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Tea with LS: Withdraw CPF MSTU and interest at 55?

Tuesday, January 10, 2017

Very well researched and put together. Hats off to LS who originally placed this in the comments section.
Hi AK,

I guess this withdrawal regarding top-up money and its interest is causing a lot of confusion. This is due to the frequent changes in CPF policies/withdrawal rules. What is making it worse is that some of our CPF officers are also not as well-versed and providing wrong information (anecdotes from my friends and some comments in forums. Please disregard this if its offensive to you) and also the CPF website is poorly designed with incomplete information all over the place. 
I had trawled through the website for more than 1 hour in order to post the information below. (Maybe I am just lousy at searching for information at the CPF website, lol)

Firstly, what is causing the confusion? It is because of this particular rule...

"After setting aside your Full Retirement Sum or Basic Retirement Sum with sufficient property charge/pledge, you can choose to withdraw the remaining CPF balances (excluding top-up monies, government grants, and interest earned in your Retirement Account)"

But in the same webpage, this is we can also see this;

"​Your Ordinary and Special Account savings after setting aside the applicable Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) with sufficient property charge/pledge."

Does this means you can withdraw all remaining funds in OA/SA after you set aside the amount for FRS/BRS? Or will the first statement take priority and takes effect (resulting in unable to withdraw the top-up money and its interest) even after we set aside enough for FRS/BRS? This is what is causing the confusion.

After searching the CPF website for over an hour, I finally found this;

"If you had received top-ups before age 55, the top-ups and accrued interest in your Special Account (SA) will be transferred to your Retirement Account (RA) when you turn 55. Any excess, above the Full Retirement Sum applicable to you, can be withdrawn when you apply for withdrawal at age 55."

What is interesting and yet confusing is this (also in the same webpage);

"In addition, top-up monies cannot be used to form part of the Basic Retirement Sum (BRS) in computing how much RA savings above their BRS that can be withdrawn through sufficient CPF property charge or pledge"

Which actually means that even if your BRS is $83,000, and you have $123,000 in your RA ($100,000 is from top-up and its interest), you will not be able to withdraw anything. That is due to after deducting your top-up money ($100,000) from your RA ($123,000), you got only $23,000 left which is less than the BRS ($83,000). You can read in detail of the example provide at the webpage.

So let us summarize :

1) If it is about FRS, you can withdraw all the remaining funds that exceeds the FRS amount,

2) if it is about BRS, the rule applies and you cannot withdraw the top-up money and its interest. You can only withdraw remaining funds if your RA still exceed BRS after deducting the top-up and its interest.

Sorry for the exceedingly long post but I hope it clears up the doubts.

P.S. actually I may be wasting my time here trying to clear things up since the withdrawal might change again 1-2 years down the road. I still have almost 2 decades before I hit the withdrawal age...
P.P.S hopefully this is useful for people who is near to the withdrawal age (55 years old)...
Related post:
Did CPF Top Ups but denied lump sum withdrawal?


AK71 said...

Hi LS,

Please weigh in on this which I am posting on behalf of a reader, MF:

Hi AK, I was reading the post n comments on the MTSU. There were many comments about not being able to withdraw the balance after setting aside the retirement sum. One thing I note fr these wordings "(excluding top-up monies, government grants, and interest earned in your Retirement Account)". Based on this, I deduced that
1) TOP up monies cannot be withdrawn i.e. If u have topped up $140,000 throughout your lifetime, this $140k will be used to form your FRS and u can't withdraw this $140k.
2) interest which cannot be withdrawn only applies to interests earned in RA. It does not apply to interests earned on the TOP up monies WHEN they were in your SA as understood by many on this topic. My view is this only kicks in when the TOP up monies move to your RA at 55 (as they cannot be withdrawn) and u start earning interests on this TOP up monies which is now sitting in your RA.
This is my reading of that sentence but may need cpf's clarification

Unknown said...

Hi AK,

Thank you for posting this up.

These questions really need professional from CPF Board to answer. Else what we write here are all based on our interpretation of the rules... We might be right but we might also be wrong...

1) As per mentioned in the blog post, any excess above FRS can be withdrawn when the money is transferred from OA/SA to RA at the age of 55. Please take note, this is for top-up when you are younger than 55.

2) My interpretation is the same. What can't be withdrawn is just the interest earned inside the RA. Nothing to do with Top up interest

We really need CPF clarification...

AK71 said...

Hi LS,

Yes, it is important to make a distinction between top ups done before or after 55. Hence, the related post in this blog above.

Before doing anything, if it matters enough, it is necessary to check and maybe check again to avoid disappointment. :)

Anonymous said...

Hi AK, wrote to CPF Board sometime back. If it helps... Those in bold
are from my email. The rest are all their reply.

Thank you for your email of 12 June 2015.

It is not clear to me, if you have used cash as top-up in the first place, are the top-up monies eligible for withdrawal?

Top-up monies cannot be withdrawn. The top-up monies in your Special Account and the interest earned will be transferred to your Retirement Account when you reach 55.

E.g. @ age 55, RA is 181k, minimum sum is 161k, top-up 20k.
The withdrawal @ age 55 is 181k - 161k = 20k
181k - 161k - 20k = 0?

If the Full Retirement Sum is $161,000, only $161,000 from your Special Account and Ordinary Account will be transferred to your Retirement Account. The excess will remain in your Ordinary Account which is allowed to be withdrawn.


OA : $100,000
SA : $120,000 ($20,000 are top-up monies)

$120,000 from your SA and $41,000 from your OA will be transferred to your RA at 55. The remaining $59,000 in your OA is allowed to be withdrawn.

I would be pleased to help if you need clarification or further assistance on CPF matters. Alternatively, you can call us on 1800 227 1188 from Monday to Friday, 8am to 5.30pm. Thank you.


After reading it and thinking it through, I think not much of an impact to most working class. It will most likely impact people who never contributed to CPF (either self-employed) and did a top-up to SA only. Make sense?


AK71 said...

Hi LS,

Here is another one on my FB wall:

Cassidy Gan:
"Top up for BRS is excluded in the calculation for withdrawal? Is not top up using the cash we put in? If interest earned is understood we cannot include but with top up? By the way what is top up in your definition?

"Refering to this part of the article : Which actually means that even if your BRS is $83,000, and you have $123,000 in your RA ($100,000 is from top-up and its interest), you will not be able to withdraw anything. That is due to after deducting your top-up money ($100,000) from your RA ($123,000), you got only $23,000 left which is less than the BRS ($83,000). The top up of $100K is excluded from the total $123K to make up for the excess withdrawal on minimum sum of $83K."

AK71 said...

Hi FC,

Absolutely. I said the same thing here before too. It is an academic matter for most people unless our SA is made up purely of MSTU money. :)

Mao Mao said...

Any excess cash is good to contribute into SA for tax relief and 4% interest. Do not over-contribute until you have insufficient money for your immediate needs.

AK71 said...

Hi Mao Mao,

And for people who are more interested in the income tax relief, remember that beyond $7K of top up a year, there is no income tax relief.

Serendib said...

@AK71, @MaoMao,
not only is there no income tax relief beyond the $7k cash top-up, but once you reach the Full Retirement Sum (ie 2xBRS), you cannot top-up at all!

AK71 said...

Hi Serendib,

That is a point to remember especially for people who are concerned about getting income tax relief by doing top ups for as many years as possible.

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