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"For those under 65, the Basic Healthcare Sum next year will be S$54,500, up from S$52,000 previously, the authorities said."
Source:
CNA, 16 November 2017
The Basic Healthcare Sum (BHS) which was known as the Medisave Contribution Ceiling (MCC) in the past has been raised from $49,800 to $52,000 in 2017.
This means that we can voluntarily contribute $2,200 now.
Of course, for those who are gainfully employed, this contribution will enjoy income tax relief.
For people like me whose CPF-SA has already hit or exceeded the prevailing Minimum Sum or Full Retirement Sum, this is about the only avenue we have to pump more money into our CPF to earn a 4% interest.
Of course, for those of us whose mandatory contributions (MC or contributions from earned income) are lower than the CPF Annual Limit ($37,740), we can also do regular voluntary contributions for the difference, maxing out the CPF Annual Limit.
The CPFB will apportion the contribution to our OA, SA and MA.
How much goes into each account will depend on our age group.
I am so glad to be promoted to the next age bracket which means more of my regular voluntary contributions will go to my CPF-SA which is paid a higher interest.
One of the reasons for me to be happy with ageing.
We can do a contribution to our CPF-MA online.
Here is how to do it:
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| Go to CPF e-Cashier homepage. |
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| Enter details and choice. |
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| Check allowable contribution |
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| $2,200 this time of year. |
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| Contribute online using eNETS |
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| It is done! |
I contributed only $2,000 because that is the daily limit for me.
How much interest will $2,200 earn in a year?
At 4%, that is $88.
Some people might say $88 is not a lot of money.
What will AK say?
It is still money and good money from the government too.
How do we build wealth through saving money?
Slowly and steadily, every dollar adds up.
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| From my FB wall. |
What? Don't have $2,200 to contribute to your CPF-MA?
Oh, you need the money buy your daily cup of Starbucks coffee?
OK lor. You are free to choose.
I choose to have free medical insurance.
It is such a no brainer.
I forgot to mention that 88 is such an auspicious number too.
Huat, huat ah!
Related post:
How to get free medical insurance?
Bloggy Award
49 comments:
Hi AK,
I had understood the Medisave account topup is counted as part of VC. If this additional topup exceeds the Mandatory Contribution limit, does that mean it will be refunded next year without interest? Thanks in advance! Having trouble calculating my room for VC.
HI AK,
I had understood top ups to Medisave is counted as VC of which maximum amount is determined by the CPF Annual Limit. How do we calculate whether this medisave topup does not exceed the CPF Annual Limit? Understood from CPF Board that any excess VC will refunded without interest next year. Asking as I think may have overcontributed VC early last year and lost out on opportunity cost. Thanks in advance!
Hi JD,
Yes, it is part of the CPF Annual Limit. If we should exceed, there will be a refund next year without interest. Happened to me a couple of times before. :(
HI ASSI
Chanced upon this blog and it was a shame that I didnt come across earlier. Anyhow, better late than never.
I just did a voluntary contribution to MA upon reading this and am glad that it is tax deductible. I never knew that! I only thought that voluntary SA contribution is tax deductible. I did voluntary SA contribution only last year as a way to reduce my income tax. I also did a transfer from OA to SA account to earn the higher interest, though I am didnt max the SA limit yet. One thing that I am still debating is if I should max the SA limit or continue to do voluntary contribution annually to get the tax deduction. I can save 11% tax on the $7K contribution which to me is a good deal but I am not sure if maxing out SA limit at the 4% compounding might work out to be a better deal in the later years. C
Would you care to share?
Hi Cindy,
Recipient of such a contribution gets income tax relief.
You might be interested in what Venkatesan said in the comments section of this blog post:
Why worry about hitting CPF MS?
HI AK
Thanks! Venkatesan has exactly the same questions as me!
Hi AK,
This is not necesarity bad..
For someone who is employed, if you contribute $37,740 into CPF Jan 2017, you will be earn the CPF interest for the whole of 2017. If you make $6k/month, it will take you 17 months to reach $37,740. My point is even if you over contribute to CPF and get a refund from CPF, you are still likely to get more interest than putting it with a bank.
By the way, does CPF refund you the following month after you exceed the Annual Limit (AL) or they will refund only in the following year?
Cheers,
K
Blogger AK71 said...
Hi JD,
Yes, it is part of the CPF Annual Limit. If we should exceed, there will be a refund next year without interest. Happened to me a couple of times before. :(
January 8, 2017 at 1:52 PM
Hi K,
The following year. :)
See:
The CPF is really a national PONZI scheme!
