Frequently Asked Questions About CPF


1. For the extra 1% interest, how do they divide the interest on $40,000 between SA and RA?

CPF allocates based on the precedence of RA-OA-SA-MA. If you are currently after 55 years old, and you have RA, that takes precedence. If you are before 55, it will go to OA (20k) then SA, then MA.

2. If I use OA to pay for a housing loan, is the accrual interest that I have to pay back based on 3.5% or 2.5%?

It will be based on 2.5%

3. Should I use my spare cash now to pare down my housing loan so I can accumulate my CPF. I’m currently paying off my loan using my OA? What are the advantages of paying back the loans early?

By paying off your loans early, you are using excess cash to hasten the payoff. The advantage is that if your cash is earning a very low return, paying off early saves you the interest on a mortgage that you would have to pay. So mathematically, paying back loans early is better.

However, if you are an investor and the cash can be put into investments earning greater than the mortgage interest on your loans, then mathematically, it may be better not to pay off earlier.

Another advantage of paying off a loan early is to have a peace of mind that you do not have a future cash flow constraint should you lose your job. That peace of mind can be priceless for many people.

4. Is it better to use OA to pay down the mortgage to save interest or to top up SA?

Currently, if you pay down mortgage you save on 2.6% in mortgage interest (HDB Concessionary Loan Rate) and if you choose to top up you earn an additional 1.5%. However, CPF OA and SA compound at different rates and we have not done an in-depth study on the compounding effect. We will update if we have clarity on this.

5. If I have $200,000 in my SA, when I reach 55, will the Full Retirement Sum (FRS) of $181,000 be transferred to RA or I can decide to transfer 200,000 instead. In other words, is it only the basic, full, or enhance sum be selected or it can be any sum above basic?

By default, only the FRS amount (currently $181k) will be pulled from your SA to fulfil the RA Full Retirement Sum. You can transfer the additional amount into your RA when you reach 55 if you have not hit the prevailing Enhance Retirement Sum (ERS) limit.

6. If SA has met FRS does any additional 1% interest from OA and MA go to OA?

The extra 1% will stay at SA and after 55 in RA

7. Can you just clarify the $181k SA cap on contributions – presumably there is a tax on that as it’s above the $7k/$14k SGD tax-free portion?

Under the Retirement Sum Top Up Scheme (RSTU), CPF members can top up their CPF SA (before age 55) and CPF RA (after age 55) and enjoy tax deduction up to $7,000 for your own top-up and $7,000 if you top up your parent’s or spouse retirement sum. Thus, a CPF member can enjoy up to a maximum of $14,000 in tax deduction under this RSTU scheme.

This reduces your taxable income.

8. Can you do cash top-up once you hit the FRS?

Once you reach the FRS, you cannot do top up in the Retirement Sum Top Up Scheme. You can still top up your MediSave if you have not hit the Basic Healthcare Sum (BHS) to earn tax relief. You can still do voluntary contribution which will be allocated into your OA, SA, and MA based on your age’s allocation rate. The maximum contribution you can do is $37,740. Unfortunately, voluntary contributions do not attract tax relief unless you are self-employed.

9. Can I withdraw from FRS after 55? Can I use it as an emergency fund?

After 55, an equivalent of the prevailing FRS is transferred to your RA. IF you wish to withdraw this sum, you can only withdraw the amount above the BRS (half the FRS), if you have to charge your property to CPF.

10. Is it better to top up RA to ERS at 55 to get higher CPF life payout or just use BRS and property pledge and invest the difference?

The answer to this question is whether you can get a better return investing versus the return you can earn in CPF. Also, it depends on how reliable you want your stream of income to be. CPF LIFE gives a reliable income stream regardless of markets. At Providend, we believe in balance – using both CPF LIFE and investment in your spending plan to give you the income you need at retirement and also the reliability you will want.

11. I am 53. If I have $500k cash on hand now, is it better to put into CPF or invest with Providend?

This is a question we will need more information on because it will very much depend on your current situation.

Considerations include:

  • from what age onwards do you need your retirement income?
  • Is $500k part of your resources?
  • what is the income requirement for the lifestyle that you want to live?

