Update on tax on Supplementary Retirement Scheme withdrawal

Cur­rently, an SRS mem­ber can with­draw up to $40,000 per year from his SRS account tax-free on or after reach­ing the pre­scribed retire­ment age, assum­ing that he has no oth­er tax­able income. Over the max­im­um with­draw­al peri­od of 10 years, he can with­draw up to $400,000 tax-free.
How­ever, if an SRS mem­ber passes away before com­plet­ing his SRS with­draw­als or made a full with­draw­al on the grounds of ter­min­al ill­ness, he would not be able to enjoy the full bene­fit from spread­ing out his SRS with­draw­als over a 10-year peri­od. Hence, from year of assess­ment 2016, a tax exemp­tion of up to $400,000 would be gran­ted for SRS funds deemed with­drawn upon an SRS member’s demise or a with­drawn in full on the grounds of ter­min­al ill­ness.

Next, from July 2015, SRS mem­bers will be able to apply to their SRS oper­at­ors to with­draw an SRS invest­ment by trans­fer­ring the invest­ment out of their SRS accounts (e.g. into their per­son­al Cent­ral Depos­it­ory (CDP) account), without hav­ing to liquid­ate their SRS invest­ments. This is only applic­able for the fol­low­ing types of with­draw­als, which qual­i­fy for the 50% tax con­ces­sion:

  1. with­draw­al on or after the stat­utory retire­ment age pre­vail­ing at the time of an SRS member’s first con­tri­bu­tion (cur­rently age 62);
  2. with­draw­al on med­ic­al grounds;
  3. with­draw­al in full by a for­eign­er who has main­tained his SRS account for at least 10 years from the date of his first con­tri­bu­tion; and
  4. actu­al with­draw­al made by an SRS mem­ber or his leg­al per­son­al rep­res­ent­at­ive (if he is deceased) from his SRS account, after the SRS invest­ment that is to be with­drawn had earli­er been deemed with­drawn upon death or after the expiry of the 10-year with­draw­al peri­od.

All oth­er with­draw­als from an SRS account, includ­ing pre­ma­ture with­draw­als, must be made in cash.

Singapore inflation in 2015

Infla­tion in Singa­pore fell 0.6% year-on-year in Decem­ber, com­pared to -0.8% in Novem­ber. Core infla­tion, which excludes the cost of accom­mod­a­tion and private road trans­port, rose to 0.3% from 0.2% in Novem­ber.

Private road trans­port cost fell by 1.1% in Decem­ber, com­pared to the 1.7% decline in Novem­ber. Accom­mod­a­tion cost dropped by 3% in Decem­ber, same as the decline in Novem­ber. How­ever, over­all ser­vices infla­tion increased to 0.9% in Decem­ber, up from 0.7% in Novem­ber, due to a faster pace of increase in hol­i­day travel expenses and a smal­ler decline in tele­com­mu­nic­a­tion ser­vices fees. Mean­while, food infla­tion was down to 1.5% last month from 1.6% in Novem­ber, due to the mod­er­a­tion of increase in prices of pre­pared meals such as hawker food.

For the whole of 2015, infla­tion fell by -0.5%, down from 1% in 2014. This is the first decline since 2002. Core infla­tion eased to 0.5% in 2015, com­pared to the 1.9% in 2014.
Core Infla­tion is expec­ted to be between 0.5% and 1.5% in 2016 while over­all infla­tion is pro­jec­ted to aver­age between -0.5% and 0.5% in 2016, accord­ing to MAS and MTI.

Changes of CPF in 2016

CPF CELING
CPF con­tri­bu­tion ceil­ing will be increased from $5000 to $6000 with effect from 1 Jan 2016. This will help to boost anoth­er $170 from employ­er and $200 from employ­ee for those earn­ing more than $6000 monthly salary and below 55 years old. Though the take-home pay for these employ­ees will reduce by $200, the sav­ings for retire­ment will be boos­ted by these extra sav­ings.

CPF CONTRIBUTION RATE
The CPF con­tri­bu­tion rate for employ­ee 50 years and above will be increased from 1 Janu­ary 2016.

