CPF changes that you may not be aware of?

Singaporeans best prepared for healthcare expenses?

I refer to the article “Singapore best prepared for future healthcare expenses” (Straits Times, Jan 9).

It states that “Singaporeans are among the best prepared for future health expenses among five countries in Asia.

Singapore also has the least to worry about when it comes to the future health gap – the difference between the cost to meet consumers’ health needs and the money available.”

A lot of Medisave?

A possible contributory reason for the above may be that Singaporeans have a lot of funds in their Medisave account.

How much of the CPF Due to Members of $207.5 billion in 2011, is due to Medisave?

In 2009 alone, Singaporeans withdrew “a total of S$660 million from their Medisave accounts to pay for the direct medical expenses incurred in hospitals, clinics and other healthcare facilities”.

In addition, S$875 million was withdrawn for MediShield and ElderShield premium payments.

“52 per cent of the withdrawals in 2009 were to pay for the members’ own direct medical expenses.

The remaining withdrawals were to pay for family members: 17 per cent for spouses, 18 per cent for parents, 12 per cent for children, one per cent for grandparents and others.” (“S’poreans withdrew total of S$660m from Medisave accounts in 2009“, Channel NewsAsia, Apr 26, 2010)

Medisave Required Amount

In this connection, I discovered the following in the CPF web site’s online CPF Withdrawal at age 55:-

“Any inflows of money such as new contributions and refunds received after 55 may be used to top-up your Medisave or Retirement Accounts to meet the prevailing Medisave Required Amount or cohort CPF Minimum Sum respectively.”

Prevailing vs cohort amount?

It has been my understanding all along that the cohort Medisave Required Amount (MRA) was applicable and not the prevailing MRA.

What’s the difference between cohort and prevailing?

Cohort is the amount that was applicable at the time when you turned 55, whereas prevailing is the amount which has been increasing every year.

For example, the prevailing MRA from 1 January 2013 has been increased to $38,500.

So, prevailing MRA means that the amount that you have to meet after reaching 55 will keep increasing.

When was “cohort” changed to “prevailing”, or am I mistaken as to my understanding that when the MRA was introduced, it was not “prevailing”?

What this may mean is that if you have an amount in your Ordinary Account that is in excess of your Minimum Sum requirement at 55, and you choose not to withdraw, the amount available for withdrawal in the future may be reduced to meet an increasing prevailing MRA in future years, if the MRA is applicable to you.

Contributions after 55 to meet Minimum Sum shortfall?

Also, does “Any inflows of money such as new contributions and refunds received after 55 may be used to top-up your Retirement Accounts to meet the cohort CPF Minimum Sum”, mean that your CPF contributions after age 55 may also be used meet any shortfall to your Minimum Sum?

My understanding is that previously, your CPF Ordinary Account contributions after 55 could be withdrawn on your birthdays subsequent to age 55.

Income Tax

Another rule that you may not be aware of – “Upon approval of your application (to withdraw at 55), your CPF savings will be forwarded to the Inland Revenue Authority of Singapore (IRAS) to settle your income tax liabilities (if any)”.

Other CPF changes?

Here are some other CPF changes over the years that you may not be aware of:-

“Medisave Required Amount increase 20% – highest ever?“, Dec 21

“Erosion of CPF protection from creditors“, Nov 7

“What happens when 4% CPF rate ends in 2014?“, Oct 15

“Financially stressed, but can only withdraw excess CPF next birthday?“, Sep 13

“Explain the lower payouts of new CPF Life plans“, Mar 8

“CPF: Pay to disabled children monthly?”, Nov 23, 2011

“CPF: Leave at 55 at your own peril?“, Jul 30, 2011

“ICT make-up pay: Part-time workers shortchanged?“, Apr 27, 2011

“Amendments to the CPF Act – did you know?“, Sep 1, 2010

“CPF: can’t withdraw more at 55 even with property pledge?”, May 23, 2010