You will need to look at your wealth in totality and to see that after funding your other financial goals, how much is left over, and overall what is the nature and characteristic of your income plan. We would advise you to speak with a Providend client adviser to understand how you can have a good spending plan before making any decision.

12. Question on voluntary CPF contribution. It was mentioned earlier that one can continue to make voluntary contributions post 55. Is there an age limit beyond which it would be acceptable?

There is no limit.

13. Which CPF LIFE Plan is better between Basic and Standard?

It largely depends on your needs and preference, the basic plan has a lesser fixed payout but leaves more to be bequeathed to your loved ones. Whilst the standard plan has a higher fixed-income payout but leaves less for distribution to your family upon your death.

14. When do I decide which plan I want?

You can decide before the age you want to drawdown. If you belong to the cohort that has turned or will turn 55 from May 2016 onwards, it will be anytime from age 65 to age 70. If you do not decide on the plan by age 70, the CPF board will decide on the Standard Plan for you.

15. Why does it matter to optimize your CPF with the “SA Shield” concept?

There is a sequence in which CPF “forcefully” transfer up to the FRS from your CPF OA, SA into CPF RA. CPF will transfer monies from your SA first and if your RA has not hit the FRS, CPF will transfer your monies in your OA next.

By optimizing with the “SA Shield” concept, during the time of assessment, your monies in your CPF SA is in your CPF investment account, and thus CPF Board will transfer whatever monies that are left in your CPF SA, and then the main bulk of your funds, which is in CPF OA into CPF RA. When all these transfers are over, you can then sell your investments to transfer the proceeds back to your SA.

This allows you to keep the bulk of your CPF monies after age 55 in your CPF SA to earn a higher interest compared to your OA.

16. Can we channel our monies in our OA to RA after 55 to get higher interest? If so, what’s the purpose of optimising before 55? I can still do so after 55?

Refer to the previous answer to the objective of SA Shielding.

Regarding whether you can top up your RA with the monies in CPF OA, if the CPF member has yet to liquidate the SA he took out for the shielding, he can certainly instruct CPFB to transfer his balances in OA to form the ERS instead. But once the CPFIS-SA is redeemed and the monies back in SA, then CPFB will take from SA first.

17. What is the low-risk product to optimise in SA one month before turning 55?

There are some CPF SA approved unit trust that invests in fixed income instruments. Fixed income tends to be lower in volatility and thus more suitable than other investments to execute this SA shield. The caveat is that by doing this, you may potentially suffer some losses due to volatility in the bond unit trust. But you have to accept this risk to retain a higher amount in SA rather than in the OA so that you can get the 4% interest after age 55.

18. If I put FRS or ERS at 55, can I withdraw partial up to BRS before 65 when I need an emergency fund?

If you have not started taking income from your CPF Life, have to charge your property to CPF, you can withdraw the amount above BRS. However, if you have to do Retirement Sum Top Up (RSTU) above the BRS amount, the RSTU top-up amount above the BRS amount cannot be withdrawn as well.

19. When can I top up RA to meet ERS ceiling?

You can top up any time of the year.

20. If I have $200k in SA but only have $55k in OA, can I still optimise?

You can still optimise just that the benefit you will see is less compared to someone with more in their Ordinary Account (OA). What you gain is a recurring 1.5% more in interest earned in CPF SA instead of CPF OA versus potential short term downside volatility for the funds you temporary move to your CPF investment account.

21. After 55, the money still left in SA and OA, what would the interest rate be like? Do we still have OA and SA accounts? Or is it collapsed into a single RA account?

Your OA and SA accounts will still exist after 55 years old. The interest will still be the same, which is currently a floor rate of 2.5% for your OA and at least 4% for your SA.

22. Can I choose Basic Retirement Sum even if I have more than 181k in the SA?

If you have decided to charge your property to CPF, you can choose to withdraw the monies above the BRS from your CPF RA.

23. For the Retirement Top Up Scheme, could you please clarify if the $7,000+$7,000 cash top-up maximum is per month or per year?

The maximum top-up limit is per year.

24. After the age of 55, one can only voluntarily top-up RA, am I right? Upon reaching ERS, can you still voluntarily top up into RA? Or will you only be able to top up voluntarily into SA/OA then?

After age 55, you can only top up into RA.

