Earlier this month, Parliament made changes to the Central Provident Fun when they passed a new CPF Act changing the minimum requirements that members must meet in order to contribute to their parents’ and grandparents’ retirement savings.
The New CPF Act
Under the new CPF act, property purchased using CPF savings counts towards the required minimum savings for the Retirement-Sum Topping Up (RSTU) Scheme to be able to contribute to a family member’s CPF account.
The change means a drastic increase in the number of CPF members eligible to transfer their excess savings.
Previously, only 20% of members qualified, however, with the new act approximately 30% of CPF members, or 340,000 people aged 30 to 70, will be able to make contributions to their parents’ and grandparents’ retirement funds.
There were four MPs who spoke during the debate about the changes with concerns ranging from whether Singaporeans are saving enough for retirement, calls for more flexibility for spouses to transfer to each other and that tax relief would encourage more transfers.
Josephine Teo, the Second Minister for Manpower, addressed each of these points in turn saying that the new act, "will give members more options to strengthen their parents' and grandparents' retirement adequacy". Additionally, that it is already considerably easier for spouses to transfer money to each other.
Furthermore, she said that more and more younger Singaporeans are meeting their retirement goals but these new changes will encourage them to help out their older family members or struggling siblings.
Another concern, raised by Workers’ Party MP Png Eng Huat (Hougang) was if CPF officers will advise members on all their options upon reaching different age milestones.
Teo responded saying, “the CPF Board will advise those who want to make the transfers accordingly.”
What is the RSTU Scheme?
Under this scheme, you can increase your own or family member’s retirement savings through top ups. You can do this via CPF transfer or cash based on the recipient’s age and up to a certain level depending on the person’s relationship to you.
What is the benefit of the RSTU Scheme?
When you top up for others, you help to build their Special Account total up to the Full Retirement Sum (if below 55) meaning that they are earning more interest. When you make cash top-ups, either for yourself or others, you can enjoy a tax relief of up to $7,000 per calendar year. For more information, visit the Central Provident Fund Board website.
Read more: How to have a happy retirement
Sources:
The New Paper, CPF Board, The Straits Times