In Singapore, our CPF accounts are opened from the time we are born and stay with us through every stage of our life. Like it or not, CPF is a crucial scheme that we all need to understand. Building our knowledge on CPF-related topics can help us optimise the way we, our parents and even our children, can fully benefit from our CPF accounts.
One way to leverage on our CPF savings is to make periodic top ups to increase and compound our balances to ensure we have enough in our retirement.
Why Contribute More To Our CPF Accounts?
If we’re still skeptical about the benefits of contributing more funds to our CPF accounts, here are a few reasons why it could make sense.
#1 We are able to put our funds in a virtually risk-free investment, guaranteeing our principal and interest returns. This guarantee is provided by the Singapore government, one of the few triple-A credit-rated countries in the world.
#2 We earn a relatively good interest return of between 2.5% (on our CPF Ordinary Account) to 4.0% (on our CPF Special Account) or even up to 6.0% (if we have a Retirement Account). Unlike many other forms of investments, our interest returns are reinvested at these rates or higher, and we do not have to worry about reinvestment risk.
#3 In most instances, we also enjoy tax savings when we contribute to our CPF accounts, whether from our employment or on a voluntary basis. We do not pay taxes on CPF contributions from our monthly salary. Each year, we can also enjoy a dollar-for-dollar tax relief on top-ups of up to $8,000 to our CPF Special Account (or Retirement Account) and MediSave Account.
#4 Our contributions form a forced savings to grow our retirement nest egg, medical needs and to pay for our home. At the same time, we need to understand that topping up our CPF accounts is an irreversible process, so we need to be careful when planning to put more money into our CPF accounts. While this may sound like a disadvantage, our future retired-self may be very thankful that we made such a move when we were younger.
#5 A safety net that we can rely on no matter how dire our financial situation. This is because our CPF funds will kept safe from any legal liabilities we may have, especially if we have to declare bankruptcy.
What Is The Maximum We Can Contribute To Our CPF Accounts?
Even if we want to enjoy the benefits of topping up our CPF accounts, there are caps in place that prevent us from pouring too much funds into the system. Below are some ways we can contribute to our CPF accounts, as well as the caps on each method.
Ordinary Wages (OW)
Our salaries are broken into two categories – Ordinary Wages (OW) and Additional Wages (AW). For each type of salary, there is a separate cap on the maximum amount we can contribute to our CPF each year.
Under the Ordinary Wages component, which is typically our monthly salary, the CPF contribution ceiling is capped at $6,000 per month. This means only the first $6,000 of our monthly salaries require CPF contributions from us and our employers. If we earn more, any amounts above the first $6,000 will not attract any employer or employee CPF contributions. The CPF monthly salary ceiling will increase to $8,000 in 2026 (in Sep 2023: $6,300; Jan 2024: $6,800; Jan 2025: $7,400; and Jan 2026: $8,000).
Depending on our age, the yearly amount of our CPF Contributions from our Ordinary Wages can vary:
|Age||Employee Contribution Rates||Employer Contribution Rates||Total||Annual CPF Ordinary Wage Contributions Ceiling
|55 and below||Employee: 20%||Employer: 17%||Total 37%||$26,640|
|Above 55 to 60||Employee: 15%||Employer: 14.5%||Total 29.5%||$20,240|
|Above 60 to 65||Employee: 9.5%||Employer: 11%||Total 20.5%||$14,760|
|Above 65 to 70||Employee: 7%||Employer: 8.5%||Total 15.5%||$11,160|
|Above 70||Employee: 5%||Employer: 7.5%||Total 12.5%||$9,000|
Based on $6,000 monthly salary
From 2024, the CPF contributions for senior workers will also rise – and will continue to rise till their respective levels by about 2030. This means seniors can look forward to higher CPF contributions in future years.
|Age band||1 Jan 2023||1 Jan 2024||By 2030|
|55 and below||
|Above 55 to 60||29.5%||31.0%||37.0%|
|Above 60 to 65||20.5%||22.0%||26.0%|
|Above 65 to 70||15.5%||16.5%||16.5%|
Total CPF contributions (%) for local employees
Additional Wages are usually not paid on a monthly basis, and comprise payments such as performance bonuses, annual bonuses or leave pay. The total amount of Additional Wages that requires CPF contributions in a year is [$102,000 – Total Ordinary Wages (up to the CPF monthly salary ceiling)].
Assuming we earn $6,000 a month, our maximum Additional Wages (AW) will be $30,000. Following the formula above, we can calculate that only $102,000 – $72,000 = $30,000 of our Additional Wage will attract CPF contributions. That means even if we get a bumper bonus worth more than $30,000 a month, only the first $30,000 will attract employer and employee CPF contributions.
|Age||Maximum Additional Wage (if we earn $6,000 a month)||Contribution Rates||Total CPF Contributions for Additional Wage ($30,000)|
|55 and below||$30,000||Employer: 17%
|Above 55 to 60||$30,000||Employer: 14.5%
|Above 60 to 65||$30,000||Employer: 11%
|Above 65 to 70||$30,000||Employer: 8.5%
|Above 70||$30,000||Employer: 7.5%
As we can see, even though we may be earning the same amount, we could be contributing different sums to our CPF accounts depending on how old we are.
