7 Changes to CPF rules that you should know
If you’ve got a minute,
- Changes are made to Retirement Sum Scheme and CPF LIFE for CPF members to receive higher monthly payouts.
- CPF members will be able to enjoy higher tax savings by performing cash top-ups.
Beneficiaries will receive CPF monies faster and with greater ease. To offer greater ease of receiving retirement payouts and a boost in building nest eggs, several changes will be made to Central Provident Fund rules.
Here are the 7 changes you should know about:
1. Retirement Sum Scheme payouts
From 1Q2022, members who are under the Retirement Sum Scheme (RSS) and who have fully withdrawn their Retirement Account (RA) savings but still have funds in their Ordinary or Special accounts (OSA), will automatically receive monthly payouts from their OSA. This will apply to members who are not under CPF LIFE.
Prior to the change, monthly payouts under RSS would be withdrawn from a member’s CPF RA until it is depleted. These payouts depend on what they have in their RA and they would only last till they reach age 90. When the RA is depleted, they can opt to transfer funds from their OA and SA to their RA.
2. CPF LIFE payouts
From November 2021, CPF LIFE members who receive inflows, such as top-ups or housing refunds, will see an automatic increase in their CPF LIFE payouts. This is because the inflows will be used to meet their Full Retirement Sum in their RA. Members will start receiving higher payouts from July 2022.
Prior to the change, they have to apply to increase their CPF LIFE premiums with these inflows. Otherwise, these inflows will be paid to them as additional monthly payouts outside of CPF LIFE.
3. Transfer of Ordinary and Special accounts savings to Retirement Account at payout start age
For members turning 65 from 1 Jan 2023, their OA and SA savings will be transferred to their RA, up to their cohort’s Full Retirement Sum, when they start their monthly payouts instead of when they are eligible to start payouts. This allows members to receive higher monthly payouts.
Members continue to have the option to do a transfer from their OA and SA to RA via the Retirement Sum Topping-Up scheme to benefit from the higher interest in RA before they start payouts. There will not be any changes to existing lump sum withdrawals at age 55.
4. Enhanced tax relief cap for voluntary cash top ups
From 1 Jan 2022 onwards, the annual tax relief cap will be increased to $8,000 for cash top-ups for yourself and another $8,000 for cash top-ups for your loved ones. This enhanced cap is applicable for top-ups to Special, Retirement and MediSave accounts.
Prior to the change, the annual tax relief is capped at $7,000 whenever members top up their account and another $7,000 for top ups to loved ones’ accounts in cash.
Additionally, members who contribute to their loved one’s Medisave account will enjoy tax relief. Previously, tax relief is only given to the recipients of Medisave top-ups.
5. Simplification of top-Ups to Medisave
From 1 Jan 2022 onwards, Medisave top-ups will only be dependent on the difference between the Basic Healthcare Sum (BHS) and the current Medisave balance of the member.
Prior to the change, members will have to consider the CPF Annual Limit and the BHS for top-ups to their Medisave accounts – by taking the lower of the two.
The BHS is the estimated savings you need in your MediSave Account for your basic subsidised healthcare needs in old age. For CPF members below age 65, the BHS will be adjusted annually to keep pace with the expected growth in MediSave use by the elderly. This ensures that the BHS will stay relevant for each cohort when they arrive at retirement age.
For CPF members who turn 65 years old in 2022, their cohort’s BHS is $66,000 and will be fixed for the rest of their lives.
6. Quicker disbursement of CPF monies after a member’s death
From 1 Jan 2022, the period in which CPF monies are retained after a person dies will be shortened to 6 months instead of 7 years after being notified of the member’s death. If monies are not claimed within 6 months, they will be transferred out of the deceased member’s CPF account without any further interest being paid.
For un-nominated CPF monies not amounting to more than $10,000, a single beneficiary will be able to represent all eligible beneficiaries and with their consent, apply to the Public Trustee’s Office (PTO) to receive un-nominated monies. As PTO will only need to verify the information of one family member, this allows the beneficiaries to receive the un-nominated monies faster.
There is no change for nominated CPF monies, which will be automatically transferred to the qualifying nominees by CPF Board.
From 1 April 2022, nominees with bequeathed Singtel Discounted shares will automatically receive the sale proceeds from the liquidated shares without having to submit any application. Nominated shares will automatically be liquidated 6 weeks after the CPF Board is notified of a member’s death. Nominees still retain their rights to transfer the shares to their CDP accounts before the liquidation if they wish to do so.
7. Government grant recovery if eligibility criteria are no longer met
From 1 Jan 2022, when a member no longer meets the continuing eligibility conditions to receive the Government grants, he or she will have to refund these grants with interest. This prevents people from gaming the system and helps ensure fairness for all.
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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.