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4 Ways To Exploit The Government For Financial Well-Being

Here are some easy methods that anyone can use to improve their financial well being.

We love exploiting government schemes. There’s something about it that makes us feel like Robin Hood –  outsmarting the rich (Singapore Government) to give to the poor (ourselves). But even Robin Hood had to have good strategies for his attacks and what he was taking.

So here are some of the government schemes that we can take full advantage of today for our own financial well-being.

1. Transferring Money From Our CPF Ordinary Account To Special Account

Do you want to earn an additional 1.5 per cent in risk-free annual interest for your retirement portfolio?

Well here is the thing. You can, and that is by simply transferring the money that you have in your CPF Ordinary Account (CPFOA) to your CPF Special Account (CPFSA). The CPFOA pays a base interest rate of 2.5% per annum while the CPFSA pays a base rate of 4% per annum, so that’s an interest differential of 1.5% per annum.

If you are intending to build your retirement portfolio, this is one of the best and most effective ways you should consider. At $100,000, this would give you an additional $1,500 more in interest each year, risk-free, and compounded, till the age of 55.

2. Maximise Government Grants For HDB Flats

The sheer number of HDB grants that Singaporeans are entitled to have crept up so much that we are starting to get really confused over the various acronyms that they are given.

Let’s recall some of the key ones.

Additional Housing Grant (AHG) 

The AHG of up to $40,000 is meant to help lower and middle-income families earning up to $5,000 per month buy their first subsidised home. The AHG is granted according to your income, and can be used by families to offset the cost of purchasing their first home, new or resale.

It is important to note that at least one of the applicants (you or your spouse) must be working over the past 12 months prior to the application.

Special CPF Housing Grant (SHG)

If you are intending to buy a new 4-room (or smaller) unit at a non-mature estate, the SHG will provide additional grant of up to $40,000 for homebuyers earning up to $8,500, exact figures depend once more on your income.

This grant is on top of what you get from the AHG.

Step-Up CPF Housing Grant 

If you are currently living in a 2-room subsidised flat in a non-mature estate and want to upgrade to a new 3-room flat in a non-mature estate, you will be entitled to the step-up grant of $15,000.

Proximity Housing Grant (PHG) 

If you purchase a resale flat that is near your parents (or children), you will now get an additional $20,000 grant. Aside from being able get home cooked meals from Mom and baby seating support from Dad, you still get extra government grants. This provides all the more reasons to purchase flats nearer to your loved ones.

This is on top of the $30,000 you will get if you are a first-time buyer getting a resale flat.

3. Claim Your Tax Break 

Wealthy people all over the world engage tax consultants to help them reduce their tax liabilities.

In Singapore, we have one of the lowest income tax rates in the world. However, that doesn’t mean the average Singaporeans should just sit back, relax and wait to be taxed. There are some things you can do (legally) to reduce your income tax liabilities.

Top-Up Your Family Members CPF Account 

If you provide a top-up to your parents’ CPF Account, you can earn a dollar-for-dollar tax relief of up to $7,000 per year. Doing so allows you to kill two birds in one stone. You provide for your parents retirement while at the same time reduce your tax burden.

Course Fee Relief

If you are currently working and pursuing a part-time degree, masters, or other forms of upgrading which is relevant to your career, there is a great chance that you can actually claim tax relief on the cost you incur for your education. These include examination fees, course fees and registration fees up to a maximum of $5,500 per year.

4. Treat The Singapore Saving Bonds As Your Personal De-Facto Savings Account

If you are looking for a fixed deposit account that provides you upwards of 2.6% interest per annum for a 10-year period, but does not penalise you in anyway for early withdrawal, then we got just the right product that you are looking for. The Singapore Savings Bonds (SSB).

Unfortunately, because no one makes any commission selling you the SSB, the SSB tends to be underrepresented in the finance industry. Agents would rather sell endowment plans or saving plans that are risker, possibly give you less returns and lock away your flexibility, instead of recommending the SSB, assuming they even understand it.

In fact, we have known of agents who have dissed the SSB even though it was clearly superior to the benefit illustration of the savings plans they were trying to sell us (yes, we spend sometime looking through both). Talk about ethics in the industry.

Read Also: Why You Should Invest In The SSB Instead Of Endowment Plans

The abovementioned ways are tools or tips that any Singaporean can easily “exploit” to his or her advantage. They cost next to nothing and are easy to implement.

Rather than find complex ways and take additional, and often unknown, risks, why not simply rely on these straightforward and easy to understand methods instead?

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