Understanding changes to Singapore’s Provident Fund

Leong Sze Hian
Jul 31, 10


COMMENT Following recent policy changes to the Central Provident Fund (CPF) in Singapore, Malaysian permanent residents (MPRs) in the island republic, or those who have worked there and have a CPF account, need to be aware of six key areas before they reach the age of 55.

1. Upon reaching 55 years, if your CPF Special Account (SA) plus property pledge, which can be up to a maximum of 50 percent – currently S$61,500 (RM143,647) – of the CPF Minimum Sum (MS), is insufficient to meet your MS, which is currently $123,000, your CPF Ordinary Account (OA) balance will be transferred to your CPF Retirement Account (RA) to make up for the MS shortfall.

johor singapore causeway 041106What this means is that you may no longer be able to use your OA balance to pay for your monthly home mortgage payments.

So, if you are affected by this policy, use your entire OA balance to pay up your mortgage before you turn 55.

If you continue to work after 55, your CPF-OA contributions can continue to be used to service your mortgage.

2. For those aged 55 and younger, CPF Life will be compulsory from 2013 onwards for MPRs with at least S$40,000 in their combined CPF-OA and SA accounts. MPRs with less than S$40,000 can choose to opt for the CPF Life.

So, if you plan to give up your Singapore permanent residency and want to withdraw your entire CPF as a lump sum, you may wish to do so before turning 55.

Otherwise, only the surrender value of your CPF Life (depending on which of the four plans you choose) may be given to you. If you do not choose one of the four CPF Life plans, the default option is the CPF Life Balanced plan.

If you choose the highest monthly life annuity payout from age 65 under the CPF Life Income plan with no bequest to beneficiaries, there is no surrender value. So, if you plan to give up your Singapore permanent resident status to withdraw your entire CPF, you should choose the CPF Life Basic plan, which has the lowest monthly annuity payout, highest bequest and highest surrender value.

NONEMPRs who are at least 50 years old and have not worked in Singapore for the last three years, may elect to withdraw their entire CPF by giving up their Singapore permanent residency and never again returning to Singapore to work.

I know of one case where an MPR gave up his permanent residency, only to discover that he could not withdraw his CPF because he had worked for one month during the last three years. He appealed to the immigration authority but to no avail.

So, be absolutely certain that you have not worked for the last three years before you give up your permanent residency in Singapore.

3. MPRs who are already over 55 now have up to the end of next year to opt for the CPF Life scheme, or do nothing and remain under the current MS Payout scheme, which will pay a monthly amount from age 65, or earlier for those MPRs who reached 55 before 2009, until the account runs out.

This is estimated to be about 20 years or longer, depending on future CPF interest rates. You can use the CPF website’s MS Payout calculator and the CPF Life Payout Estimator calculator to make a comparison before coming to a decision.

NONEIn making your comparison and decision, you should note that the MS Payout calculator does not include the extra one percent interest payable on the first S$60,000, which is already factored into the CPF Life Payout Estimator calculator.

So, it may not be exactly an apple-to-apple comparison. Therefore it is likely that the MS Payout may be slightly longer than the 20 years assumed in the calculations.

4.If you plan to downgrade to a smaller flat, the sales proceeds (CPF utilised and accrued interest) of your flat will also be transferred to your RA, if you have a MS shortfall.

What this means is that after setting aside the MS, you may have less available from your flat sale proceeds to pay for your smaller, downgraded flat.

So if you want to downgrade, you may like do it before 55.

5. Upon reaching 55, your OA and SA that is transferred to your RA to meet the MS can no longer be invested. So if you want to invest your OA and SA, do it before 55 (note: the first S$20,000 of the OA and S$40,000 of the SA cannot be invested).

6. When the OA is transferred to the RA to meet the MS at age 55, the OA also can no longer be used to pay for one’s own or children’s tertiary education fees. So if you are turning 55, use your CPF to pay for a full year’s fees, instead of the usual one semester.





LEONG SZE HIAN’S late father moved from Kuala Lumpur to Singapore in 1952 Since he was born in Singapore in 1953, there may be some confusion as to whether he was conceived in Malaysia or Singapore. His next article will be on why Malaysians are snapping up public housing flats in Singapore like nobody’s business.


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