Hi AK, when will excess contributions (above the 37,740 limit) be returned? I'd made a slight excess (1k+) but haven't received the excess in my bank accts or deductions in my CPF statements (asking as u'd also made similar excess topups before). Thanks :)
Hi simplyme,
It will be soon. See the link I gave K above. ;)
Hi AK,
I am curious how CPF calculates interest when the contribution amount goes above the Annual Limit. I believe it should be CPF will pay interest on the first $37,740 that is contributed into the CPF account for the year. Anything after that does not earn interest and will be returned the next year.
Just contributed the balance $200. Yeah! :D
Hi K,
I am inclined to agree with you.
I don't mind over contributing by a bit each year. Unlike overfilling a mug which leads to waste, at least the money is coming back to us. LOL. Less stressful this way too as I don't have to worry about being accurate in my calculations. Agar agar can liao.
Eeks, feb! I shall patiently wait for my letter from CPF :) doing another VCMA end-Jan (not yet at the BHS)
Hi AK, I understand that VC to SA enjoys 7k tax deduction annually. If I do VC to MA, is that mean another 7k tax decution on top of the VC to SA?
Hi AK,
I am so glad that you blog about this. I missed the announcement by CPF board. For your readers who like to read about it. The link is below.
https://www.gov.sg/~/sgpcmedia/media_releases/cpfb/press_release/P-20161129-1/attachment/CPF%20interest%20rates%20(Q1%202017)%20and%202017%20BHS%20-%2029Nov16.pdf
Actually, it might interest your readers that they will not 'only get' $88. If we compound $2,200 at 4% for 10 years, the amount will come up to $3,256.54. That's $1,056.54 Ang Bao. Or for 15 years, its $3,962.08, an Ang Bao of $1,762.08. Or for 20 years, its $4,820.47, a bigger Ang Bao of $2,620.47.
So, it really depends on the age of your reader and the time they can let the Magic of Compounding do its work.
Thanks again for blogging. You've helped this reader in many ways!
Cheers,
ED
Hi Ying,
You are referring to the Minimum Sum Top Up (MSTU) to the SA. First $7K annually gets income tax relief.
If you voluntarily contribute to your MA, you will get income tax relief too. This is in addition to the MSTU to the SA. :)
Hi ED,
I love compound interest but I was going for the huat factor with CNY just round the corner. LOL. Huat ah! ;p
wah boss you account getting bigger and bigger. That's the power of compound interest. The eight wonder of the world. :)
Hi LT,
The heavy lifting is done by time. I am a lazy guy. ;p
HI AK,
If do VC to MA where it will hit 52k, the exceed future mthly contribution to MA will go to OA or SA? Cos now all exceed MA mthly work contribution go to OA...
Hi sweet,
In my case, as the SA has exceeded the full retirement sum, the MA contribution should go to the OA.
Hello AK,
I just received a letter from CPFB today telling me that indeed I had overcontributed VC as i suspected :/
However, what i was surprised is that the amount of overcontribution is much less than what i expected. Just to be sure, i went to double checked my employer CPF contributions history for 2016 and the total 2016 Jan-Dec employer contributions (including bonuses) is more than what was stated in the CPF letter. I went to play with the numbers and the figure stated in the letter is possible if CPFB did not include the Dec contribution which included CPF for AWS. Is it possible that CPFB made a mistake in the calculation or is there some way of calculating mandatory contributions i am not aware of? Do not really want to check with CPFB in case it's really a mistake and they want to refund me even more VC XD
Hi JD,
Hush, hush. LOL. ;p
If it really bothers you, then, give CPFB a call. :)
Hi AK,
I know my mandatory contributions for the year (employee + employer) will definitely exceed the Annual Limit. Now my MA is $49800, does it still make sense for me to VC $2200 to my MA. Will the subsequent refund for exceeding Annual Limit, be to me or to my employer? Will this refund cause problem for my company's HR?
Thanks in advance,
JT
Hi JT,
Wah! You have a happy problem. ;)
I don't know if your HR will black face or not. Better check with them first. :)
Hi JT, i've asked CPF this before. The priority is always mandatory contributions then VC. It's not possible for mandatory contributions alone to exceed the annual limit based on normal monthly CPF contributions (since there's a salary cap on the applicable %). If say your mandatory con will definitely hit the annual limit of 37,740 then there's little in doing a VCMA unless u want to earn the 4% interest on your MA from the start of the year.
