CPF is a complicated system, and every time I delve into it, I discover new aspects.
One recent revelation was regarding the Special Account (SA) top-ups.
There are benefits to topping up CPF Special Account. For instance, per year, members can get tax relief of up to $8,000 for themselves and another $8,000 for parents, parents-in-law, grandparents, grandparents-in-law, spouse, and siblings.
Moreover, the Special Account interest rate is at 4.08%, which is higher than the Singapore Government Bonds, which yield at most 3.03% at the time of writing. Both are backed by the same government
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Therefore, it’s no surprise that some CPF members are drawn to the benefits of topping up their or their loved ones’ Special Accounts.
Since the Retirement Account (RA) will be funded by the Special Account first, one can compound the SA savings by topping up, allowing them to grow faster and potentially exceed the Full Retirement Sum (FRS) requirement by age 55.
Starting in 2025, any excess funds will flow to the CPF Ordinary Account (OA), and the SA will be closed when one turns 55.
At 55 years old, a CPF member can choose to withdraw the remaining amount after setting aside the FRS. If they pledge their property, they can withdraw even more. However, the fine print states that interest earned, government grants, and top-ups cannot be withdrawn because these funds are meant for retirement purpose.
An important consideration is that your cash top-ups to the SA will not be available for lump sum withdrawal from age 55. These amounts will be used to increase your CPF LIFE monthly payouts in retirement. Therefore, you must consider the CPF LIFE monthly payouts you want before deciding to top up your CPF SA. It’s a one-way street.
Your CPF contributions to the CPF SA as part of your employment will not be subject to this lock-up. You can withdraw them from age 55 after setting aside the required FRS amount.
You might wonder what happens to the monies you transfer from OA to SA. These are also considered top-ups and will be treated as non-withdrawable savings.
If you had kept it in the OA, you would have been able to withdraw it at 55 after meeting the FRS. But transferring from OA to SA inadvertently locks it up and subjects it to CPF LIFE rules. Hence, you need to be clear about the implications before topping up or transferring OA to SA.
Ultimately, I think this is fair. One cannot treat the CPF SA like a high-interest savings account and expect the flexibility to withdraw the money simultaneously. In the financial markets, there isn’t a product that matches CPF SA in terms of risk and return. The additional interest comes at a price—it is meant solely for your retirement, hence the lock-up. There is no free lunch in this world.
Many Singaporeans and PRs do not have an appetite for risk and prefer not to invest in most financial instruments due to the fear of loss. Topping up becomes a means to earn higher interest. However, we cannot be overly reliant on the system and must grow our savings and nest egg independently. This doesn’t necessarily mean investing in stocks or risky investments. There are enough alternatives for the average person to consider, such as Singapore Savings Bonds, SGS Government Bonds, Money Market Funds, and Fixed Deposits. These are relatively low-risk, though they won’t match CPF SA interest rates, but they will not be subject to a long-term lock-up.
“You might wonder what happens to the monies you transfer from OA to SA. These are also considered top-ups and will be treated as non-withdrawable savings.”
Ehh not true …. oa->sa can withdraw above FRS or BRS as applicable.
Only cash topup via RSTU die die cannot take out (also incl. the 4% interest earned from said topup lol).
Hi, you can refer to this explanation for more on how the withdrawal amount is computed –
https://www.cpf.gov.sg/service/article/how-is-the-withdrawable-amount-computed
U may have confused with oa/sa–>ra topup after 55 …. this one also die die cannot take out from RA except thru cpf life.
What happens if SA balance at 55 exceeds ERS?
Hi Sarma,
You can refer to the following FAQ: https://www.cpf.gov.sg/service/article/what-happens-to-my-cpf-savings-when-i-turn-55
The key points are:
– When you turn 55, we will transfer your CPF savings, up to your Full Retirement Sum (FRS), to create your Retirement Account (RA). Your Special Account (SA) savings will be transferred first, followed by your Ordinary Account (OA) savings.
– Once you have set aside your FRS in RA, the remaining SA savings will be transferred to the OA and can be withdrawn at any time.
– You can also opt to transfer your OA savings to the RA up to prevailing ERS to earn long-term interest rates and receive higher retirement payouts.
You can draw it out as it pushes out mandatory contributions. The brs is filled up partially by rstu/oa to sa monies.
Yea clarified with CPF too. Transfer from OA to SA is different from topping up of SA under RSTU scheme.
The former is not excluded in computation of amount withdrawable with property pledge.
You might want to edit the article on that portion.
What you wrote is correct if you made the transfer BEFORE 55. If you make the transfer AFTER 55, you can’t withdraw lump sum for the amount you transferred from OA to RA.
Also, what I wrote is about lump sum withdrawal WITHOUT property pledge. Where transfer from OA to SA amounts cannot be withdrawn as lump sums.