  • Above 50 to 55, employ­er CPF rate will be increased from 16% to 17%, while employ­ee CPF rate will be increased from 19% to 20%;
  • Above 55 to 60, employ­er CPF rate will be increased from 12% to 13%, with no change to the cur­rent employ­ee CPF rate of 13%;
  • Above 60 to 65, employ­er CPF rate will be increased from 8.5% to 9%, with no change to the cur­rent employ­ee CPF rate of 7.5%.

In addi­tion, for CPF mem­bers aged 55 and above from 1 Janu­ary 2016, the first $30,000 from the CPF accounts will earn extra 1% per annum, on top of the cur­rent 1% extra interest on the first $60,000 of their total CPF sav­ings. That is,

 

 

Total CPF bal­ance

Interest Rate
If in Special/Retirement/Medisave Accounts If in Ordin­ary Account
First $30,000 6% 4.5%
Next $30,000 5% 3.5%
Remain­ing bal­ance above $60,000 4% 2.5%

This trans­lates to extra $300 sav­ings per year for the next 10 years before CPF Life pay­out starts at 65. Assum­ing the yearly $300 interest earned goes into the Retire­ment Account which earns 4% interest, this trans­lates to $3,745 after 10 years. With high­er amount in CPF Retire­ment Account, CPF mem­bers can expect high­er pay­out from their CPF Life.

SUPPLEMENTARY RETIREMENT SCHEME
The caps on con­tri­bu­tion to the vol­un­tary retire­ment sav­ings scheme, Sup­ple­ment­ary Retire­ment Scheme (SRS) will be increased from 1 Janu­ary 2016. For Singa­por­ean and Per­man­ent Res­id­ent, the cap will be increased from $12,750 to $15,300. The cap for for­eign­er will be increased from $29,750 to $35,700. This will help to increase the per­son­al income tax sav­ings, as the amount put into SRS will enjoy tax relief. Moreover, retire­ment cash­flow will be improved when SRS money is allowed to be with­drawn without pen­alty from age 62 onwards.

25,000 Singapore Residents to pay extra 30% MediShield Life premium

Nation-wide hos­pit­al­iz­a­tion plan, MediShield Life, will be imple­men­ted on 1 Novem­ber 2015. Min­istry of Health has already iden­ti­fied 25,000 Singa­pore Cit­izens and Per­man­ent Res­id­ents with ser­i­ous pre-exist­ing ill­nesses who will have to pay extra 30% extra premi­um for the next 10 years to cov­er the pre-exist­ing ill­nesses. After which, they would pay the same premi­ums as their peers. If you belong to this group, you will receive a let­ter with details about your new MediShield Life cov­er­age, premi­ums and sub­sidies, includ­ing the Addi­tion­al Premi­ums. The vari­ous sub­sidies for MediShield Life premi­ums will also apply to Addi­tion­al Premi­ums.

If you cur­rently not insured with Medishield, you will also receive the let­ter soon to inform you on the premi­ums and sub­sidies. For oth­ers, you will only receive the let­ter one month before your plan is due for annu­al renew­al from either the CPF Board (cov­er under MediShield) or your private insurer (cov­er under Integ­rated Shield Plan) with details about your premi­ums and sub­sidies for the MediShield Life com­pon­ent of your Integ­rated Shield Plan.

The broad cat­egor­ies of ser­i­ous pre-exist­ing ill­nesses are:

Broad cat­egor­ies Indic­at­ive examples (not exhaust­ive)
Can­cer Lung can­cer, colorectal can­cer, breast can­cer, stom­ach can­cer
Blood dis­orders Parkinson’s dis­ease, Mus­cu­lar dys­trophy, Amyotroph­ic lat­er­al scler­osis (ALS)
Heart or oth­er cir­cu­lat­ory sys­tem dis­eases Heart attack, Coron­ary artery dis­ease, Chron­ic ischaem­ic heart dis­ease
Cerebrovas­cu­lar dis­eases Stroke
Res­pir­at­ory dis­eases Chron­ic obstruct­ive pul­mon­ary dis­ease
Liv­er dis­eases Alco­hol­ic liv­er dis­ease , Chron­ic hep­at­it­is, Fibrosis or cir­rhosis of liv­er
Autoimmune/ Immune Sys­tem dis­eases Sys­tem­ic lupus eryth­em­atosus, Human Immun­ode­fi­ciency Virus/ Acquired Immune Defi­ciency Syn­drome (HIV/ AIDS)
Ren­al dis­eases Con­gen­it­al heart dis­ease, Con­gen­it­al ren­al dis­ease, Bil­i­ary atresia
Psy­chi­at­ric con­di­tions Schizo­phrenia
Chron­ic con­di­tion with ser­i­ous com­plic­a­tions Hyper­tens­ive heart dis­ease, Hyper­tens­ive kid­ney dis­ease, Dia­betes with kid­ney com­plic­a­tions, Dia­betes with eye com­plic­a­tions

