Tis’ the season for giving. While we may want to celebrate the Christmas spirit of giving, sometimes some recipients are really hard to shop for. Parents are especially hard to gift. If the gift is too expensive, they will complain that we spend too much. If the gift is too cheap, they will complain (but in secret to their friends).
Here’s why CPF top-ups are the best Christmas presents you can give to your parents and while you’re at it, gift yourself.
CPF Top-Ups Cannot Be Regifted
The social faux pas during Christmas is regifting and it’s never a good feeling when you see your hard-chosen Christmas present being regifted. It becomes worse when a freeloading sibling/relative conveniently takes the present for themselves.
The good thing about CPF top-ups is that they can only go to your intended recipients (i.e., your parents). You don’t have to worry about that top-up being regifted to someone else.
CPF Top-Ups Are Better Than Cash In Safeguarding Retirement
For most Singaporean households, giving cash as a present is a perfectly acceptable gift. In fact, it may be the most perfect gift for parents who can save it or spend it in their own preferred manner.
However, cash gifts always come with the worry that the money may be spent in an undesirable manner. For example, if your parents are not financially savvy, the monies may be mishandled or squandered away on frivolous expenses.
With CPF top-ups, you can gift your parents substantial amounts of money and rest assured that the money will go towards safeguarding their retirement. CPF top-ups made through Retirement Sum Topping Up Scheme (RSTU) go directly to the recipients’ Special Account (SA) or Retirement Account (RA) if they are over the age of 55.
The amount you choose to gift your parents through CPF top-ups will then grow and compound in their SA or RA at the minimum interest rate floor of 4% p.a. and up to 6% p.a if they are aged above 55.
CPF Top-Ups Are As Good As Cash In Retirement And Is Tax Deductible
If your parents are above the age of 55 and already have the Full Retirement Sum (FRS) in their CPF account, CPF top-ups are as good as cash for them.
This is because we can only freely withdraw our CPF monies above the FRS after 55. If our parents are above 55, we can make top-ups to their CPF account until the limit of the Enhanced Retirement Sum (ERS). As long as there are sufficient monies in their OA and SA and their CPF balance is maintained above the FRS, they can freely withdraw as cash.
The benefit of making a CPF top-up instead of presenting cash to our parents is that we can receive tax deductions as the giver, up to $8,000 for topping up our loved one’s CPF account.
Your Parents May Also Get A Matched Gift From The Government
If your parent’s CPF account is below the Basic Retirement Sum, they can still benefit from your gift of CPF top-ups. In fact, they will receive double the gift because the government will do dollar-for-dollar matching for eligible seniors.
If your parents meet the following criteria for Matched Retirement Savings Scheme, they will receive that matched amount from the government:
- Aged 55 to 70 (inclusive)
- CPF Retirement Account savings is less than the prevailing Basic Retirement Sum (the BRS for seniors turning 55 in 2022 is $96,000)
- Average monthly income of not more than $4,000
- Annual Value (AV)of residence being not more than $13,000
- Do not own more than one property
Gift Yourself This Christmas
In addition to topping up your parent’s CPF account, you can also gift yourself this Christmas with a CPF top-up to safeguard your own retirement. Not only are you compounding the monies for your future retirement, but you will also be eligible for up to $8,000 tax deduction for top-ups to your own CPF account.
So, share the spirit of giving with this slightly unconventional but highly thoughtful gift!
Read Also: What Is The Maximum Amount Of Tax Relief We Can Get From Our CPF Contributions Each Year
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