6 CPF Changes Announced In Budget 2024

Budget 2024 came with some changes to CPF rules, and this will affect how Singaporeans take it into account to plan and save for retirement. Here is a quick summary to the CPF changes that will take effect from 1 January 2025.

#1 Special Account Will Be Closed At Age 55

Previously, the Retirement Account (RA) will be created at age 55, and it will be funded from the Special Account (SA) followed by Ordinary Account (OA) up to the Full Retirement Sum (FRS). The SA and OA remain, and members may withdraw funds from them from age 55 onwards.

The announced changes will see the SA closed upon member reaching age 55 from 1 January 2025 onwards. The funds in the SA will first be transferred into the RA, and the excess, if any, will be transferred into the OA.

Consequently, the loophole to known as the CPF Shielding Hack would now no longer be available.

#2 Enhanced Retirement Sum (ERS) Increased To 4 Times Of Basic Retirement Sum (BRS)

The ERS was previously 1.5 times of Full Retirement Sum (FRS), and since FRS is 2 times of BRS, that means that the ERS would be equivalent to 3 times of Basic Retirement Sum (BRS). In Budget 2024, ERS was changed to 4 times of BRS, which will allow members to increase contributions through Retirement Sum Topping-Up (RSTU) or OA. This will allow members to get higher payouts through CPF LIFE.

Read Also: 8 Things To Know About The CPF Enhanced Retirement Sum (ERS)

#3 Enhancements to Matched Retirement Savings Schemes (MRSS)

The MRSS was launched in 2020 to help eligible seniors reach their BRS through dollar-for-dollar matching under the RSTU. There are two enhancements announced in Budget 2024.

Source: CPF Website

Firstly, the matching grant cap will be increased from $600 per year to $2,000 per year, with a $20,000 cap over the member’s lifetime. Secondly, the age cap has been broadened to include all members aged 55 and above.

Do note that starting 1 January 2025, RSTU cash top-ups that receive the matching grant will no longer qualify for tax relief.

While there was previously no lifetime cap for the MRSS, it would have taken 34 years of topping-up at the $600 annual cap to reach $20,000, which means the member will receive $20,000 in matching grants earliest at age 89. With the announced changes, a member could receive the full $20,000 in matching grants by as early as age 65, which will continue to earn interest. Do note that members will no longer be eligible for MRSS once the BRS is reached.

#4 Higher CPF Contribution For Older Workers Aged 55 to 65

From 1 Jan 2025, Employees aged 55 to 65 and with wages exceeding $750 will have their CPF contribution rate increased by 1.5%.

Source: CPF Website

Since the SA will be closed at age 55, the CPF contributions will be fully allocated to their RA up to the FRS, with the remainder channelled to the OA.

The CPF Transition Offset will be extended for another year to cover half the increase in employer contributions for 2025. In other words, since the employer contributions will increase by 0.5% of the worker’s wage, the CPF Transition Offset will cover 0.25% of the worker’s wage in 2025.

#5 Increase In Income Threshold Of Spouse/Siblings For Tax Relief From Cash Top-Ups

Previously, givers who make cash top-ups to their spouse’s/sibling’s CPF accounts will enjoy tax relief if the spouse’s/sibling’s income does not exceed $4,000 in the previous year. This amount has been increased to $8,000. Do note that this income includes income from bank interest, dividend and pension, investment income, rental income and directorship income.

#6 Enhancements To Silver Support Scheme

The two main enhancements to the Silver Support Scheme (w.e.f. 1 January 2025) are:

• Payments will be raised by 20%.
• Criterion for household monthly income per person is raised to $2,300 (up from $1,800).
  Source: CPF Website

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