CPF Amendment Bill 2021 and AK talks to himself.

Thanks to a nudge by Siew Mun, I went to read the CPF Amendment Bill 2021.

Some of my many blogs on the CPF have become outdated because of this Bill.

The changes which interest me most are the following and they will take effect from 1 January 2022:

1. Enjoy tax relief when we top up our loved ones' CPF MA.

I have always been curious why the recipient gets income tax relief and not the giver?

Well, this is now fixed.

2. Enjoy up to $16,000 income tax relief when topping up CPF MAs.

We can get up to $8,000 income tax relief for topping up our loved ones' CPF MAs.

We can also get up to $8,000 income tax relief for topping up our own CPF MA.

Take note that this income tax relief cap is shared by the RA, SA and MA.

So, previously, we would not say "Top Up" to MA but "Voluntary Contribution" to MA.

Now, when we inject money into the MA, it is a "Top Up" and it will share the annual income tax relief cap for the RA and SA.

This annual cap was $7,000.

3. Beefing up the MA is no longer part of the CPF Annual Contribution Limit.

This follows from the previous point that injection of money into the CPF MA will be considered a "Top Up" and not a "Voluntary Contribution."

What do all these changes mean for those of us who are actively using the CPF to have a strong foundation in retirement funding?

Would my strategy have changed because of these changes?

In the first 4 years of my life as a working adult, I transferred all my OA savings to my SA to give it a bigger base and more time for compound interest to work its magic.

I would still do that today if I just started my life as a working adult.

If I had extra funds, I would have pumped more money into my SA which would enjoy income tax relief at the same time.

Income tax relief will apply to the first $8,000 of Top Up from next year instead of $7,000.

Now, in my early retirement, I would continue to do yearly Voluntary Contribution to my CPF account up to the prevailing Annual Contribution Limit as I think of the CPF as a AAA rated sovereign bond with attractive coupons.

See:

$1.5 million in CPF savings by doing nothing henceforth.

The difference with this CPF Amendment Bill is that I will be able to inject a bit more money into my CPF account from next year because the MA is now under the "Top Up" scheme and not "Voluntary Contribution."

Since my CPF SA has already hit the prevailing FRS, I cannot do Top Up to my CPF SA anymore.

However, since the Basic Healthcare Sum increases yearly, there will be room for me to Top Up my CPF MA yearly.

I will provide links to this blog in some of my older blogs such as the following:

1. Ways to beef up our CPF savings.

2. Know how to grow our CPF savings?

Reference:
CPF Amendment Bill 2021 Highlights.

Read Siew Mun's comment in this blog's comments section:
Retiring by 40 is a fantasy.