25. Is there a topping scheme just for MediSave?

There is a top-up scheme to top up your CPF MediSave, up to a prevailing Basic Healthcare Sum (BHS). You can enjoy tax relief for you MediSave top-up as well.

26. Can I just confirm that after the age of 55, we will no longer be able to voluntarily top up specifically to our SA/OA/MA accounts, assuming that our RA has already reached ERS?

After 55 you can still continue to contribute a maximum of $6000 x 17 month x 0.37 Less CPF Mandatory Contribution into your OA/SA/MA. If you are doing top-ups under Retirement Sum Top Up scheme, you can only top up into your RA up to the prevailing ERS.

27. Can I still top up RA if it has already meet ERS ceiling?

You can top up your RA to the new ERS when it increases every year as the top-up limit does not take into consideration interest earned in your RA. To find out exactly how much you can top up, do log in to your CPF account using your Singpass to find out more.

28. Is it advisable to encourage adults (20+ yrs old) to start out to work to put some savings into CPF?

We have to look at the adult’s situation. A young adult that started out work have fewer commitments and topping up their CPF allows them to enjoy tax relief. However, doing so reduces their cash flow.

While they may not need the money so soon, eventually they may need the cash flow for big-ticket items such as getting married, home renovations. Thus, we need to assess their overall plan to comment further.

29. What is the latest age where a person must totally withdraw from CPF?

There is no latest age.

30. Should a young person use the voluntary contribution scheme to save extra cash into OA for a property purchase? Versus saving in cash?

It depends. If you cannot earn as high of interest as 2.5% in short term, less volatile investments, then CPF is an alternative. However, under voluntary contributions (VC), you cannot control which account you top up to. You will be topping up to all three accounts (OA, SA, MA). Thus, you have less money when you need to downpay for your property. This might not be what you desire. Overall, it might make more sense to put money in low-risk instruments such as investment-grade bond funds and higher-yielding savings accounts.

31. Is the top-up scheme the same as what we contribute to SRS annually cap $15,300?

Both the SRS and Retirement Sum Top Up (RSTU) allow you to enjoy tax relief but they are different schemes.

32. What if there is no nomination? Where does the money go?

Your CPF monies will be administered by the Public Trustee and distributed under the Intestate Succession Act.

33. Can I put more than $181,000 into the CPF RA?

Yes, you can. After 55, you can top up to the prevailing Enhance Retirement Sum ERS which is currently at $271,500.

34. Any benefits from pledging the property (50%) even if I can meet the FRS?

The main benefit is that you can withdraw more cash from your CPF accounts at age 55 as you don’t have to set aside the FRS in the RA. If you have a use for the excess cash, by charging your property to CPF, you are able to withdraw anything in excess of BRS. The downside is that the annuity income that you will get in the future from CPF Life will be lower.

35. Every year the Enhanced Retirement Sum increases. If I have already met the Enhanced Retirement Sum at age 55, is there any benefit to top up the enhanced RA sum subsequently?

You can top up your RA to the new ERS when it increases every year as the top-up limit does not take into consideration interest earned in your RA. To find out exactly how much you can top up, do log in to your CPF account using your Singpass to find out more.

36. I’m age 55 next year & have no intention of withdrawing the excess. For how long I can leave the cash in the account?

You can leave the balance in your CPF OA and SA for as long as you want.

37. So we can buy ETF with monies in our CPF OA?

There is a list of Approved ETFs that you can invest with your CPF OA. You may want to check them from the CPF Board website.

38. Can I still top up RA if it has met ERS ceiling?

You can top up your RA to the new ERS when it increases every year as the top-up limit does not take into consideration interest earned in your RA. To find out exactly how much you can top up, do log in to your CPF account using your Singpass to find out more.

39. When you sell your property, what happens to the OA funds that were used? Does it go back into CPF and able to earn the interest?

When you sell your property, the funds in your CPF that goes into servicing the mortgage, together with the accrued interest that could have been earned had they not been used, will go into your CPF to earn OA interest which is currently 2.5% p.a.

For more CPF-related resources, check out:
1. Assets That Cannot Be Distributed Via A Will | CPF Monies & Joint Accounts
2. The Purpose of CPF and Your CPF Accounts
3. Minimum Sum Scheme vs CPF LIFE Plans

We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.

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