybe there would be no need for a contribution.

Removing the automatic transfer makes it less onerous for the self-employed, who would not need to put in money only to have it transferred out at the beginning of each year.

I cannot find any valid reason for the automatic transfer out of the Medisave account if the BHS is to be increased the following year.

The self-employed must keep on topping up the shortfall that the CPF Board created in the first place.

In view of rising healthcare costs, BHS is likely to increase, so I propose that any excess amount above BHS be retained within Medisave for those below the age of 65, to accommodate any future increase in BHS limits. The CPF Board can consider transferring money in excess of the BHS out of Medisave accounts for members aged 65 and above.

Chan Swee Wing

A version of this article appeared in the print edition of The Straits Times on November 11, 2019, with the headline 'Why make self-employed top up shortfall CPF Board is creating?'. Print Edition | Subscribe