Are The CPF Rule Changes Good Or Not?

Under proposed changes to the CPF Act debated in Parliament on 1st November 2021, these are 5 changes to CPF rules that you should know!

PS: Number 3 concerns how you can get more tax savings.

I'd explain these points in a simplistic manner and the information to changes to CPF rules are accurate as of this time of writing. On the surface, it is likely only 1 or 2 CPF rule changes really affect you.

5 changes to CPF rules

#1 Retirement Sum Scheme automatic transfers

This mainly impacts Singaporeans who are not in the CPF LIFE because of the amounts in RA. 
Around 83,000 people under the Retirement Sum Scheme and the payouts will be automatic for them moving forward.

If you have enough for Full Retirement Sum FRS, this change does NOT affect you much.

#2 Flexibility in deciding when to transfer funds

Take note this is "From January 2023" 

You'd be able to decide when to transfer the funds and can do so anytime between 65 and 70 years old. Generally, this is good as it gives you more options for your CPF money especially if you want to defer your CPF LIFE payouts.

#3 Simplifying tax relief rules (From 1Jan2022 ONLY!)

Currently, there is a $7,000 tax relief cap for the Retirement Sum Topping-Up scheme (RSTU). You can get it if you are giving to your own SA or to your loved one's SA.

(Love ones = spouse/sibling/parent/grandparents/parents in law based on current RSTU definition for tax relief)

Do note also for tax relief Iva RSTU to spouse and sibling, there is a less than $4,000/year income criteria.

From 1st of Jan 2022, the amount this amount is at $8,000 but the LIMIT WILL BE SHARED with giving your own to medisave via Voluntary contribution (VC-MA)

How does this go?

Right now when you give to your loved one's medisave, they get the tax relief NOT you.

From 1st of Jan 2022, you will be the one who gets the tax relief when giving.

Therefore the total that can be achieved for tax relief is $8,000 for giving to yourself and $8,000 for giving to loved ones. Total $16,000.

This is generally good news for you because medisave amounts are used up for insurance premiums unlike CPFSA which is hardly touched. If you have more than FRS in CPFSA, you'd know that RSTU wouldn't be available for you to tap for contribution to get tax relief.

#4 Quicker disbursement of CPF money when a member dies

There is no change to the nominees' rights to make claims at any time.

Hence, please NOMINATE your CPF to save your claimants the trouble.

Although the duration that CPF money is retained after death will be shortened to six months, nominating it will expedite to within 15 working days from notification of the member's demise.

In addition, with nomination, CPF will contact nominees for you.

Nominating CPF can now be done even online. To find out more, click the article link.

#5 Government to recover grants if eligibility NOT met

Not much is mentioned beyond "Government can recover grants in cases where the grants were automatically issued to eligible members, but the members later chose not to continue meeting the eligibility conditions."

My guess is grants to needy family such as via HOPE scheme and may not concern most citizens.

My thoughts

The new tax rules do indeed give slightly more for contribution to get tax savings.

Elderly parents are likely to have medical needs and are retired which makes tax relief given to them redundant. For this change on the giving to loved ones medisave, I believe many people can tap on it for tax relief.

Voluntary contribution VC still stands at up to $37,740 and self employed members can tap on the full amount. For employed members, the limit of $20,400 still stands and it is the max contribution from mandatory contribution.

If you are looking to save taxes, check out this video on HOW I'M AIMING FOR $80,000 TAX RELIEF!

Josh Tan Jian Liang (CHFC) Principal Author: REVIEWS: Practising financial planner with Promiseland Independent Pte Ltd. TJL100057681 EXPERIENCE: More than 14years. Josh Tan is a young parent, speaker, author and founder of TheAstuteParent.
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