Singapore Amends Central Provident Fund Act and Retirement and Re-Employment Act
On November 2, 2021, Singapore’s Parliament passed the amended Central Provident Fund (CPF) Act and the Retirement and Re-Employment Act. The CPF is the obligatory savings and pension plan for Singaporeans and permanent residents that fund their retirement, healthcare, and housing needs in Singapore.
Under these amendments, the government aims to streamline the CPF rules to offer greater flexibility for transfers and quicker disbursements and topping up of CPF accounts. Further, the retirement and re-employment ages will be raised to 63 and 68, respectively. Since 2017, Singapore employers are obligated to offer re-employment options for employees who reach the retirement age.
What are the amendments to the CPF Act?
Easier for CPF members to receive their retirement payouts
Retirement Sum Scheme (RSS) members who have depleted the funds in their Retirement Account (RA) will automatically have payouts from their Ordinary Accounts (OA) and Special Accounts (SA). This is to ensure there are no disruptions to payouts with the government aiming to implement this new rule in the first quarter of 2022.Previously, RSS members who depleted their RA savings could only continue receiving payouts if they applied to transfer money in their OA or SA to their RA.
The RSS is one of two retirement schemes under the CPF Board, the other being CPF LIFE. The RSS provides CPF members with monthly payouts during retirement until the savings in their RA runs out, or they turn 90.
CPF LIFE was introduced in 2009 and offers monthly payouts for life.
Simplifying tax relief rules
Under the Retirement Sum Topping-Up (RSTU) scheme, a CPF member can top up their SA (if they are below the age of 55) or RA (if they are 55 or above) via CPF transfer or cash. The CPF member can also top the SA or RA savings of their family members. There is also a S$7,000 (US$5,153) per year tax relief if a CPF member is topping up for themselves and an additional S$7,000 (US$5,153) per year if they are top-up for parents, in-laws, grandparents, grandparents-in-law, spouse, and siblings.
Effective from January 1, 2022, the tax relief cap for voluntary top-ups will increase to S$8,000 (US$5,890) per year.
In addition, the government has introduced a tax relief cap of S$8,000 (US$5,890) per year to CPF members who top up a MediSave account (the account used for healthcare needs).
The quicker disbursement of CPF funds upon the death of a member
From April 2022, the duration in which the CPF funds are retained after death has been shortened to six months compared to the previous length of seven years. This timeframe gives beneficiaries enough time to claim nominated monies from the CPF Board.Suppose a CPF member did not designate a CPF nomination. In that case, relatives can appoint a ‘beneficiary representative’ who can submit a consolidated claim for the funds at a maximum amount of S$10,000 (US$7,365). If there are disputes among the beneficiaries after the funds have been disbursed, the beneficiaries can seek recourse under the law.
Increase of retirement and re-employment ages
From July 2022, the retirement and re-employment ages will increase to 63 and 68, respectively, and 65 and 70 by 2030.
Singapore’s Manpower Minister Tan See Leng told Parliament that the increase in the retirement and re-employment ages was necessary – particularly as by 2030, one in four Singaporeans will be 65 and older, resulting in talent shortages and hurting the country’s productivity and competitiveness. Businesses can raise their retirement and re-employment ages ahead of the scheduled timeline.
In early 2021, the government announced that the CPF contribution rates for employees aged 55 to 70 years will increase earning more than S$750 (US$552) per month, starting from January 1, 2022.
The new rates are as follows:
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