Changes to CPF Retirement Account: Building up your nest egg together

Changes to CPF Retirement Account: Building up your nest egg together

With Valentine's Day in a week's time, you are probably planning how to celebrate it with your loved one.

Yes, you can have a romantic candlelight dinner with flowers and expensive gifts, but there is another practical way you can show your love.

For married couples, how about ensuring that your spouse's retirement is secure?

Take, for example, this couple, who topped up each other's Retirement Account, after new CPF changes this year, to earn a higher interest rate.

Retired engineer K.B. Tan, 58, has been doing voluntary cash top-ups into his own and his wife's CPF account for the past 10 years.

Previously, there was only one reference point - the Minimum Sum - that CPF members have to set aside in their Retirement Account when they turn 55.

From January 2016, Singaporeans have three reference points as a guide to how much they should set aside in their Retirement Account - the Basic, Full and Enhanced Retirement Sum.

Depending on how much they have in their Retirement Account savings, they can expect a payout every month from the age of 65.

Before the CPF changes kicked in this year, Mr Tan had to satisfy the Minimum Sum (now known as the Full Retirement Sum), of $139,000, before he could do a spousal transfer.

Now, he needs to set aside only the Basic Retirement Sum, which in his case is $69,500 - half of the Full Retirement Sum - in his Retirement Account.

The Basic Retirement Sum for a CPF member who turns 55 this year is $80,500.

If a CPF member does not own any property, he or she cannot withdraw any amount above the Basic Retirement Sum.

In Mr Tan's case, he owns a private apartment, so he can.

His wife, Madam Melody Peh, 56, quit her job as a system analyst in 2000 to look after their two children, a boy and a girl, then aged nine and 10.

Their children are now 25 and 26 and both are working.

Mr Tan says: "Last time, many people don't think about retirement and maximising their investment returns.

"It is only when they get older that they start thinking about how to maximise their returns."

So when the CPF changes took effect this year, Mr Tan transferred $80,500 from his Ordinary Account into his wife's Retirement Account and his wife did the same for him early last month.


This way, they have a generous account in their Retirement Accounts, which attract a better interest rate.

He says: "Instead of earning 2.5 per cent, now both of us are earning 4 per cent.

"By doing this, I'm getting 1.5 per cent more returns by just doing an electronic transaction."

Mr Tan could have withdrawn the amount above his Basic Retirement Sum, but he chose to leave the money in his Retirement Account to earn risk-free returns.

If you are like Mr Tan and have maximised the amount you can have in your Retirement Account, you can also invest extra amounts in your Ordinary Account and Special Account under the CPF Investment Scheme.

Be sure to set aside $20,000 in your Ordinary Account and $40,000 in your Special Account before you do so.

Among the investments you can invest in are exchange traded funds and shares.

To learn how you can increase your investment returns, check out suitable courses at

Tax relief with top-up

With just a day to go before the first day of Chinese New Year, many Singaporeans will be busy cooking, decorating and filling up hongbao for tomorrow. Some may have queued for new notes to put into the red packets.

Well, besides giving physical notes, you can also make cash top-ups to the Central Provident Fund (CPF) accounts of your parents, parents-in-law, grandparents, grandparents-in-law, spouse or siblings.

Not only will you get to show filial piety, you will also enjoy tax relief from the amount of cash top-ups that you make.

The maximum amount of cash top-up to your family members' Special Account (SA) or Retirement Account (RA), for which you will get tax relief on, is $7,000.

If you make a cash top-up to your own SA or RA, you enjoy tax relief on a maximum of $7,000.

So the total amount of tax relief you can get is on $14,000 - $7,000 for the top-up to your own SA or RA, and another $7,000 to your family members' SA or RA.

But there are some restrictions on claiming the tax relief for cash top-ups to your spouse or siblings.

They must not have an annual income exceeding $4,000 in the year preceding the year of the top-up. The income threshold, however, does not apply to parents, grandparents, a handicapped spouse or handicapped siblings.

The relief is granted automatically to those who are eligible, based on records sent to the Inland Revenue Authority of Singapore, so you do not need to claim it.

This article was first published on February 7, 2016.
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