5 Things You Should Know About CPF Top-ups

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5 Things You Should Know About CPF Top-ups

If you want to retire a millionaire, your Central Provident Fund (CPF) is one of the things you need to be proactive about. Not later, but right now.

Here’s how much interest you earn under each of your CPF account:

  • Ordinary account: 2.5 to 3.5% per annum (p.a.)
  • Medisave and Special accounts: 4 to 5% p.a.
  • Retirement account: 4 to 6% p.a.

The interest rates include an additional 1% p.a. on the first $60,000 of your combined balances (with up to $20,000 from the Ordinary Account).

For those aged 55 and above, they will receive an additional 1% extra interest p.a. on the first $30,000 of their combined balances. This is on top of the extra 1% interest on the first $60,000 of their combined balances (total 6%).

Here’s the priority of the accounts that make up the $60,000 and $30,000 combined balances:

  1. Retirement Account, including balances for the CPF LIFE annuity premium payment
  2. Ordinary Account, up to $20,000
  3. Special Account
  4. Medisave Account

Let’s say you are 35 years old this year. S$20,000 in your Ordinary Account (3.5% p.a) and S$10,000 in your Special Account (5% p.a.), will turn into roughly S$60,000 of CPF savings when you are 55 years old. That’s not taking into account the monthly contributions, top-ups, and transfers you and your employer will be making in those years.

Besides your monthly employee contributions, topping up your account or your recipients’ can help you maximise interest earned and get you some tax relief.

Here are five things you need to know about it.

1. You have many options for CPF top-ups

1. You can top-up all three CPF accounts

Under the Voluntary CPF Contribution, you can top-up all three of your accounts with a lump sum. The funds will be divided across the accounts according to the allocation rate determined by your age and earn the respective interests mentioned above.

2. You can top up your Medisave Account

Alternatively, you can choose to only top up your Medisave Account, which earns you 4 to 5% interest p.a.

You will also enjoy tax relief (a personal income tax relief cap of S$80,000 applies). For self-employed people, both mandatory and voluntary contributions are tax-deductible, up to 37% of your annual Net Trade Income (NTI) or the CPF Annual Limit of $37,740, whichever is lower.

3. You can top up your and your recipients’ Special or Retirement Account

Under the Retirement Sum Topping-Up Scheme, you can make cash top-ups or CPF transfers to your own or your family member’s Special (below age 55) or Retirement (above age 55) Account for higher interest (up to 5%) and tax relief (for cash top-ups only) per calendar year. Conditions apply. Learn more here.

Family members include your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings.

If you have S$40,000 in your Ordinary Account (earns you 3.5% interest on the first S$20,000 and 2.5% interest on the rest p.a.) and do not need the funds for housing or education, you can consider transferring some of the money to your Special Account to earn higher interest (up to 5% p.a.). To find out how much additional interest you will receive by making an OA to SA savings transfer, use this calculator.

Related: 6 Smart Things We Can Do That Will Reduce Our Income Tax

2. But there are limits

Voluntary CPF Contribution

The amount you can contribute for the year is the difference between the CPF Annual Limit of $37,740 and the amount of mandatory contributions.

If you wish to contribute to your Medisave Account only, the amount you can contribute is subject to the current CPF Annual Limit or the current Member’s Basic Healthcare Sum (BHS) of $52,000, whichever is lower.

Retirement Sum Topping-Up Scheme

To top up your own Special or Retirement account, the limits are:

  • Up to Full Retirement Sum (currently S$166,000) for recipients below age 55
  • Up to Enhanced Retirement Sum (currently S$249,000) for recipients aged 55 and above

To top up your loved ones’ accounts, the limits are:

Recipient below age 55 Current Full Retirement Sum

Less: Special Account (SA) savings and SA savings withdrawn for investments

Recipient age 55 and above Current Enhanced Retirement Sum

Less: Retirement Account (RA) savings

RA savings refer to the cash set aside in the RA (excluding amounts such as interest earned, any government grants received) plus amounts withdrawn such as monthly payouts and payout eligibility age lump sum withdrawal.

Your recipients can also check how much they can receive through my cpf Online Services > My Messages.

3. The good news is you can top up any amount

You can top up any amount you like or can afford up to the aforementioned limits. There’s no minimum amount required.

4. Aim for at least S$60,000 combined balances

As you already know, your first S$60,000 in your CPF (up to S$20,000 in the Ordinary Account) earns you an extra 1% interest (up to 5%). To make full use of the extra 1% interest, aim to have at least S$60,000 in your CPF.

5. Top up earlier in the year to maximise interest earned

Does topping up earlier instead of later in the year make a difference? Yes, it does! You earn more interest because CPF interest is calculated monthly and credited and compounded annually.

If you have S$10,000 in your Special Account and you top up S$2,000 in end January without any other contributions in the year, you will get S$591 of interest credited at the end of the year. But if you top up S$2,000 in end November, you will only get S$508 of interest credited at the end of the year. That S$83 difference is from the 10 extra months of interest that your S$2,000 top up earned!

5 things you should know about CPF top ups


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