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CPF: Minimum Sum Top Up and Interest Computation.

Tuesday, January 6, 2015

This blog post is a reply to questions posed by a reader, Vicster: here.

Hi Vicster,

1. Since your home loan is fully paid up and if you do not have any other uses for the funds in your OA now or in the future, you could consider doing an OA to SA funds transfer.

2. "You can enjoy tax relief of up to $7,000 per calendar year, for cash top-up for yourself and/or cash top-ups received from your employer. You can enjoy an additional tax relief of up to $7,000 per calendar year if you make cash top-ups for your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings. To qualify for tax relief for cash top-ups for your spouse/sibling(s), he must not have an annual income exceeding $4,000 in the year preceding the year of top-up (e.g. salary or tax-exempt income such as bank interest, dividends, and pension) or is handicapped."

Source: Application to Make Top-Ups Under the Minimum Sum Topping-Up Scheme (For Members)

3. That is a good idea but you could also do an estimate of what your mandatory contributions (MC) for the year might be and do a voluntary contribution (VC) earlier in the year to receive more in interest payments.

4. "CPF interest is computed monthly, then compounded and credited annually to your respective accounts."

Source: CPF Interest Rates: FAQs.

Related post:
How to upsize $100K to $225K in 20 years?


Ana said...

I'm sure there are many who would disagree voluntary CPF topping up as they believe there is a conspiracy theory where the government is devising all ways not to let people use their COF funds.

If you try to ask them why, they will counter with you "and how do you know how the CPF works?".
I don't know if people like AK is in the majority or minority.

But I can only say SINGAPOREANS will one day create the downfall of this miracle nation by their suspicion and endless complaints. This nation that was built out of literally nothing, and plenty of blood & sweat. In fact, SINGAPOREANS unfortunately are not like the Hong Kong people - who at least, despite expensive homes & increasing inequality - agree that stupidity is stupidity (eg Joshua Wong, that Benny guy etc) and refuse to support them - and want continued peace & prosperity.

BP said...

What happens if the cash topup to SA exceeds the 31.4k yearly contribution limit?

AK71 said...

Hi Ana,

There will always be people who are sceptics and we know for a fact that on the subject of the CPF there are plenty of sceptics. I can only hope that there is a silent majority who don't think like the sceptics do.

AK71 said...

Hi BP,

The contribution cap of $31,450 is different from the annual MS Top Up cap of $7,000. So, you can max out both.

If you should exceed the contribution cap of $31,450 this year, the excess will be refunded to you without interest by the CPF Board.

Ana said...

In 2011, I met a new immigrant from India. He worked hard & started a renovation business here.... providing for his wife & child. He was not interested in politics - only interested in providing for his family.

Now when I think back, I think he is wise, just like the majority HK people.... why destroy your own home? I sure hope all the rubbish comments on FB forms a minority.

TWF - The Why Factory said...

Ana, fortunately the majority still think rationally and are prudent. Unfortunately the noise/voice of the conspiracy theorists is quite loud online. I really wish this beautiful nation to continue its miraculous journey.

RayNg said...

Quote: 1) I have about 30k left in my OA. Is it wise to transfer all into SA or leave 20k in there (to enjoy the extra 1%?) Could be used for a 2nd property if I so choose to buy (looking at the current situation, I can't afford anyway)

Just talking to myself ...

If he is considering to invest in 2nd property and wanted to tap OA to finance the mortgage, then it is better don't transfer his OA to SA.

He could continue to build up his OA (>14.4K yearly) for property investment.

With regard to SA. Since he has ~$80K in his SA, and assume that he continues to work until 55, he could have accumulate ~$240K by then even without cash top up or OA>SA transfer.

AK71 said...

Hi Ray,

I think the "talking to myself" disease is getting to be highly infectious. Cham. -.-"

Hope it doesn't become an epidemic. LOL. ;p

Thanks for weighing in on this. Appreciate it. :)

vicster said...

Hi Ray

Thanks for "talking yourself" whilst still directing your response to me. All AK's fault :p

I resonate with you on the purchasing the property side should I choose to do that.

Looks like to have a win-win, using cash as top-up may work best for now.

Thanks AK for your earlier response as well!

AK71 said...

Hi Vicster,

Indeed, it is all my fault. I am so sorry for this. -.-"

Now, I hope that the WHO will recognise this as a threatening epidemic and provide me with much needed financial aid. ;)

Thai Amulets said...