Those whose pre-exist­ing con­di­tions are less ser­i­ous or are well-con­trolled, such as well-con­trolled dia­betes, or hyper­ten­sion with no com­plic­a­tions, osteoarth­rit­is, pre-can­cers, fibroids or cysts or those who were hos­pit­al­ized due to a one-off event, such as an acci­dent or dengue are not sub­jec­ted to the 30% addi­tion­al premi­um.

First Singapore Savings Bond

The first Singa­pore bond was opened for applic­a­tion on 1st Septem­ber 2015 and will close on 25 Septem­ber 2015, 9pm. The total amount for this alloc­a­tion is $1.2 bil­lion.

You can apply in mul­tiples of $500 up to $50,000 through DBS/POSB, OCBC or UOB ATMs, or through DBS/POSB’s Inter­net Bank­ing portal. You will also need to have the indi­vidu­al CDP Secur­it­ies account linked to any of your bank accounts as CDP is the cus­todi­an for Sav­ings Bonds and it will pro­cess the applic­a­tions, interest pay­ments and redemp­tions. You may vis­it CDP’s webpage for inform­a­tion on open­ing your CDP Secur­it­ies account.

The alloc­a­tion will be con­duc­ted on 28th Septem­ber 2015 and the bonds will be issued on 1 Octo­ber 2015. The interest will be paid on 1st April and 1st Octo­ber every year till matur­ity date on 1 Octo­ber 2025. The interest for 1st year is 0.96% p.a., and 1.09% p.a. on second year. It will increases to 3.70% p.a. on the 10th year. So if you hold for 10 years till matur­ity, the com­poun­ded interest rate is 2.63%p.a.

Singa­pore Gov­ern­ment will issue the Singa­pore Sav­ings Bond every month. The applic­a­tion peri­od is always 1st of the month till the 4th last busi­ness day of the month. Alloc­a­tion of the bonds will be con­duc­ted on the 3rd last busi­ness day of the month and res­ults will be pub­lished on its web­site after 3pm. Should the total amount of applic­a­tions exceed the amount on offer in a par­tic­u­lar month, you may not get the full amount you applied for. The excess cash will be refun­ded to you by the end of the 2nd last busi­ness day of the month. Sav­ings Bonds will be issued on the 1st busi­ness day of the fol­low­ing month. You will be noti­fied by CDP via mail of the amount of Sav­ings Bonds allot­ted to you. You can also check your hold­ings online through the CDP Inter­net ser­vice or by call­ing CDP at 6535–7511. The total amount of Sav­ings Bonds held across all issues can­not be more than $100,000.

You will receive the first interest pay­ment 6 months after the bond is issued. Interest will be auto­mat­ic­ally paid into the bank account that is linked to your CDP account. Interest will be paid every six months after that, on the 1st busi­ness day of the month. The interest pay­ments will be reflec­ted in your CDP state­ments.

There is a $2 trans­ac­tion fee for any trans­ac­tion such as applic­a­tion and redemp­tion of the bond.

You can redeem in mul­tiples of $500 on the 1st busi­ness day of each month till the 4th last busi­ness days of the month without pen­alty. Redemp­tion pro­ceeds will be paid by the end of the 2nd busi­ness day of the fol­low­ing month. If you redeem before the sched­uled interest is paid, you will receive a pro-rated amount, which is the interest you have earned but have not been paid.

