CPF savings transfer to parents and grandparents

Cur­rently, CPF mem­bers can only trans­fer sav­ings from their CPF accounts to their par­ents or grand­par­ents after set­ting aside the full retire­ment sum. How­ever, mem­bers can soon do the trans­fer after set­ting aside the basic retire­ment sum if they have prop­erty pledges or charges to meet the full retire­ment sum, after the CPF Amend­ment Bill is passed in par­lia­ment soon.

Note that for those turn­ing 55 in 2017, the full retire­ment sum is S$166,000, so the basic retire­ment sum is half at S$83,000.

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.

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.

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.

Focus Group Discussions on enhancement to CPF

CPF Advis­ory Pan­el has just announced a series of Focus Group Dis­cus­sions (FGD) to be con­duc­ted from mid-Novem­ber 2014 to mid-Janu­ary 2015. The dis­cus­sion will be on the fol­low­ing top­ics:-

  1. Min­im­um Sum — how to adjust bey­ond 2015 for future retir­ees
  2. Lump sum with­draw­als at age 65 years — how much should CPF mem­bers be able to with­draw and under what con­di­tions
  3. CPF pay­outs — how could CPF pay­outs be adjus­ted to address cost of liv­ing increases over time
  4. Altern­at­ive invest­ments and annu­it­ies — how to provide more flex­ib­il­ity for CPF mem­bers who are pre­pared to take on more risks.

You can email to cpf_panel@mom.gov.sg to con­trib­ute your ideas on the above top­ics or to sign up for the FGD.  The first 4 FGDs sched­ule to dis­cuss the first 3 top­ics are as fol­lows:-

  •  15 Novem­ber 2014 (Sat­urday) 9.00am to 12.30pm at *SCAPE
  • 22 Novem­ber 2014 (Sat­urday) 9.00am to 12.30pm at *SCAPE
  • 9 Decem­ber 2014 (Tues­day) 6.30pm to 9.30pm at the Nation­al Lib­rary Build­ing
  • 10 Janu­ary 2015 (Sat­urday) 9.00am to 12.30pm (ven­ue to be in town area)

There will be more FGD ses­sions to be announced later.

For more inform­a­tion, please vis­it http://www.cpfpanel.sg

Lease Buyback Scheme extended to 4-room HDB flat

On 3rd Septem­ber 2014, the Min­istry of Nation­al Devel­op­ment (MND) and the Hous­ing & Devel­op­ment Board (HDB) announced four enhance­ments to the Lease Buy­back Scheme (LBS) with effect from 1 April 2015.
Only house­hold with at least one of the own­er a Singa­por­ean and all own­ers must be at least at CPF Draw-Down Age in order to par­ti­cip­ate in this LBS.

Firstly, the LBS will be exten­ded to 4-room HDB flats. On top of the pro­ceeds the own­ers receive from selling the tail-end lease of their flat to HDB, they will receive a fur­ther $10,000 cash bonus per house­hold if the total CPF top-up is $60,000 or more. If the total CPF top-up is less than $60,000, the house­hold gets a pro-rated bonus of $1 for every $6 CPF top-up.

Secondly, the income ceil­ing for par­ti­cip­at­ing in the LBS will be raised from $3,000 to $10,000 per month. The income ceil­ing for the Sil­ver Hous­ing Bonus (SHB) scheme will be raised from $3,000 to $10,000 cor­res­pond­ingly.

Thirdly, each own­er of a house­hold will only be required to top up his/her CPF RA to half the age-adjus­ted pre­vail­ing CPF Min­im­um Sum (MS), instead of the full age-adjus­ted pre­vail­ing MS cur­rently. There­fore, they will be able to retain more cash upfront from par­ti­cip­at­ing in the LBS. How­ever, for any cash pro­ceeds above $100,000, the own­ers will still be required to top up the excess amount into their respect­ive CPF RAs. How­ever, if you are a sole-own­er of the HDB flat, this rule does not apply to you and you will still be required to top up your CPF RA to the full age-adjus­ted pre­vail­ing CPF MS.

Fourthly, eld­erly house­holds will have the flex­ib­il­ity to choose the length of lease to retain, based on their age and pref­er­ences, instead of hav­ing one stand­ard 30-year lease for all. Those aged 70 to 74 will have the option of a 25-year lease, those aged 75 to 79 will have the option of a 20-year lease, and those aged 80 or older will have the option of a 15-year lease. On the oth­er hand, those who prefer longer leases can choose to retain more than the min­im­um required for their age, in 5-year incre­ments, up to a max­im­um of 35 years. Any uncon­sumed lease will be refun­ded to the owner’s estate. A house­hold must have lived for at least 5 years and have at least 20 years of lease to sell to HDB to be eli­gible for the LBS.