Separately, just to confirm my suspicion, you dont mean that your CPF MA contributions will reach the 52k BHS limit and not the annual limit right?
Hi JD, not all CPF contributions are subject to the 37,740 annua limit. E.g. GST voucher medisave, NS home awards (medisave), etc. only working contributions are subject to the limit. I'd checked this last year as i was also worried about exceeding the annual limit due to NS home :)
Hi simplyme,
Thanks for sharing. :)
"only working contributions are subject to the limit."
More accurately, Mandatory Contributions + Voluntary Contributions in a year cannot exceed the CPF Annual Limit. :)
Hi simplyme,
Yes, I know I will hit the annual limit of 37740 within the year. With the BHS limit revised to 52k, it will be a few months before my MA hits 52k. So I intend to VC 2200 to hit 52k to earn the 4% interest from the start of the year. With my monthly mandatory contributions, my MA will overflow to SA/OA, and also eventually in the year I will exceed the annual limit. How will the refund happen, is it back to my employer since it is the mandatory contribution that trigger the hitting of Annual Limit. Dont really want to annoy the HR;-)
Hi simplyme and AK,
Thks. Yes I will hit the AL later within the year and I am thinking of VC MA 2000 to hit the BHS upfront to earn the 4%.
Eventually the refund for exceeding the AL, will it be a refunding for the initial VC of 2000 or for the overcontributed 2000 in the last MC?
Thanks in advance,
JT
Hi JT, even though your VCMA came first (before your employer's contributions), your VCMA will be the one that will be refunded without interest. Hence my previous reply that mandatory contributions always taking priority in the calculations for annual limit. This applies regardless of the order/month of contributions. If you're certain that your annual mandatory contributions from yourself/employer will definitely hit the annual limit, you wouldn't be able to take advantage of the VCMA tax relief by topping up the difference between the old and new BHS. This is usually done by those who can't hit the AL.
Hi JT,
Like I said, you have a happy problem. ;p
Hi AK,
just in case if you are not aware your "self-chat" has been uploaded to following financial website.
http://cj.sharesinv.com/20170111/42755/
Regards
JQ
Hi JQ,
I don't go there, actually. Thanks for letting me know. ;)
They reproduce some of my blogs in Chinese. No compensation for me but I agreed to this arrangement as it is doing something good for the Chinese educated.
I can speak Mandarin well enough. When it comes to reading and writing, especially writing, I am quite happy to let someone else do it for me. ;p
Reader:
Hello AK, may I know if there's any limit in contribution to MA for tax relief every year? So far I understand there's a 7k cap for SA contribution (to get tax relief).
AK:
VC to the MA is limited by the annual contribution limit. Mandatory + Voluntary contribution cannot exceed this limit. So, if a person's earned income has already maxed out this limit, no voluntary contribution is allowed. The limit is $37,740. If mandatory contribution is only $25,000, for example, the member can do a VC of $12,740 to his MA and get tax relief too.
Hi AK and friends,
I am currently planning to make my first VC and I was wondering if you can "think out aloud" these ideas and questions I currently have(already checked through CPF website and all the terminology is making it quite difficult find clear answers to my questions).
1) Is there a "deadline" for doing VC such that it will be considered for tax relief in the following(2018) work year?
2) As my MA is currently 15k below the the BHS, I was thinking to first hit the BHS(will probably take 2 years to achieve) so that all future mandatory/voluntary contributions(+interest) goes into my SA, making it easier to track. Any thoughts on this?
3) From what I can find, one can only top up to his own SA, but can top up to their "loved ones" MA. Does this mean the only way to top-up my MA is to get my immediate family to top-up for me?
Hi Fong,
1. If you want to enjoy tax relief for the following year, you have to make sure your contribution is recognized before end of this year. So, getting it done a couple of weeks before the the year ends is pretty safe.
2. Maxing out your CPF-MA to the BHS is a good idea. However, You have to remember that VC + MC cannot exceed the annual contribution limit. So, check what is your current annual MC and contribute the difference between this and the annual contribution limit to your CPF-MA.
3. You can contribute to your own CPF-MA. Recipient will get tax relief. So, in this case, you will get tax relief.
Just follow the steps provided in this blog if you wish to do a VC to your CPF-MA online. It is pretty easy. ;)
Hi AK,
Many thanks for your reply.
Yes, I am aware of the annual VC+MC limit, that's why I was asking when the VC needs to be done(whether its work year or calendar year) because if we are to expect any bonus, we would only know sometime in December.
