It is the tax season again whereby every dutiful Singapore contributes to nation building. Heartland Boy would like to introduce the CPF Retirement Sum Topping-Up Scheme and the importance of it when filing for your income tax. Heartland Boy is confident that that almost every young working adult can take advantage of the CPF Retirement Sum Topping-Up Scheme to immediately reduce his or her income tax expense.
How the CPF Retirement Sum Topping-Up Scheme works
The CPF Retirement Sum Topping-Up Scheme allows CPF members to build up their retirement nest by topping up your own or your loved ones’ accounts. Topping up your spouse or parents’ CPF would qualify under the definition of loved ones. The added beauty of this scheme is that members can also qualify for CPF Cash Top-Up Tax Relief during the process, provided that the following criteria are met:
|Below 55||Use cash to top up your Special Account and that your existing Special Account does not exceed the Full Retirement Sum*.|
|Above 55||Use cash to top up your Retirement Account and that your existing Retirement Account does not exceed the Full Retirement Sum*.|
*As of 2016, the Full Retirement Sum is S$161,000. The FRS increases every year to catch up with inflation. Note that cash top-ups beyond the current Full Retirement Sum will not be eligible for tax relief.
You can read about Heartland Boy’s experience of topping up his mum’s Retirement Account here.
The amount of tax relief that you enjoy is the amount of cash that you contribute to your Special Account or Retirement Account (if you are above 55 years old), capped at S$7,000 per annum. The CPF Retirement Sum Topping-Up Scheme therefore allows you to reduce your chargeable income through tax relief, and eventually enable you to reduce your income tax expense.
Advantages of the CPF Retirement Sum Topping-Up Scheme
1. Enjoy Tax Relief
- The greatest benefit offered by the CPF RSTU is tax relief. Make full use of it when your Special Account or Retirement Account has not exceeded the Full Retirement Sum yet. Heartland Boy would also advise young employees to top up their CPF SA before topping up their Supplementary Retirement Schemes.
2. Almost Every Young Adult Is Eligible
- Young working adults are especially eligible because it takes at least 5.5 years to exceed the Full Retirement Sum, assuming that your mandatory contributions are maxed out every year and that you transfer all your OA to your SA. (Note: The Mandatory CPF Annual Limit as at 2016 is $37,740. Eligibility for RSTU is not based on CPF Annual Limit. Rather it is based on whether your Special Account has reached FRS) Therefore, young working adults should make use of the CPF Retirement Sum Topping-Up Scheme to reduce their income tax expenses. OKAY, even if you are that overachiever that managed to achieve the Full Retirement Sum within 6 years, you can still explore cash top-ups to your loved one’s Special Account/Retirement Account* up to the Full Retirement Sum to enjoy tax relief. In this process, you can also help grow your loved one’s retirement funds so that they can enjoy a higher payout from CPF LIFE. (Lifelong Income for The Elderly)
*Do note that even though you may have multiple loved ones, the total cash top-ups relief applicable is capped at S$7,000 per category per year.
Disadvantages of CPF Retirement Sum Topping-Up Scheme
Cash is King
- It is common to have the mentality that it is safer and better to always have cash by your side, especially in today’s volatile market. Therefore, cash top-up into your Special Account is truly a decision not to be taken lightly. Heartland Boy suggests that setting up an emergency fund should be the first financial goal of any young working adult, and only after this has been accomplished should cash top-ups into your Special Account be considered.
- Even after setting up an emergency fund, some people still feel difficult to part with cash. Heartland Boy would then preach about the virtues of delayed gratification, and how “suffering” a little now would go a long way into having a better tomorrow.
- Cash top-up into your Special Account is an irreversible process. Before the age of 55, savings in the Special Account cannot be withdrawn and utilized for any purpose, including paying off your housing mortgages or funding your child’s tertiary education.
Not Utilized For Computation To Meet Minimum Sum For Investment
- Cash top-ups to your Special Account cannot be utilized for computation to meet the minimum sum for investment. Currently, the minimum sum required in your Special Account is S$40,000, before you are allowed to use the excess balances for CPF Investment Schemes (CPFIS).
Not Utilized For Computation To Meet BRS In Your Retirement Account
- The Basic Retirement Sum (‘BRS’) is $80,500 in Year 2016. The cash topped up into your CPF under the RSTU scheme cannot be computed as part of your criteria to meet the BRS. To find out more about how the RSTU affects your withdrawal limits, you can read this article here where there are complete scenarios to illustrate the amount you are able to withdraw from your CPF.
Apply For CPF RSTU Online
The process to apply for CPF Retirement Sum Topping-Up Scheme online is super simple and manageable. Here is a step-by-step guide on how to apply online.
- Log in online to cpf.gov.sg with your SingPass
- Under Online Services, choose “My Request”
- From there, expand the option of “Building Up My/ My Recipient’s CPF Savings
- Under “Using Cash”, please select “Contribute To My/My Recipient’s Special Account” (if you are below 55) via either internet banking or cheque as shown below.
- Please apply the CPF transfer to Self and ensure that payment is made using Cash.
- Confirm the disclaimer policy and key in the amount you would like to transfer!
