Topping up your CPF accounts is a great way to ensure your retirement is well funded, but you can also make top-ups for family members so they, too, have more cash for their golden years.
The top-up trend is growing fast: Last year, about $1 billion worth of cash top-ups went into the Special Accounts (SA) or Retirement Accounts (RA) of about 61,000 Central Provident Fund (CPF) members.
About $1 billion of top-ups using CPF savings (CPF transfers) were made for around 35,000 members.
Some of these funds were top-ups made by members themselves, while some came from other people, usually a family member.
Last year was the first time such top-ups had reached the $2 billion mark. The total cash and CPF top-ups to SA and RA amounted to $1.8 billion in 2016.
Some of these top-ups are a way to enjoy tax relief while enabling CPF members or their loved ones to benefit from the compounding effect of the CPF's interest rates to grow their nest eggs.
Mrs Tan Chui Leng, group director (retirement income) at CPF Board, said: "We are encouraged to see more members doing CPF top-ups, and are topping up not just to themselves but also to their loved ones. Regular top-ups, even if done in smaller amounts, can go a long way to help members grow their retirement savings over time, so it is important to act early."
The Sunday Times highlights what you should know about these top-ups.
RETIREMENT SUM TOPPING-UP SCHEME
This scheme allows you to build your retirement savings by topping up your own CPF account or that of someone else.
You can top up your own and/or another's SA (for those aged below 55) or RA (55 and above).
Since 2016, it has become easier to top up a spouse's account. Members need to set aside only the Basic Retirement Sum for themselves first instead of the Full Retirement Sum, before topping up the spouse's CPF accounts.
Note that a personal income tax relief cap of $80,000 applies from Year of Assessment 2018.
This cap affects the total amount of all tax reliefs claimed, including any relief on cash top-ups made under the Retirement Sum Topping-Up Scheme on or after Jan 1, 2017.
As cash top-ups made under this scheme cannot be refunded to the originating CPF account, you should evaluate whether you would benefit from tax relief before making any deposit.
CPF members can make cash top-ups to anyone but they get tax relief only when they make the top-ups to themselves or specific family members, subject to certain conditions.
You can get tax relief of up to $14,000 a calendar year if you make cash top-ups for:
• Your parents, parents-in-law, grandparents, grandparents-in-law, spouse or siblings. To qualify, your spouse/siblings must either be handicapped or have income that did not exceed $4,000 in the preceding year.
• If you make a top-up for yourself or your employer makes one for you.
Topping up for yourself or a loved one helps build the SA of those under 55 up to the Full Retirement Sum, or the RA of those 55 and above up to the Enhanced Retirement Sum.
However, you get tax relief for cash top-ups to your own or your recipient's RA only up to the prevailing Full Retirement Sum, which is $171,000.
The Enhanced Retirement Sum is $256,500, or three times the Basic Retirement Sum. This translates into estimated monthly payouts of $1,910 to $2,060 from the age of 65.
The Enhanced Retirement Sum option was exercised by 11,200 of the members who benefited from cash top-ups last year.
WHEN TO TOP UP
Top-ups can be done on a monthly of yearly basis through Giro. This removes the hassle of having to complete forms or write cheques.
You can also earn more interest by topping up earlier in the year and avoid the risk of busting the deadline to qualify for tax relief.
Topping up does not have to be in one lump sum. Do small but regular top-ups by making a Giro arrangement to deduct funds from your monthly salary.
If you set aside $100 a month for 15 years into an SA or RA, you will accumulate a basic sum of $18,000, but the 4 per cent yearly interest these accounts earn would have compounded that amount to $24,400.
And if you already intend to top up yearly, consider doing it in January instead of December, so as to earn higher interest.
HOW TO TOP UP
• Submit an online application under My Requests after logging in with your SingPass on the CPF website (CPF transfers and cash top-ups) and for cash top-ups, make payment immediately via OCBC's Internet banking/mobile banking/ATM.
• Through the e-Cashier facility on the CPF website (only for cash top-ups).
• Download the Retirement Sum Topping-up form on the CPF website and mail it and your cheque to the CPF Board (only for cash top-ups).
• At any AXS station (only for cash top-ups).
• For Giro arrangement, download the "Top Up Retirement Sum Using Giro" form from the CPF website.
• Invest editor Lorna Tan's new book Retire Smart is available in major bookstores.
|New ways to learn about CPF|
- The CPF can be mind-spinningly hard to understand for some of us but help is at hand.
- The fund's board recently introduced three new initiatives to help members learn about how the whole thing works - and how to make it work best for each of us.
- Hopefully they will make it easier for members to understand their CPF balances and learn about their options, so they can make the most of their savings.
NEW VIDEO (BETA) FEATURE
- (www.cpf.gov.sg/videofeature) The new video feature allows you to create a personalised CPF video from which you can learn about optimising your savings. Selected data from the Yearly Statement Of Account (YSOA), such as your account balances and transactions, will be used to create the video, which takes only two to three minutes.
- This feature is available to CPF members who receive their YSOA illustrated summary.
REDESIGNED MY CPF PROFILE
- The redesigned my cpf profile was launched in January with more features, including a prominent display of your latest CPF account balances upon log-in.
- You can also get a graphical representation of your total balances for the past five years, with graphs showing how your latest contribution has been allocated and your CPF fund inflows and outflows for the past three months.
- It offers quick links to popular online calculators and CPF life events information.
REDESIGNED MY CPF MOBILE APPLICATION
- The my cpf mobile application has been redesigned and improved.
- In addition to CPF Board's mobile-friendly website, the app provides members with easy access to personal CPF information on the go and a quick way to calculate the amount of contributions payable.
- You can access information on your balances, and savings for healthcare, housing and investments, and your contribution history.
- The my cpf mobile app is available on the Apple App Store and Google Play Store.
Growing your CPF savings via top-ups