On 1 November 2021, Ministry of Manpower (MOM) announced CPF (Amendment) Bill 2021 which set out changes to the CPF scheme. Concurrently, they also announced the increase of the retirement age from 62 to 65 and the re-employment age from 67 to 70 by 2030. While this would be gradually implemented from 1 July 2022, there would be no change to CPF withdrawal ages. This would be assuring to Singaporeans concerned about any delays to being able to withdraw their CPF savings as they near retirement.
To help CPF members to prepare for retirement, the following 7 changes will be made to the CPF scheme, with the first taking effect immediately from November 2021.
#1 Automatic Increase Of CPF LIFE Payouts If You Receive Inflows To Your Retirement Account [From November 2021]
Immediate from 1 November 2021, we would be able to automatically receive higher CPF Life payouts when we receive inflows to our Retirement Account (RA). Examples of inflows to our RA include top-ups or housing refunds.
When we turn 65, our RA savings are automatically transferred to form our CPF LIFE premiums (for Standard and Escalating plans). Prior to the change, any inflow to our RA savings, such as RSTU top-ups or housing refunds when we sell our property, was paid out as additional monthly payouts, separate from CPF LIFE payouts. If we wanted to use the inflow to increase our CPF LIFE payouts, we would have to take the additional step of applying for it. With the new change, this would be automatically applied, eliminating the hassle of applying.
#2 Tax Relief From MediSave Top Ups To Apply To The Giver [From 1 January 2022]
Currently, the tax relief from MediSave top ups apply to the recipient of the top-ups. When we make top ups to our loved ones’ MediSave accounts, the tax relief actually apply to them. This is unlike the Retirement Sum Topping Up Scheme (RSTU), where the tax relief applies to the giver.
With effect from 1 January 2022, the tax relief from MediSave top ups will apply to the giver. This will align with the RSTU. It also makes more sense for us to top up our loved ones’ MediSave as it would maximise our tax deductions.
#3 MediSave Top Up Limits Will Be Simplified [From 1 January 2022]
Topping MediSave will also be simpler from 1 January 2022 as the maximum limit will be the difference between our Basic Healthcare Sum and our MediSave balance. For CPF members turning 65 in 2021, the BHS is $63,000.
Currently, the maximum amount we can top up is the difference between the CPF Annual Limit ($37,740 in 2021) and the mandatory CPF contributions made for the calendar year. This is then subject to the limit of our BHS. With the change, there is no need to consider the CPF Annual Limit.
#4 Increase In Tax Relief To $8,000 For Top Ups To Self And $8,000 For Top Ups To Loved Ones [From 1 January 2022]
Currently, through the Retirement Sum Topping Up Scheme (RSTU), we can receive up to $7,000 tax relief when we top our CPF account and another $7,000 tax relief when we top up our loved ones’ CPF accounts.
From 1 January 2022, this will increase to $8,000 tax relief for self top ups and another $8,000 tax relief for top ups to loved ones. This tax relief cap will be combined with the tax relief for voluntary contributions to MediSave.
#5 Continuation Of Retirement Payouts From Ordinary And Special Accounts [From First Quarter 2022]
Only applicable for those who are under the Retirement Sum Scheme, members who have fully withdrawn their Retirement Account savings but still have funds in their Ordinary Account (OA) or Special Account (SA), will automatically receive monthly payouts from their OA or SA. This will apply from first quarter 2022 and is expected to benefit 83,000 members.
Currently, if we are receiving Retirement Sum Scheme payouts, the payouts will cease when we deplete our RA, even if we still have savings in our OA or SA.
#6 Beneficiaries To Receive CPF Monies Faster And With Greater Ease [From 1 April 2022]
From 1 April 2022, it will be easier to claim the CPF assets, both nominated or un-nominated, upon the passing of our loved ones.
For un-nominated CPF monies, currently, the monies are transferred to the Public Trustee’s Office (PTO) for disbursement. The PTO then traces and verifies each beneficiary’s claim before disbursing the monies. From 1 April 2022, this will be streamlined to let a single beneficiary represent all other beneficiaries (with their consent) to receive un-nominated monies amounting not more than $10,000. This process will be simpler and faster. For un-nominated CPF monies exceeding $10,000, the process will remain unchanged.
For nominated CPF monies, the monies are disbursed automatically by CPF Board to the qualifying nominees. From 1 April 2022, this automatic disbursement will apply to nominees with bequeathed discounted Singtel shares, purchased under the Special Discounted Shares scheme. Currently, the Board has to wait for nominees to instruct whether to transfer these shares to their own CDP accounts or liquated. If the shares are not claimed after 7 years, the Board would then liquate them.
Following the change, these shares would be liquidated 6 weeks after the Board is notified of a member’s death, unless otherwise instructed. The sale proceeds will then be automatically disbursed, together with other nominated CPF monies, to the nominees. This liquation is line with the choice of most nominees when claiming bequests today.
In line with the streamlining of process and automatic disbursement, CPF Board would also shorten the duration of retaining unclaimed CPF monies from 7 years to 6 months after the Board is notified of the member’s death. If the nominated monies are not claimed within 6 months, the monies will be transferred out the deceased member’s CPF accounts and no further interest would be paid. Nonetheless, CPF beneficiaries still retain the right to claim the nominated at any time.
#7 Transfer Of Ordinary And Special Accounts Savings To Retirement Account At Payout Start Age [From 2023]
While the age where we are eligible to start our CPF LIFE payouts is 65, we actually have a choice to start our payouts anytime from 65 to 70 years old. By delaying the start of our payouts, we allow our CPF monies to compound further and increase our eventual payouts. According to CPF, this deferment can increase our payouts by up to 7% for each year deferred.
At age 55, our Retirement Account (RA) is created and savings from our SA and OA, up to the Full Retirement Sum, will be transferred to our RA. If by the time we turn 65 and are eligible for payouts, our RA savings is less than our FRS, there would be another transfer from our SA and OA to our RA.
To give greater flexibility, For members turning 65 from 2023, their Ordinary and Special accounts savings will be transferred to their Retirement Account, up to their Full Retirement Sum, when they start their monthly payouts instead of when they are eligible to start payouts.
Here’s an infographic summarising the CPF changes:
This article was originally published on 7 November and updated with infographic.
Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.