The other thing we should note is that if we earn less than $6,000 a month, we will be eligible for higher Additional Wage contributions. This is because the CPF Annual Limit of $37,740 is for both Ordinary Wage and Annual Wage. For example, if we are 55 and below and earn $5,000, we will receive CPF contributions on up to $42,000 of Additional Wages (compared to the $30,000 limit for those who are earning $6,000 a month).
As mentioned earlier, the CPF monthly salary cap will rise in the coming years, up to $8,000 in 2026. However, the annual salary ceiling will still remain at $102,000. This means that even for someone earning $8,000 today, the total amount of CPF contribution will still be up to the CPF Annual Limit of $37,740. What will change is how much of it comes via the Ordinary Wage (OW) compared to Additional Wages (AW). When that happens (in 2026), we will only receive CPF contributions on up to $6,000 of Additional Wages (compared to $30,000 on the current system where the monthly salary ceiling is $6,000).
Voluntary Contributions (VC)
The next thing we have to note is the Annual Limit of $37,740 for our CPF Mandatory Contributions and Voluntary Contributions to all three of our CPF accounts. This can be derived from the earlier formula, where the figure of $102,000 was used. 37% of this figure equates to $37,740 – which is the CPF Annual Limit.
If we have not hit the CPF Annual Limit via our salaries, we can make Voluntary Contributions (VC) up to $37,740. However, do note that Voluntary Contributions will be to all 3 of our CPF Ordinary Account, CPF Special Account and CPF Medisave Account, and is non-tax deductible.
We can also make Voluntary Contributions to only our MediSave Account, up to our Basic Healthcare Sum (BHS) of $68,500 in 2023. While we do receive tax deductions for MediSave Account contributions, it is capped at $8,000. This tax relief component will also be shared with our contributions via RSTU (explained below).
Retirement Sum Topping Up Scheme (RSTU)
We can also tap on the Retirement Sum Topping Up scheme to top-up via CPF transfers or cash to our own or our loved ones’ Special Account (up to the Full Retirement Sum (FRS) for recipients below 55) or Retirement Account (up to the Enhanced Retirement Sum (ERS) for recipients 55 and over). The FRS is $198,800 in 2023; the ERS is $298,200 in 2023.
While we can make a cash top-up to hit the FRS or ERS in one shot, we need to note that we only enjoy tax relief of up to $8,000 a year if we top up our Special Account or Retirement Account, and an additional $8,000 a year if we top our loved ones’ Special Account or Retirement Account. On top of this, the combined $16,000 potential tax relief is subjected to a personal income tax relief cap of $80,000. The maximum $16,000 tax relief we receive on CPF top-ups is also shared with any contributions we make to our MediSave Account.
In addition, we will only qualify for tax reliefs on top-ups to our spouse’s or siblings’ CPF accounts if their income does not exceed $4,000 a year or if they are handicapped. There is also a tax relief cap on:
1. Recipients below 55: Current FRS less the sum of SA savings and net SA savings withdrawn under CPF Investment Scheme for investments that have not been completely disposed of;
2. Recipients above 55: Current FRS, less RA savings. (This means that we do not get any tax benefits for CPF contributions beyond the FRS.)
In this case, our loved ones must be either our spouse, parents, parents-in-law, grandparents, grandparents-in-law and siblings. If we top up our children’s CPF accounts, we will not receive any tax relief.
Voluntary Housing Refund
If we are uncomfortable with the CPF Property Charge and Accrued Interest we see ballooning in our CPF account, we can refund any amount, capped at the full principal amount and accrued interest (including any housing grants we received) for our home purchase. Again, this is not tax deductible as we are simply “returning money that we borrowed” from our Ordinary Account.
Additional Medisave Contribution Scheme (AMCS)
This little-known scheme allows employees to receive further Medisave Account contributions from employers, up to a limit of $2,730 a year. This is beyond the CPF Annual Limits that typically apply, and are tax-free for employees as well as give tax benefits to employers.
Employers may opt for such contributions as additional medical benefits to employees, either to compensate them for remaining medical benefits not consumed or so that employees can purchase personal medical insurance.
We Need To Understand Why We Are Topping-Up Our CPF Accounts
As we can see, there are many ways we can contribute funds to our CPF accounts. While the amounts that are contributed from our salaries and bonuses are mandatory, the rest of the schemes can be done on a voluntary basis. Our employer can also chip in more via various contribution schemes.
If we are making top-ups, we will want to ensure that we get the maximum benefit out of it. This includes receiving tax relief on our contributions, as well as earning the best interest return – which may mean deciding whether to top-up our own or our spouse’s/ parents’/ grandparents’ or in-laws’ CPF accounts. The maximum tax relief we can get for RSTU top-ups is $8,000. This amount is also shared with contributions made to our MediSave Account. We can also get another $8,000 tax relief if we contribute to our loved ones’ Special Account, Retirement Account or MediSave Account.
Lastly, we can also make large lump sum top-ups to our CPF accounts via the Retirement Sum Topping Up (RSTU) scheme, Voluntary Contributions (VC) to our MediSave up to the Basic Healthcare Sum (BHS), and to Voluntarily refund CPF Ordinary Account savings withdrawn for our housing – all without receiving substantial tax relief. Nevertheless, this can give us greater peace of mind as well as enable our funds to earn good interest returns in the various CPF accounts.
The one thing we need to know before making top-ups is that this is an irreversible process, and we cannot withdraw funds that we decide to put into CPF.
This article was originally published on 11 March 2019 and updated with new information.
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