A chunk of our monthly CPF contributions goes into our MediSave Account (MA). Our MediSave Account balances are meant for our healthcare needs, including paying for certain healthcare insurance premiums such as 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 more.
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.
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 decrease as we grow older, since our home repayment will be increasingly taken care off. Meanwhile, contributions to our Special Account increase until we turn 55, and then decrease as well, since we would be targeting to save the Full Retirement Sum (FRS) by 55.
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 2023.
|Employee’s Age (Years)||Allocation Rates From 1 Jan 203 (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||7||10.5|
|Above 60 to 65||3.5||6.5||10.5|
|Above 65 to 70||1||4||10.5|
* Approximate from the CPF website
What Is The Basic Healthcare Sum (BHS)?
The Basic Healthcare Sum (BHS), which is currently $68,500 in 2023, 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.
What Happens If I’m Turning 65 Next Year?
In 2023, the Basic Healthcare Sum (BHS) is capped at $68,500 for CPF members born in and after 1958. 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 3.8% to $68,500 in 2023.
|Year We Turn 65||Basic Healthcare Sum (BHS)||Increase|
(MediSave Minimum Sum was $43,500 in 2015)
* From the CPF website
What Happens If I’m Not Turning 65 Next Year?
The Basic Healthcare Sum (BHS) is $68,500 in 2023. 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 continue to increase for us 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 been contributed 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.
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.
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.
First, we can try to reference healthcare expenditures from the government budget 2022. It is estimated that the Ministry of Health will spend $19.3 billion in 2022. Compared to 2016, when $9.9 billion was spent on the Ministry of Health, this is an average increase of 12% each year. Instinctively, it is hard to fathom our BHS rising 12% each year for the next few decades.
We could also try to base our BHS increments on the current trajectory the government has been taking with recent increases – which is around 5%. The latest increase from $66,000 in 2022 to $68,500 in 2023 is a 3.8% rise. These figures are relatively close to the annual increase in the Full Retirement Sum (FRS), which has been increasing at a compounded annual growth rate of 4.5% since 2003.
The other piece of information we have is how much more households have been spending on healthcare. According to the Department of Statistics Singapore, households have been spending an average of 4% more on the “Health” category in the 10-year period from 07/08 to 17/18. This is closer to the most recent 3.8% increase in BHS from 2022 to 2023.
|Age In 2023||Basic Healthcare Sum (BHS)|
|72 and above||$49,800 (Set in 2016)|
|71||$52,000 (Set in 2017)|
|70||$54,500 (Set in 2018)|
|69||$57,200 (Set in 2019)|
|68||$60,000 (Set in 2020)|
|67||$63,000 (Set in 2021)|
|66||$66,000 (Set in 2022)|
|65||$68,500 (Set in 2023)|
|Based on 4.0% increments||Based on 3.0% increments|
As we can see, this figure is quite substantial for anyone aged 30 this year. Compounding our BHS by just 1% more – at 4.0% a year – will mean we have to set aside close to $80,000 more by the time we turn 65. Compounding by levels greater than 4.0% 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.
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