I suppose what I will do now is to stagger my VC until Dec so that in the event of exceeding the annual ceiling due to the year end bonus(we can always hope right :-D), then the balance of the VC will just be refunded(in cash?)
Weird...I kept re-reading the CPF website and your blog but it just didn't seem to register that I can do a VC to my own MA even when it is clearly shown in the photos above, but thanks for the clarification!
Hi Fong,
Yup. If we should exceed the annual limit, excess contribution will be refunded without interest in the new year. See: CPF is a national PONZI scheme!
Gambatte! :)
Jimmy Ng:
had made the request to CPF, to raise the MA ceiling generously or remove it.
Perhaps, my voice not loud enough.
Kelvin Tan:
If there is no cap on medisave, there will be less incentives for people to stay healthy and not use medisave as far as they can.
Jimmy Ng:
unlikely too, with the withdrawal caps & deductibles (co-payment).
it is just that the cost is always north bound & treatment are mostly unavoidable, unless you want to meet the maker soon.
Kelvin Tan:
First, do you understand how the existing cap to BHS provides incentives for people not to tap on Medisave, before either 55 or 65?
Jimmy Ng:
no i don't. tell me
Kelvin Tan:
The cap forces consideration of the long term. No one is going to ignore a potential disease in favor of a higher payout at 55, for we all know that we’ve got to survive diseases to live long enough to collect those payouts.
Jimmy Ng:
as if i can choose when the disease can hit me.
so my point is, when i am able to afford to work & contribute, i should be allowed to put more $ into MS.
never knew when I'll need it and how long I'd be around.
I am not keen on PMI to cover that shortfall above BHS. Not keen to feed those fat cat insurance company & agents but it is a necessary evil that grows leap & bound annually. Which is why i liked a higher quantum to pay this via interest earned from MS
Kelvin Tan:
Fair enough, you rather earn 4% in medisave and am willing to give up the benefits of a higher payout at 55.
The real question is how many Singaporeans think in the same way? A policy change would affect all of us.
Perhaps one piece of data that might aid the discussion is, what is the average medisave money that is left behind after one pass away in Singapore? If it is already a huge amount, then removing the cap would be a silly move because we will be sacrificing even more of our retirement payouts, for the sake of putting it on medisave which we never end up using.
Ho Wai Han:
I hope the cap for ma is not increased as the expected interest from the current 52k cap is sufficient to cover the Medishield life premium. Also you cannot withdraw ma except for medical and upon death. So 52k should be adequate and not overly burdensome for the majority of Singaporeans.
Reader says...
Hosay liao! Got angpow again next yr for MA!
"For those under 65, the Basic Healthcare Sum next year will be S$54,500, up from S$52,000 previously, the authorities said."
Source:
http://www.channelnewsasia.com/news/singapore/cpf-interest-rates-to-remain-unchanged-from-january-to-march-9412574
Hi AK,
Let's say my medisave is already $52K for 2017 and next year the cap is $54.5K.
My employment contributes more than the $2.5K increase e.g. $3K in medisave cap for 2018.
So even if i top up $2.5K medisave next year in January, I am not entitled to the VC-MA tax relief right? How about the interest calculated
Hi Chris,
If we contribute $2.5K to our MA at the start of the year, this sum will get 4% interest for the full year. So, that is $100.
In your case, if you do that, you would hit the BHS of $54.5K and you will still get income tax relief on this $2.5K voluntary contribution to the MA.
Then, all your mandatory CPF contributions from employment for the year will only go to your OA and SA. Nothing goes to your MA.
Reader says...
Thanks for your efforts in writing the articles! It’s motivating and educational. Quick question: I’m unable to find govt’s ‘Ang bao’ for TOP up cpf. Can you advise please? Many thanks in advance!
AK says...
The "ang bao" is the full year interest earned. 😛
It is a $100 "ang bao" this year.
If you have not done it yet, cepat!
Happy New Year AK!
2017 was my first year doing 7k VC to MA and quite unexpectedly received CPFB's letter last week notifying me that there's a few hundred+$ of excess VC that will be refunded without interest. I guess that's a "good" problem nevertheless!
If everything else stays the same for contribution ceiling and VC, the next logical thing to do is to start looking into an SRS account right?
Hi Fong,
It has happened to me before too. ;p
http://singaporeanstocksinvestor.blogspot.sg/2016/02/the-cpf-is-really-national-ponzi-scheme.html
SRS is a good idea if you are still paying income tax. :)
http://singaporeanstocksinvestor.blogspot.sg/2011/01/srs-brief-analysis.html
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