Hi Ak

I understand that hdb can be used to pledge 50% of the MS requirement.

So when topping up SA should we consider this and top up only sufficient to meet the MS? Any difference to have the full MS in the SA vs. half of the MS amount in SA and the other half being pledged by hdb?

Thanks, hope you have a great evening :)


AK71 said...

Hi Thai,

Well, it would depend on our means. If we do not have the ability to top up our SA to the MS required, then, pledging our property is the way to go.

If we have the ability to top up our SA to the MS required, I think we should take full advantage of this. Then, our property remains fully ours.

Thai Amulets said...

Thanks Ak,

Further to that what other advantages we may have to top up SA in cash compared to trf amount from OA to SA (other than having more amt in cpf).


AK71 said...

Hi Thai,

If we believe that the CPF is an essential cornerstone in planning for retirement adequacy, we want to get the maximum benefit out of it. So, having more money in the CPF is not a bad idea.

We have to remember that a big advantage of doing a $7K MS Top Up to the SA annually is the income tax relief that we get. OA to SA transfer does not get any tax relief.

Thai Amulets said...

Thanks again Ak! :)

Gd nite to you!

Thai Amulets said...

Thanks Ak! Tax relief would be a minor concern to me at least for now as i am earning a low income haha.


Unknown said...

How they check tax exempt income exceed for the individual to entitle tax relief top up? Do they check with the banks?

AK71 said...

Hi C Chu,

I am not sure I understand your question. Hmmm... Everyone is allowed income tax relief for a max of $7K in MS Top Up to their SA a year (if they have yet to hit the MS).

We can also do VCs but these do not enjoy income tax relief unless the VC is exclusively to our MA (if the ceiling has not been hit). However, if our mandatory contributions already max out the contribution cap of $31,450 in 2015, then, no VC is allowed.

Unknown said...

I am trying to get my spouse top up my SA and get tax relief for spouse.

Written "To qualify for tax relief for cash top-ups for your spouse/sibling(s), he must not have an annual income exceeding $4,000 in the year preceding the year of top-up (e.g. salary or tax-exempt income such as bank interest, dividends, and pension) or is handicapped.""

So how CPF check if I exceed the $4K? Does CPF go through SGX account for dividend total, bank account for interest etc? Just wondering...

AK71 said...

Hi Chu,

Ah, I see. All of us have to file our income tax return even if we are not taxable. So, I guess IRAS will have our past year's filings. :)

AK71 said...

actually the calculation should be: $161K in SA. The compound interest is:
1st year:
40K @ 5%=$2K
121k @ 4%= $4840
Total 1st year: $6840
Total SA 1st year= 161k + $6840= $ 167840
2nd year :
40k @ 5%=$2k
Total 2nd year: $7113.60+167840= $174953.60
Or is fixed at yearly interest of $6840 & accumulative to 55years old?

Leave the interest calculation to the CPFB. Won't run away de.

AK71 said...

Reader says...
For SA top up, I saw some comments in your post someone said top up in early Jan and some said late Jan? Is there a diff?

It make sense to top up earlier possible in SA right? So to earn the 4% interest as early as possible? Assuming we haven't reach the FRS amount...

Hey its okay now, i found the answer, so late jan will be relatively better since they calculate by calendar mth balance for cash top up.

AK says...
My view is that the difference is micro. Top up a few days earlier or a few days later is OK lah. What is more important is to do it. 😉

AK71 said...

Reader says...
I think the portion where the interest income is affected by large transfers due to the timing in the month of transfer or property payment is important.

AK says...
My view is that the difference is micro and over a longer term, we will look back and realise it really is insignificant. :)

Reader says...
I agree with your view. :) It's just that that small detail is interesting. But yes, it's too immaterial.

AK says...
Yes, it is interesting but, for the vast majority of readers, it is also rather insignificant. I would rather readers focus their energy on taking action and not worry about minor details. :)

steady said...


I did OA transfer to SA. Now that my SA is $166k and i am unable to further transfer OA funds to SA account.
How can i make use of OA funds to earn an interest rate of at least 4% ?

I am not good at stock pick and i am a risk adverse person.
Currently, i am using Cash to invest in STI-ETF on monthly basis.

(i know i am talking to myself, haha)

AK71 said...

Hi steady,

Unfortunately, I don't know any other way to earn a 4% interest using OA money.

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