Connect with us

CPF

CPF Medisave: Here’s How Your Basic Healthcare Sum Might Look Like When You’re 65

Basic Healthcare Sum (BHS) is a cap, and not a minimum sum you need to have.


When we contribute a portion of our monthly salaries into our CPF accounts, a chunk of it goes into our MediSave Account (MA). Our MediSave Account balances are meant for our healthcare needs, including paying for certain healthcare insurance premiums on MediShield Life, private Integrated Shield Plans and Careshield Life, as well as a variety of treatments, such as day surgeries, outpatient treatments, vaccinations, health screenings and others.

This shows just how important our MediSave Account savings are in providing a safety net for Singaporeans. What many of us may not know is that the Basic Healthcare Sum (BHS) enforces a cap on how much money we can have in our MediSave Account.

Read Also: 9 Ways You Can Use Your MediSave To Pay For Your Healthcare Expenses

How Much Do We Contribute To Our Medisave Account?

In our initial working years, we start off contributing 8% of our salary to our MediSave Account, and this gradually increases to 10.5% as we grow older. At the same time, contributions to our Ordinary Account decreases as we grow older, while contributions to our Special Account increase until we turn 55, and then decrease as well.

This highlights the importance the government has put on securing ourselves in terms of our healthcare needs for our old age. While this is true, there is also a cap on our Medisave Account – the Basic Healthcare Sum (BHS).

For reference, here are the CPF allocation rates in 2022. Note that from 2022, those above 55 to 70 years will see between 2% and 1.5% more CPF contributions to their Special Account, coming from both employer and employee share of CPF contributions.

Employee’s Age (Years) Allocation Rates From 1 Jan 2022 (For Monthly Wages ≥ $750)
Ordinary Account (% Of Wage) Special Account (% Of Wage) Medisave Account (% Of Wage)
35 and below 23 6 8
Above 35 to 45 21 7 9
Above 45 to 50 19 8 10
Above 50 to 55 15 11.5 10.5
Above 55 to 60 12 5.5 10.5
Above 60 to 65 3.5 5.5 10.5
Above 65 to 70 1 2.5 10.5
Above 70 1 1 10.5

* From the CPF website

Read Also: Complete Guide To Your CPF Contributions In Singapore: Salary Caps, Contribution Rates And Allocation Rates

What Is The Basic Healthcare Sum (BHS)?

The Basic Healthcare Sum (BHS), which is currently $66,000 in 2022, caps the amount of money we can have in our Medisave Account for life when we hit 65. Once we turn 65, our BHS is fixed for the rest of our lives – even though the actual BHS might increase for subsequent cohorts.

This is meant to provide for our basic subsidised healthcare needs in our old age, as well as our MediShield Life premiums. The Basic Healthcare Sum (BHS) replaced the Medisave Contribution Ceiling since 1 January 2016. This move also saw the old Medisave Minimum Sum abolished.

Read Also: No Medisave Minimum Sum From 1 January 2016 – Here Is What You Need To Know About It

What Happens If I’m Turning 65 Next Year?

In 2022, the Basic Healthcare Sum (BHS) is capped at $66,000 for CPF members born in and after 1957. This cap will continue to rise each year, accounting for increasing life expectancy and healthcare costs. However, after we turn 65, our Basic Healthcare Sum does not increase anymore.

For reference, the Basic Healthcare Sum (BHS) was $52,000 in 2017 and $49,800 in 2016. The Basic Healthcare Sum (BHS) has increased around 5% each year – slightly higher than the 4% per annum interest we receive on our MediSave balances.

Most recently, the Basic Healthcare Sum (BHS) was increased 4.8% to $66,000 in 2022.

Year We Turn 65 Basic Healthcare Sum (BHS) Increase
2022 $66,000 4.8%
2021 $63,000 5%
2020 $60,000 4.9%
2019 $57,200 5.0%
2018 $54,500 4.8%
2017 $52,000 4.4%
2016 $49,800 N.A.
(MediSave Minimum Sum was $43,500 in 2015)

* From the CPF website

And What Happens If I’m Not Turning 65 Next Year?

The Basic Healthcare Sum (BHS) is $66,000 in 2022. This means we cannot continue contributing to our MediSave Account beyond this limit. If we’re not turning 65 next year, our Basic Healthcare Sum (BHS) will likely continue to increase each year.

In the situation we aren’t 65 but have already reached the Basic Healthcare Sum (BHS), we can no longer contribute to our MediSave Account. Any monies that would have gone into our MediSave Account, will instead flow into our Special Account, or Retirement Account (RA) if we are over 55. In the event our Special Account or Retirement Account has hit the Full Retirement Sum (FRS), the overflow will go into our Ordinary Account.

Read Also: What Happens To Your CPF Contributions When You Hit Your Basic Healthcare Sum (BHS) in Your CPF MediSave Account (MA)?

