[This article was written by Ryan Ong, and first appeared in SingSaver.com.sg] Love it or hate it, CPF is part of being Singaporean. Some of us don’t like the forced savings, while others feel it’s a great idea. But amid the constant arguments, some common myths have emerged. Here are some of the most common ones you may have heard of:
Myth 1. You Won’t Get Anything From Your CPF if You Don’t Meet the Retirement Sum
Should you not meet the Basic Retirement Sum at 55, you won’t need to top up your Retirement Account with cash.
However, if you have any new CPF contributions, government top-ups or other refunds received after 55, part or all of these amounts will be transferred to your Retirement Account when you next withdraw your CPF.
Find out more about the Retirement Sum Scheme here.
Myth 2. You Need to Top Up Your Medisave Until You Reach the Basic Healthcare Sum
A common misunderstanding is that the Basic Healthcare Sum (BHS) is the minimum sum you need to have in your Medisave Account (MA) upon reaching age 55.
However, unlike the previous Medisave Minimum Sum (MMS)*, the BHS is the maximum amount of savings you can have in your MA. Amounts above the BHS will flow to your Special or Retirement Account to boost your monthly payouts in retirement.
See the following graphic for a clearer explanation.
What’s also good to know is that:
- The BHS is $54,500 and it will be reviewed on an annual basis to align with the growth in Medisave use by the elderly.
- Your BHS is fixed once you turn age 65 and will remain the same for the rest of your life.
* Medisave Minimum Sum (MMS) had been removed as of 1 January 2016. This means that a CPF member withdrawing his/her CPF monies from the Ordinary and Special Accounts when turning age 55 will no longer be required to top up his/her MA.
Myth 3. You Can’t Service Your Home Loans With Your CPF Once You’re 55
People do mistakenly believe that you must service the remaining loan amount in cash once you’re 55.
But in fact, you can continue servicing your home loan using your CPF even after turning 55.
In addition, before you turn 55, you can request to reserve all or part of your OA savings to pay for the outstanding housing loan on your existing property. Just note that the actual amount that will be reserved is subject to available savings in your OA. Also, the amount that you can use for your housing loan is subject to the applicable housing withdrawal limits. Find out more here.
Myth 4. CPF Makes You Pay “Double Premiums” Because of Medishield Life and Your Integrated Shield Plan (IP)
It’s not true that you pay double the premium. If you have an Integrated Shield Plan (IP), a single premium payment is made to your private insurer, and this pays for both Medishield Life and your IP.
You don’t have to pay two premiums for your Medshield Life and Integrated Shield Plan (IP) because they aren’t two separate insurance plans. Medishield is part of your existing IP. An IP is made up of both the MediShield Life component run by the CPF Board and an additional private insurance coverage component run by your private insurer.
To be sure, you can log in to my cpf Online Services to check your MA deduction.
Myth 5. You Don’t Get CPF Contributions for Part-time Work
As long as you earn more than S$50 a month, and you are a Singapore Citizen or Permanent Resident, your employer is required to contribute to your CPF. This is regardless of whether you are working full-time or part-time.
However, you must be employed under a Contract of Service. You won’t get CPF contributions if you don’t have a Contract for Service; for instance, if you are a self-employed plumber and you’re paid to fix someone’s kitchen sink, the customer does not have to contribute to your CPF.
Here’s a very useful table for you to calculate how much CPF contributions you should be getting.
Myth 6. When You Sell Your House, All the Money Goes Back to CPF
This is common hearsay.
If you have used your CPF savings to finance your property, you will have to return the amount that you have withdrawn for your property (also known as principal sum), plus the accrued interest. The balance is yours to keep in cash.
If you are 55 years old and above, and have pledged your property to withdraw your Retirement Account (RA) savings in cash, you will need to refund the pledged amount on top of the principal sum and accrued interest. The amount refunded to your CPF account will be used to meet your Full Retirement Sum in your RA. After this, any balance housing refunds will be paid to you in cash.
Accrued interest is basically the interest your CPF savings would have earned if you had not used it for your home. This is to ensure that you have enough savings for your retirement.
You should also take note that if the sales proceeds from selling your property after paying off any housing loan are lower than this amount, you don’t have to make up the difference to meet the required refund if you sold your property at market value.
Plus, if you are buying another property, you can use your CPF savings again.
[This article was written by Ryan Ong, and appeared on SingSaver.com.sg and www.areyouready.sg.]