Heartland Girl Enjoyed Tax Relief via the CPF Retirement Sum Topping-Up Scheme
In Heartland Boy’s previous article on transferring from Ordinary Account into Special Account, he also mentioned that Heartland Girl enjoyed tax relief via the CPF Retirement Sum Topping-Up Scheme. Towards the end of 2015, Heartland Boy realized that Heartland Girl was on the verge of “upgrading” into a higher income tax bracket. As a result, Heartland Boy advised Heartland Girl to top up her Special Account with cash to enjoy tax relief and reduce her chargeable income. Furthermore, this cash top up made extra sense as she had less than S$60,000 accumulated balances in her CPF then. As a result, this additional deposit in the Special Account is now earning a guaranteed 5% per annum. Not too shabby indeed.
In addition, find out how Heartland Boy enjoyed tax relief by performing a RSTU for his parents. As a result, his parents are earning 6% interest rate from CPF Board!
Alternatively, you might want to consider a cash top-up to your own or your loved one’s Medisave. This entitles the beneficiary for tax-relief as well.
The Finance Smith says
We do monthly cash top-ups to our CPF-SA as part of our asset allocation strategy and agree with you on the advantages and disadvantages you have raised. I still think the benefits outweigh the cons but we only contribute S$100 each every month so as not to lose too much liquidity.
Fully agree that the pros outweigh the cons but most people think it is a problem to worry about in the future!
Thanks for dropping by!
Hi, Thanks for the article. I noted the following from the CPF website.
“After setting aside your Full Retirement Sum or Basic Retirement Sum with sufficient CPF property charge/pledge, you can choose to withdraw the remaining CPF balances (excluding top-up monies, government grants, and interest earned in your Retirement Account)”
Does the CPF retirement top-up scheme mentioned in your article fall under “top-up monies”, which means I am not able to withdraw from CPF even after fulfilling the full retirement sum?
My understanding is that CPF Retirement Top-up Scheme is considered as top-up monies.
As for withdrawals, this is what I understand:
1) If your from mandatory contribution exceeds BRS but not FRS, you can withdraw the remaining balances from OA and SA after the BRS have entered the RA. To determine the amount that you can withdraw from your RA, it will be FRS less BRS less RSTU.
2) If you mandatory contribution exceeds FRS alone, you can withdraw all remaining funds in OA and SA, including the top-up monies.
This article may be useful to you: https://heartlandboy.com/money-withdraw-from-your-cpf-at-55/
Finally, I suggest it is best that you clarify with CPF officer if you would like further confirmation.
If FRS = 166k
Current SA has 165k
Can we still top up 7k and still get the max 7k tax relief?
If you are below 55, I believe you can only use cash top up up to FRS under the RSTU scheme. In this case, you can top up $1K and only 1K is entitled to the tax relief.
Before you make a top-up, you can request to check your limits. A message will appear under “My messages” and it will inform you or your eligibility for various schemes such as RSTU, OA to SA transfer etc.
“Young working adults are especially eligible because it takes at least 5.5 years to exceed the Full Retirement Sum, assuming that your mandatory contributions are maxed out every year and that you transfer all your OA to your SA. (Note: The Mandatory CPF Annual Limit as at 2016 is $37,740) ”
I don’t understand on this limit. Could you help? Thanks.
Are you referring to the CPF Annual Limit? This is the maximum amount that one can contribute to his CPF, either via a combination of compulsory or voluntary contribution. the RSTU is not restricted by this though since the limiting factor for RSTU is the FRS.
“The cash topped up into your CPF under the RSTU scheme cannot be computed as part of your criteria to meet the BRS.”
Can I just clarify that RSTU cash top ups cannot be computed as part of your criteria to meet the BRS only if you are looking at post-55 lump sum withdrawals? The top ups will still be part of the RA and contribute towards hitting the BRS/FRS for higher CPF Life payouts right?
Answer to your questions are both yes.
“Use cash to top up your Special Account and that your existing Special Account does not exceed the Full Retirement Sum*.”
Will I be eligible for tax relief if I do a top up of $7,000 into SA – when I am under 55 and the total of my OA + SA exceeds $171K (FRS amount)?
Typo – OA + SA + MA exceeds $171k (FRS)
yes u will be eligible. it is only SA that matters.
Just wanted to check, does it make sense for me to top up my SA using cash, and then use more of my OA to pay my mortgage (essentially this means transferring from oa to say)
If i were you, i would do that because i am entitled to tax relief for topping up SA (provided you have not exceeded the FRS). Do note that using a higher proportion of OA to pay for your home mortgage means that your accrued interest on your OA for housing grows larger.
Thanks for the reply. Can I check again that the frs is currently set at 161000? And the frs would be the addition of my ma, OA and sa?
Another thing is that for the interest rate accrued, how will I be paying that and wouldn’t that be me putting in more money to offset it, so ultimately it still my money?
Thanks for your response again
FRS does not consist of your MA. FRS is $176K in 2019.
For accrued interest rate, you simply need to refund into your OA when you sell your property.
Hi heartland boy, if I too up my parents cpf (assuming they have met the frs), can they withdraw they cpf if they are 67
If your parents have achieved FRS, i do not think you can still top up for them.
On this point,
“1) If your from mandatory contribution exceeds BRS but not FRS, you can withdraw the remaining balances from OA and SA after the BRS have entered the RA. To determine the amount that you can withdraw from your RA, it will be FRS less BRS less RSTU.”
So if my mandatory contribution is at 50000, FRS (161500) – BRS (80500) – RSTU (80500) = 500
does this mean i can withdraw the rest in my OA/SA after topping up the 500 above in RA?