Central Provident Fund (CPF) with its status as a compulsory and comprehensive saving plan has become an integral part of Singaporeans’ life, especially in terms of financial management.
CPF offers services including maintaining payments for education, housing, investment, as well as preparing for retirement. To ensure the residents can enjoy their golden age in comfort, the board of CPF has created Retirement Sum Topping-Up (RSTU) Scheme that enables the CPF members to boost their retirement savings and also their loved ones’.
As we know, at the age of 65, CPF members can start receiving monthly payout from the Retirement Accounts which can be created at the age of 55. By topping up CPF account, the recipients can get higher monthly payout and also have more flexible payout duration.
Two years ago, CPF top-ups started to become a trend among Singaporeans because of the benefits. However, many may still not be aware of the advantages gained from the top up scheme.
BENEFITS OF CPF TOP-UPS
The first and foremost reason why you should top up your CPF is because you can top up not only your own account, but also any recipient account including your family’s.
The rule is simple. If the recipients are below 55, the top up can only be done to Special Accounts, and if they are 55 and above, the top up will go to their Retirement Accounts.
The term family here includes spouse, parents, siblings, grandparents, parents-in-law, and grandparents-in-law. In fact, you can also top up to your children’s CPF accounts through RSTU Scheme or with Voluntary Contribution.
By making top-ups to your loved ones’ accounts, you do not only acquire a sense of relief that your family will be doing well at their golden years, but you will also get the second benefit which is tax relief.
There are 3 ways to claim tax relief. The first one is getting up to $7,000 tax deduction per calendar year when you perform cash top-ups for yourself. The second one is getting another tax relief up to $7,000 per calendar year by making cash top-ups for your family, with note that the recipients are handicapped or their income does not exceed $4,000 in the year preceding the year of top-up. The third one is by having your employer top up your account.
Just by topping up CPF accounts or receiving top-ups from your employer, you can enjoy huge tax exemption, which becomes a reason why people start showing interest to CPF top-ups. However, you should remember that there is a personal income tax relief cap of $80,000 which includes the tax relief from CPF top-ups.
THE AMOUNT TO TOP UP
Basically, all recipients can have more than one person making top-ups to their account as long as it does not exceed the maximum amount they can retrieve. You can check the maximum amount on my CPF.
When it comes to CPF transfer, the formula applied for transferring to spouse and to other eligible family members is a little bit different in terms of Retirement Sum.
Top-ups to spouse’s account refer to Basic Retirement Sum which is $85,500 for 2018.
Basic Retirement Sum (BRS) – CPF Balance*
Meanwhile for parents, siblings, grandparents, parents-in-law, and grandparents-in-law, the formula refers to the Full Retirement Sum of the year.
Full Retirement Sum (FRS) – CPF Balance*
*CPF Balance consists of OA, SA, and net amount withdrawn for investments.
As long as your CPF Balance exceeds the required amount set aside for BRS/FRS, you can transfer the rest to your loved ones within the amount they are allowed to receive.
HOW TO TOP UP CPF ACCOUNT
Making top-ups can be done in 2 ways: cash and CPF transfer.
The CPF transfer can be done online on CPF official website by submitting an online application via My Requests > Building Up My / My Recipient’s CPF Savings. Remember that you should have SingPass to be able to perform online top-ups.
Meanwhile, cash top-ups can be done in several ways.
The first one is online top-up using e-cashier by selecting payment for top up my own/recipient’s RA/SA under the RSTU. The same step also applies for payment using AXS machine in any AXS station.
For payment using GIRO and Cheque, you need to fill in a form that can be downloaded at https://www.cpf.gov.sg/Assets/members/Documents/Form_RSSTP.pdf for Cheque and https://www.cpf.gov.sg/Assets/members/Documents/FORM_RSTU_GIROandSI.pdf for GIRO, and then mail the document to:
Robinson Road P.O. Box 3060 Singapore 905060
CPF top-ups can be highly beneficial if calculated correctly, and it can help you to spend your golden years with the loved ones in prosperity.
The Finlens, a prominent financial consulting website is here to help you with personalized financial plan, including CPF top-ups calculation, tax relief, and building nest egg. We always strive to ensure our clients make the best financial decisions. If you need help with the RSTU Scheme, do not hesitate to contact us here, and we will be in touch with you soon.