8 Significant Changes to the CPF System Announced in November 2021

In November 2021, the CPF (Amendment) Bill 2021 was introduced in Parliament with the aim of streamlining the CPF system while enhancing certain aspects to enable members to build up their retirement nest eggs and receive payouts more smoothly.

The government has emphasised that these are not changes to CPF withdrawal rules or payout ages. With that in mind, here is a summary of the key changes announced, and how they affect you.

1) Automatic Channelling of Payouts from Ordinary and Special Accounts After Retirement Account is Depleted

Presently, when these members deplete their Retirement Account (RA) savings, their monthly payouts would cease, even if they had additional monies in their Ordinary Account (OA) or Special Account (SA). If they wished to continue to receive monthly payouts, members would then need to apply to the CPF Board to transfer these monies to their RA.

From the first quarter of 2022, CPF members receiving monthly payouts under RSS will draw from their OA and SA automatically when they have fully withdrawn from their RA. This ensures that their monthly payments are not disrupted.

This change will bring more convenience to some 250,000 CPF members who currently receive monthly payouts under the Retirement Sum Scheme (RSS).

2) Automatic Increase of CPF LIFE Payouts Following Retirement Account Inflows

Currently, members on CPF LIFE would have their payout levels determined upon the commencement of their CPF LIFE plan. Subsequent inflows of funds into their Retirement Account (RA) would result in additional payouts that are on top of their CPF LIFE payments.

This means that these enhanced payouts would not be for life. Members who wish to increase their CPF LIFE payouts would need to apply to increase their CPF LIFE premiums using these RA inflows.

From November 2021, CPF LIFE members who receive subsequent inflows into their Retirement Account, such as from cash top-ups or refunds to their CPF upon sale of property, will see an increase in CPF LIFE payouts automatically.

3) Transfer of Ordinary and Special Accounts Monies to Retirement Account Happens Only at Payout Start Age

Currently, funds from one’s CPF Special Account (followed by Ordinary Account) will automatically be transferred to their Retirement Account (RA) up to their cohort Full Retirement Sum when they reach their Payout Eligibility Age. This happens even if members decide to delay receiving payouts.

Following the change, members turning 65 in 2023 or later will only have their Special and Ordinary Account monies transferred to their RA when they start their monthly payouts.

This means that members who choose to defer the start of their payouts (to enjoy higher monthly payouts) will continue to receive interest from their Special and Ordinary Accounts.

4) Alignment of Tax Reliefs for Voluntary Topping Up of MediSave for Employees and Retirement Sum Topping-Up Scheme

We are all familiar with receiving tax reliefs for topping up our own MediSave Account (MA). And when we do make top-ups to our loved ones’ MA, as recipients they would enjoy tax reliefs. This is in contrast with the Retirement Sum Topping-Up (RSTU) scheme, which rewards the giver with tax reliefs.

From 1 January 2022, tax reliefs for MA top-ups will be aligned with the RSTU, which means the giver of top-ups under both schemes would enjoy tax reliefs.

Furthermore, the total amount of tax reliefs for CPF cash top-ups will now be shared between the RSTU and Voluntary Contributions to MediSave Account for employees. This amount is $8,000 for topping up your own CPF accounts, and an additional $8,000 for topping up your loved ones’ CPF accounts.

5) Removal of CPF Annual Limit Criteria for MediSave Account Top-Ups

Today, there are two different limits members need to consider when making MediSave Account (MA) top-ups: they cannot make top-ups beyond the Basic Healthcare Sum ($63,000 for those turning 65 in 2021) and the CPF Annual Limit ($37,640 in 2021).

From 1 January 2022, the amount members can top-up to their MA will be the difference between their current MediSave balance and the Basic Healthcare Sum. The CPF Annual Limit would not factor into MA top-ups.

6) Beneficiaries Will Receive CPF Monies Faster and With Less Hassle

CPF assets left behind by deceased members are disbursed to beneficiaries differently, depending on whether a CPF Nomination was made.

Un-nominated CPF monies would first be transferred to the Public Trustee’s Office (PTO), which will then need to trace and verify each rightful beneficiary in accordance with intestacy laws before any disbursement can be made. This time-consuming process is especially onerous for relatively modest amounts.

With the change, the PTO will allow one eligible beneficiary to receive un-nominated CPF monies not exceeding $10,000 as the Beneficiary Representative on behalf of all other beneficiaries with their consent. The process would remain unchanged for amounts in excess of $10,000.

Another change that will be made is to extend automatic disbursement of nominated CPF assets to nominees from just cash assets to include Singtel shares purchased under the Special Discounted Shares scheme.

Unless otherwise instructed, these shares will be sold six weeks after the CPF Board is notified about a member’s death, unless more time is needed to trace nominated beneficiaries. Proceeds would then automatically be disbursed, alongside monies in the various CPF accounts.

Previously, the CPF Board was required to wait to see if the nominees instruct the CPF Board to transfer the shares to their own CDP accounts or to liquidate them (In any case, the shares were to be liquidated by the CPF Board if they remained unclaimed after 7 years).

7) Changes to Waiting Period for CPF Board to Act on Unclaimed Nominated Monies and Dormant Accounts

As a result of the changes in the preceding section, it is expected that the speed of disbursement of CPF monies as well as instances of unclaimed monies would be reduced. This means that it is also not practical for the CPF Board to be required to retain unclaimed nominated CPF monies over the current 7-year duration.

Thus, from 1 April 2022, the duration the CPF Board will retain unclaimed CPF monies will be reduced to 6 months, which should be enough for the majority of beneficiaries to make arrangements to claim nominated monies. Once that time has lapsed, these monies will no longer accrue interest, although they can still be claimed at any time from the CPF Board.

Similarly, the CPF Board will apply a similar approach to CPF Accounts that have been deemed to be dormant – which is to liquidate the member’s discounted Singtel shares and stop their funds from accruing interest while awaiting rightful claims.

However, the government has given assurance that in the rare instance the dormant member was found to be alive by the CPF Board, the monies would be restored to their original CPF accounts with interest.

8) Recovery of Government Grants from CPF Members

The final major change made by the CPF (Amendment) Bill 2021 is to streamline the grant recovery process from members who were eligible to automatically receive government grants, but subsequently no longer meet this eligibility.

This is a technical change to allow the government to rightfully claw back grants to prevent unfair gaming of the CPF system. In his Parliamentary Speech on the bill, Manpower Minister Tan See Leng gave the example of a senior who received matching contributions from the government under the Matched Retirement Savings Scheme (MRSS), but  subsequently applied to reverse his/her top-ups.

The change would allow the CPF Board to efficiently recover these grants in these instances, and others.

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