This article was originally published on 26 October 2020 and updated to reflect the latest information.
Singapore’s CPF system ensures that working Singaporeans and Permanent Residents set aside a portion of their earnings each month, in order for this money to form the foundation for monthly payouts during retirement – either through CPF LIFE or the CPF Retirement Sum Scheme.
To provide a reference baseline, the government sets (and regularly reviews) milestone levels for our CPF savings: The Basic Retirement Sum (BRS), Full Retirement Sum (2 x BRS) and Enhanced Retirement Sum (3 x BRS). For those turning 55 in 2020, the Full Retirement Sum is $181,000.
Unfortunately, there is a segment of seniors who might still fall way short of even the BRS at the time of their retirement, which means they would be drawing on very modest payouts each month, which are grossly inadequate for even basic sustenance. According to the Ministry of Manpower, which administers CPF, about 435,000 seniors fall into this category.
In order to encourage and support seniors in building up their CPF balances, and thus their retirement adequacy, the government announced in Budget 2020 the introduction of the Matched Retirement Savings Scheme (MRSS), which will take effect from 2021.
Here’s what you need to know about the scheme and to make the most of the government contribution matching and prevailing income tax deductions.
What Is The Matched Retirement Savings Scheme (MRSS)?
Matched Retirement Savings Scheme (MRSS) was announced in Budget 2020. Under the scheme, the government provides dollar-for-dollar matching to eligible seniors for voluntary CPF cash top-ups under the CPF Retirement Sum Topping-Up (RTSU) scheme, up to an annual limit of $600.
MRSS will be implemented for 5 years – starting in 2021. You will be assessed yearly and notified by the CPF Board about your eligibility by February. Here are the eligibility criteria for MRSS:
– Aged 55 to 70 (inclusive)
– CPF Retirement Account savings is less than the prevailing Basic Retirement Sum (the BRS for seniors turning 55 in 2021 is $93,000)
– 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
MRSS is an incentive on top of the RTSU, however, even though RTSU contributions can be made in cash or transfers from your own Ordinary Account, MRSS matching is only applicable for cash top-ups.
The cash top-ups can be made in a lump sum, or in smaller portions throughout the year, including via GIRO. At the end of each calendar year, the total topped-up amount will be computed, and the matching grant (capped at $600 annually) will be credited by the first quarter of the following year.
MRSS grant payouts are given to seniors, so it does not matter who makes the cash top-ups – it can be seniors themselves, their loved ones, or even their employer. Those making top-ups would then be eligible for prevailing benefits of RTSU cash top-ups, such as income tax deductions.
MRSS Grant Matching Can Be Used With Existing RTSU Tax Deductions
On top of the dollar-for-dollar matching provided by the government, you (or those topping up on your behalf) can also enjoy prevailing tax benefits for making RTSU contributions.
The tax reliefs on top-ups made to your own CPF RA or by employers on your behalf amounts to $7,000 per calendar year.
Those making top-ups to the CPF RA of their loved ones (parents, parents-in-law, grandparents, grandparents-in-law) can receive an additional $7,000 in tax reliefs per calendar year. This tax relief applies to top-ups to the CPF RA of your spouse/siblings if their income (from all sources) does not exceed $4,000 in the preceding year, or if they are handicapped (mentally or physically incapacitated).
Note that the yearly personal income tax relief cap of $80,000 applies to all tax reliefs claimed, including cash top-ups made under RSTU.
Employers that make top-ups to the CPF RA of their employees will also receive full tax deductions on their top-ups.
Eligible Seniors Will Be Notified At The Start Of The Year
As the eligibility for MRSS is assessed every year, you may be able to change your eligibility if your income changes or if you change your residence. Do note that the AV is based on your place of residence (as reflected on your NRIC), this means that if you move from your HDB to your child’s condominium (and change your NRIC address), you may no longer be eligible.
For those who have not received the annual notification, you can also check your eligibility on CPF’s website.
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