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Should You Make Lump Sum Top-Ups Or Regular Contributions For The CPF Retirement Sum Topping-Up Scheme

The sooner you make your top-ups, the sooner they can begin generating decent risk-free returns for you.

By now, you’re probably familiar with the benefits of making voluntary CPF top-ups – such as tax reliefs, government matching, or to earn guaranteed, risk-free interest to achieve 1M65.

So if you’ve decided you want to make CPF top-ups for yourself or your loved ones, the only thing left to answer is how you want to do it: in a lump sum, or making regular contributions monthly.

This article explains the pros and cons of each approach, and why for most people who can, the monthly approach makes the most sense – financially and psychologically.

Read Also: Here Are The Pros And Cons Of Making Voluntary CPF Top-Ups In 2020

How Interest On Your CPF Monies Calculated – And Credited To You

Any discussion on CPF contributions frequency needs to take place in the context of how CPF interest is calculated and credited.

The good news is that interest on our CPF monies is computed monthly. Top-ups and contributions will begin to earn us pro-rated interest from the next month onwards, while withdrawals and deductions will stop earning us interest from the month they are made.

In simple terms, you can think of the amount of interest you will earn in a given month as being based on the lowest level of balances you have – since any new top-ups would only begin to earn interest the following month, and anything you withdraw would not earn interest for you.

All the interest owed to us for a given year will be credited to our respective CPF accounts by 1 January the following year, which means our CPF monies compound annually.

Read Also: Here’s How Our CPF Interest Rates Are Calculated – And Why Those Rates Are Almost Never What We Actually Earn

Scenario #1: What Happens When You Make Monthly CPF Top-Ups

As we can see from the previous section, any top-ups we make will begin to earn pro-rated interest for the year as soon as the following month. Any top-ups to our CPF made in January would earn 11 months of interest, and delaying that top-up till the end of the year would mean we’ll be missing out that interest.

Here’s a simple illustration of the interest we’ll earn if we make $100 in top-ups a month to our CPF Retirement Account:

Month Amount Of Interest Earned On $100
(Months To Earn Interest / 12 x 4% x $100)
January $3.67
February $3.33
March $3.00
April $2.67
May $2.33
June $2.00
July $1.67
August $1.33
September $1.00
October $0.67
November $0.33
December $0.00
Total $22.00


As you can see, you would be better off by $22, compared to someone who contributed the exact same amount in a lump sum at the end of the year.

Of course, one might say that contributing a lump sum in January would be even better, which is true – if you had the money lying around. The main point is that the sooner you make top-ups, the sooner they can begin generating good, risk-free returns for you.

The same logic applies to making CPF transfers from your CPF Ordinary Account to your Special Account/Retirement Account.

Read Also: Retirement Sum Topping-Up Scheme (RSTU) VS CPF Voluntary Contributions: What’s The Difference?

Scenario #2: Why You May Want To Wait And Make Lump Sum Top-Ups At The End Of The Year

We’ve learnt that making top-ups (and transfers) as soon as you can make mathematical sense, but flexibility might be one reason why someone would wait till the end of year to make CPF top-ups.

The additional cash buffer might be useful for many, and some would also like the benefit of knowing their income for the year and the total deductions they are eligible for to help them decide how much they would like to top-up to their CPF for tax relief benefits.

In those cases, there might be some sense in waiting before committing to making the CPF top-ups, which we all know is irreversible.

Read Also: 5 Reasons Why You Should Top-Up Your CPF Special Account During This Year-End

Scenario #3: Making A Lump Sum Top-Up At The Beginning Of The Year

Those who appreciate that the sooner you make your CPF top-up, the sooner your funds can begin generating returns for you, might wish to consider the third option if they have the cash on hand: To make CPF top-ups at the beginning of the year.

While this approach would provide the greatest returns of the 3 scenarios, but would also be the least flexible, since CPF top-ups are one-way, and you would lose the ability to wait till the end of the year to evaluate how much you want to commit to your CPF (for tax relief or spare cash reasons).

Read Also: CPF Investing Using FSMOne: How You Can Maximise The Returns On Your CPF Monies

Automating Your Regular CPF Cash Top-Ups – Monthly/Annually

Source: CPF Board

As you know cash top-ups can be made using three ways:

– myCPF app on Android or iOS (using eNETS or OCBC Pay Anyone)
– CPF e-Cashier service using eNETS or PayNow QR)
– GIRO (monthly or yearly instruction)

For those who want to make regular monthly contributions, you can use GIRO to automate this process, by completing and mailing in the Top Up Retirement Sum Using GIRO form to CPF Board, Robinson Road, P.O. Box 3060, Singapore 905060.

Upon approval, GIRO deduction will begin on the 15th of every subsequent month. If the 15th falls on a non-working day (Saturday, Sunday or Public Holiday), deduction will be made on the next working day.

You will need to ensure you maintain sufficient funds in your bank account for the deductions to go through successfully, since banks may charge an admin fee for unsuccessful deductions.

If you wish to amend your GIRO instructions (such as changing the amount or frequency), you can complete and mail in the Top Up Retirement Sum Using GIRO form. For those who want to terminate the GIRO arrangement, you can submit a request via the CPF website.

Read Also: Pros And Cons of Using CPF Or Cash To Pay For Your Home Loan

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