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What Happens To Your CPF Contributions After You Hit Full Retirement Sum (FRS)?

Our CPF mandatory contributions continue to flow into our Special Account after FRS


For 2022, the Full Retirement Sum (FRS) is $192,000 for those turning 55 this year. This is the amount that is meant to safeguard our retirement and one of the thresholds that determines our CPF withdrawals. While most Singaporeans reach our Full Retirement Sum only later in life, a small minority may have already accumulated their Full Retirement Sum before the age of 55.

As of 31 December 2020, 1,730 of those aged between 26 to 30 years old have CPF balances between $200,000 to below $220,000. This is more than the FRS for 2022. If you ascribe to the 1M65, 4M65 or even 10M65 schools of thought, you may be thinking of ways to maximise your CPF savings and be on your way to reaching the FRS before the age of 55.

If you have reached or are on your way to reaching this milestone you may be wondering what actually happens to your CPF contributions after you hit the Full Retirement Sum.

Read Also: How Much CPF Savings Should You Have At Every Age Group

CPF Contributions Allocations Flow To Medisave First, Then The Special Account And Finally The Ordinary Account

As working adults, we would be familiar with CPF contributions. Aside from our own employee contribution to CPF, our employers also contribute to our CPF, forming a total of 37% contribution to our CPF for those aged below 55 years old. This contribution varies depending on our age and income.

Employee Age (Years) Contribution Rates (for monthly wages ≥ $750)
Employer (% of wage) Employee (% of wage) Total (% of wage)
55 and below 17 20 37
Above 55 to 60 14 14 28
Above 60 to 65 10 8.5 18.5
Above 65 8 6 14
Above 70 7.5 5 12.5

Source: CPF

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

However, we may not be familiar with how our CPF contributions are allocated across our various CPF accounts: MediSave Account (MA), Special Account (SA) and Ordinary Account (OA).

When we are younger, our OA receives bulk of our CPF contributions. About 62% of our CPF contributions go into our OA, 16% to our SA and 22% to our MediSave when we are aged 35 and below. This allocation changes, with more going to our MediSave as we grow older. When we are aged above 70 years old, 84% of our CPF contributions would go to our MediSave.

Source: CPF

For example, if the CPF contribution for a 30-years-old is $100, $21.62 will go to his MA, $16.21 will go to his SA and $62.17 will go to his OA. If he is 60 years old, for the same $100 CPF contribution, $37.50 will go his MA, $19.64 will go to his SA and $42.86 will go to his OA.

Age CPF Contribution Ordinary Account Special Account MediSave Account
35 & below $100 $62.17
($100 – $21.62 – $16.21)
$16.21
($100 x 0.1621)
$21.62
($100 x 0.2162)

 

There is also an order of priority in how our CPF contributions are allocated: MediSave Account first, followed by Special Account and the remainder goes to the Ordinary Account.

After Reaching Full Retirement Sum (FRS) In Our Special Account, CPF Contributions Accumulate In Our Special Account

When we hit our FRS in our SA, our mandatory contributions continue to flow in our SA.

This means even when we hit the FRS in our SA, any further CPF mandatory contribution that is supposed to be allocated to SA would continue to flow into our SA.

However, we have already hit the Basic Healthcare Sum (BHS) in our MediSave Account, the MA allocation would flow into SA. For those aged 55 and above and have shortfall in their RA, the MA overflow will be credited to RA. If they have met FRS in cash or BRS with a property that lasts up to at least age 95, the MA overflow will be credited to OA.

Age CPF Contribution Ordinary Account Special Account MediSave Account
55 and above $100 $62.17 $16.21 + $21.62 Hit BHS.
$21.62
($100 x 0.2162)

 

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

We Would No Longer Be Able To Make Top-Ups To Our Special Account If We Hit FRS in SA

There is a limit on how much we can top-up in our Special Account before 55: this is capped at the current Full Retirement Sum. If we are 55 and above, the maximum amount we can have in our Retirement Account is the Enhanced Retirement Sum (or 1.5 times the FRS).

If we have already reached the FRS in our Special Account before the age of 55, we also would not be able to make further top-ups to our Special Account or enjoy the tax benefits of the Retirement Sum Topping-Up Scheme (RSTU) for topping up our own account. We would also not be able to make transfers from our Ordinary Account to our Special Account.

However, if we have reached the FRS by a combination of our OA and SA balances, our SA balance is likely to be lower than the FRS. In this case, we would be able to top up our SA or transfer our OA savings to our SA to enjoy the higher 4% interest rate of our SA, up to the FRS limit.

For example, the 2022 FRS is $192,000 and we have $150,000 in our SA and $45,000 in our OA. While in totality, we have met the FRS, we can still make RSTU top-ups or OA-to-SA transfers.

We can choose to maximise the 4% interest rate and hit the FRS limit of our SA. Once we transfer $42,000 of our OA to our SA, our balances will be $192,000 in our SA (which is also the FRS) and $3,000 in our OA. At this point, we will not be able to top up until the FRS is increased.

However, if we contribute via the Voluntary Contributions to our 3 CPF accounts, we can still contribute to our SA. The allocation for VC follows the mandatory allocations and the allocation to SA will continue to flow into SA. However, note that the VC is not tax deductible and subject to a cap of the CPF Annual Limit ($37,740) less the mandatory contributions.

Read Also: What’s The Maximum Amount You Can Contribute To Your CPF Accounts Each Year?

Full Retirement Sum Is Only Fixed When We Turn 55

The current FRS is $192,000 for the cohort turning 55 in 2022. This means that if you are aged below 55, FRS is a moving target; it will change yearly until you hit 55. As the FRS is adjusted annually, even if you hit the FRS this year, your SA balance will fall below the FRS when the FRS increases. However, it is likely that the interest earned would exceed the FRS increase.

For example, the FRS set in 2021 was $186,000. The interest earned on this amount was $7,440. This interest plus the FRS set aside in 2021 ($193,440) is higher than the FRS set in 2022 ($192,000).

For those of us who are aged 55 and above, the FRS cap on our SA no longer applies. Instead, we have a new milestone, the Enhanced Retirement Sum (or 1.5 times the FRS) which is the maximum amount we can have in our Retirement Account.

Editor’s note: the original version of this article was erroneous and has been rectified with accurate information.

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