Deflation again in December 2014

Infla­tion was neg­at­ive 0.2% in Decem­ber 2014, com­pared to Decem­ber 2013. This was due mainly to fluc­tu­ations in cer­ti­fic­ate of enti­tle­ment premi­ums, soft hous­ing rent­al mar­ket and cheap­er oil.
This is the second con­sec­ut­ive month that Singa­pore encoun­ters defla­tion, with the index at -0.3% in Novem­ber 2014.

Core infla­tion, which excludes the cost of accom­mod­a­tion and private road trans­port, how­ever, remained at 1.5% in Decem­ber 2014. Food and pre­pared meals were the largest pos­it­ive con­trib­ut­ing factor to infla­tion in Decem­ber 2014.

The over­all infla­tion in 2014 is 1%, com­pared with 2.4% in 2013, the low­est since 2009. The core infla­tion in 2014 increased to 1.9% from 1.7% in 2013.

Offi­cial fore­casts for head­line infla­tion is between 0.5% to 1.5%, while the core infla­tion is between 2% to 3% in 2015.

Elderly to use more Medisave to pay for outpatient services

With effect from 1 April 2015, a patient who is aged 65 and above can use up to $200 a year from the Medis­ave sav­ings to pay for the fol­low­ing ser­vices:-
a) Out­pa­tient med­ic­al treat­ment received at des­ig­nated health­care insti­tu­tions, and gen­er­ally cov­ers med­ic­al ser­vices and drugs, tests and invest­ig­a­tions which are neces­sary for dia­gnos­is or treat­ment of a med­ic­al con­di­tion and ordered by a doc­tor.
b) Screen­ing tests that are cur­rently under the Integ­rated Screen­ing Pro­gramme. This includes recom­men­ded screen­ings for selec­ted chron­ic dis­eases and can­cers.
c) To sup­ple­ment oth­er out­pa­tient uses of Medis­ave.  This includes the new $300 lim­it for out­pa­tient scans that was imple­men­ted on 1 Janu­ary 2015, the exist­ing $400 Mediave400 lim­it[1], the vari­ous lim­its for can­cer treat­ment and dia­gnostics, and oth­er out­pa­tient with­draw­al lim­its. In addi­tion, the eld­erly can also use it to pay for the 15% co-pay­ment when using Medis­ave for chron­ic dis­ease treat­ment.

Termed Flexi-Medis­ave, a patient can use up to $200 from his own Medis­ave or tap on his spouse’s Medis­ave, as long as the spouse is also aged 65 and above.

Flexi-Medis­ave can be used for out­pa­tient med­ic­al treat­ment at des­ig­nated health­care insti­tu­tions. These are:
a)    Spe­cial­ist Out­pa­tient Clin­ics (SOCs) at the pub­lic hos­pit­als and nation­al spe­cialty centres;
b)    Poly­clin­ics; and
c)    Med­ic­al GP clin­ics par­ti­cip­at­ing in the Com­munity Health Assist Scheme (CHAS).

[1] Currently, elderly patients can already use the Medisave400 limit for the following expenses:
a)    Outpatient treatment of 15 approved chronic conditions under the Chronic Disease Management Programme (CDMP);
b)    Screening mammograms for women aged 50 and above; and
c)    Vaccinations including Hepatitis B, pneumococcal and flu vaccinations.

 

Deflation in November 2014

Singa­pore has its neg­at­ive infla­tion, i.e., defla­tion, after 5 years from the last defla­tion in Decem­ber 2009 amid the glob­al fin­an­cial crisis. The con­sumer price index was -0.3% in Novem­ber 2014 over Novem­ber 2013, mainly due to lower COE prices, fall­ing accom­mod­a­tion costs and cheap­er crude oil. In fact, private road trans­port fell 7% in Novem­ber 2014 over Novem­ber 2013, while accom­mod­a­tion costs declines 1.2% amid a soften­ing rent­al mar­ket.

How­ever, the core infla­tion, which excludes the costs of private road trans­port and accom­mod­a­tion, was up 1.5% in Novem­ber 2014 over Novem­ber 2013. Food infla­tion was up 2.9%, due to increases in non-cooked items and pre­pared meals. This is due to the high wage costs amid the tight labour mar­ket.

Experts have fore­cast the core infla­tion in 2015 to aver­age between 2% to 2.5%, while the head­line infla­tion will be between 1% to 1.5%.