Do I Have To Meet The Basic Healthcare Sum Before I Am Able To Withdraw My CPF Monies?

There are two main instances in which we can withdraw our CPF monies – 1) when we turn 55 and 2) when receiving CPF LIFE payouts. In both instances, we can withdraw our eligible balances and monthly payouts, respectively, even if we have not met our Basic Healthcare Sum (BHS).

Unlike the previous scheme – the MediSave Minimum Sum – the Basic Healthcare Sum (BHS) is a cap rather than a minimum sum we need to save in our MediSave Account.

Read Also: How Much Cash You Can Withdraw In Lump Sum From Your CPF Account At Age 65?

What Will My Basic Retirement Sum (BHS) Look Like When I Turn 65?

To determine how much our Basic Healthcare Sum (BHS) will look like by the time we hit 65, we’ll have to rely on broad indicators. At best, these will be wide estimates of how much we will need when we turn 65. This is because there’s so much time between now and when we finally hit 65, and many things can happen – including the government changing the scheme again.

Firstly, we can rely on information from the government. In 2021, the government estimated an $18.8 billion budget for the Ministry of Health. Compared to 2016, when $9.9 billion was spent on the Ministry of Health, this is an average increase of 13.7% each year. Surely, our BHS cannot rise close to 14% each year for the next few decades.

Of course, we could also base it on the current trajectory the government has been taking when increasing our BHS each year – which is around 5%. Just to bear in mind, this is quite close to the annual increase in the Full Retirement Sum (FRS), which has been increasing at a compounded annual growth rate of 4.9% since 2003. However, this too would be hard to achieve.

Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55

The other piece of information we have is how much more individuals have been spending on healthcare. According to the Department of Statistics Singapore, we have been spending an average of 3.0% more on hospital services each year from 2016 to 2020. This is closer to the recent increases in our BHS each year.

Age In 2022 Basic Healthcare Sum (BHS)
71 and above $49,800 (Set in 2016)
70 $52,000 (Set in 2017)
69 $54,500 (Set in 2018)
68 $57,200 (Set in 2019)
67 $60,000 (Set in 2020)
66 $63,000 (Set in 2021)
65 $66,000 (Set in 2022)
Based on 3.0% increments
64 $67,980
63 $70,019
62 $72,120
61 $74,284
60 $76,512
59 $78,807
58 $81,172
57 $83,607
56 $86,115
55 $88,698
54 $91,359
53 $94,100
52 $96,923
51 $99,831
50 $102,826
49 $105,911
48 $109,088
47 $112,361
46 $115,731
45 $119,203
44 $122,779
43 $126,463
42 $130,257
41 $134,164
40 $138,189
39 $142,335
38 $146,605
37 $151,003
36 $155,533
35 $160,199
34 $165,005
33 $169,955
32 $175,054
31 $180,306
30 $185,715

 

As we can see, this figure is quite substantial for anyone aged 30 this year. Compounding by levels greater than 3.0% per annum would deliver figures that may be potentially unachievable and this may be the likely case if medical inflation persists.

Perhaps we may see a change in contribution levels to our Medisave Accounts that are much more substantial to achieve this in future. However, any change to CPF contributions would take money either away from our other accounts – which are also important for our home purchase and retirement – or see us contributing more than the up to 37% we’re already setting aside from our salary into our CPF accounts.

Don’t Get Too Worried (Just Yet)

These numbers may seem intimidating, and even scary, especially when combined with the ever-increasing Full Retirement Sum we also have to set aside in our Retirement Account. But you should not get too worried just yet.

Firstly, as stated, these numbers are merely projections into the future. We don’t really know what will transpire over such a long period of time.

Secondly, and more importantly, these figures are NOT a minimum amount we need in our Medisave Account. Instead, they are a “maximum” amount that we cannot exceed in our MediSave Account. Many individuals may also mistake the Basic Healthcare Sum as a minimum sum we need to accumulate in our Medisave Account. In fact, the Medisave Minimum Sum (MMS) was abolished since 1 January 2016, and we don’t have a minimum amount that we need to have in our Medisave Account. What this did was allow us to withdraw our monies from our accounts, beyond the required levels, without having to first meet a mandatory Medisave Minimum Sum.

In fact, the CPF Board clearly states on their website that there isn’t a minimum amount that we need to have in our Medisave Account. It even goes on to say that while we are not required to top up our Medisave Account, we can consider doing so on a voluntary basis as the Basic Healthcare Sum is an indicator of how much we may need for our healthcare in old age.

Finally, with increasing government spending on healthcare, individuals may not have to bear all of the increase in healthcare costs on our own. A greater share may come out of the government coffers to help individuals with healthcare expenses.

This article was first published on 28 May 2018 and updated with the latest information. 

Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.