pros and cons of voluntary contribution and top up to CPF savings
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Should You Do A Voluntary Top Up Of Your CPF?

7 min read

I know what you’re thinking…

Why would you want to top up your CPF when there are other financial products out there with better returns?

Also, there’re restrictions like the fact that you can only withdraw (some of) your CPF after you turn 55 years old!

But before you judge, let’s have a look at why it might be a good idea and why it might not be a suitable course of action for all.

Disclaimer: this is not a sponsored article. The opinions expressed here are based on our understanding of existing CPF policies. Please do your diligence and check with CPF to clarify your questions before doing anything! Alternatively, you can also check out the Seedly Q&A and ask the friendly community there!

Ask Your CPF-Related Questions Now!


TL;DR – Should You Top Up Your CPF Savings?

There are several ways in which you can grow your CPF savings if you have the extra cash:

  1. Voluntary cash contribution to all three accounts (Ordinary, MediSave, and Special Accounts)
  2. Voluntary cash contribution to MediSave Account only
  3. CPF Transfers from Ordinary Account to Special or Retirement Account
  4. Cash top-up to Special or Retirement Account

pros and cons of voluntary contribution and top up to CPF savings

Apart from the obvious fact that you’ll have more funds in your CPF accounts, here’s a summary of the benefits of topping up your CPF:

  • Enjoy tax relief with your voluntary contribution to MediSave Account and cash top-up to Special or Retirement Accounts
  • CPF savings grow faster with higher interest rates
  • Ease your load with your housing loan, especially during periods of financial difficulties
  • Complement your retirement portfolio and receive monthly payouts
  • Take care of your children’s education (temporarily) before they go out into the workforce

However, there are some considerations you need to take note before you decide to make voluntary cash contributions or transfers:

  • Your money is locked in and you can only withdraw your CPF savings at age 55
  • Cash is king! Plan your voluntary contributions properly, else it will affect your cash flow 
  • If you’ve done your research, there are other financial products that can give you similar returns and faster too

Basically, there’s no fixed rule here so it really depends on your financial situation.

If you plan it right, your CPF could be a viable component of your retirement portfolio.

Even if you don’t do it for yourself, some of you might choose to do it for your parents. I’ve also heard of cases where parents top up their children’s Special Account to the Basic Retirement Sum to give them a headstart in life.


What Are The Ways To Top Up CPF?

There are actually some good reasons why topping up your CPF savings may be beneficial for you!

But before we talk about that, let’s look at the different ways you can do so.

Infographic on CPF Voluntary Contributions & Retirement Sum Topping-Up
Source: Are You Ready? by CPF Board

Voluntary Contributions (VC)

Even though you are already working and contributing monthly to all three CPF Accounts, you can still do cash top-ups if you wish to boost your CPF savings.

Cash Top-Up to Ordinary, MediSave & Special Accounts

That’s right, if you want to increase the savings in your Ordinary Account (OA), you will have to contribute to your MediSave (MA) and Special Accounts (SA) as well.

The amount contributed to each Account will be based on the CPF Allocation Rates for your age range.

For example, if you’re 35 years and below and you decided to top-up $100 to all three accounts, the amount in each account would be as follows:

  • Ordinary Account (62.17%): $62.17
  • MediSave Account (21.62%): $21.62
  • Special Account (16.21%): $16.21

The yearly amount you can top-up is capped by the CPF Annual Limit, which is currently at $37,740.

Cash Top-Up to MediSave Account only

With a longer life expectancy, our medical expenses will probably continue to increase, and topping-up to MediSave can help to ease your future load.

Apart from the CPF Annual Limit, the amount that you can contribute yearly to your MA is capped by the Member’s Basic Healthcare Sum (BHS), whichever is lower.

The current Basic Healthcare Sum (BHS) is currently at $57,200 and is expected to adjust periodically for members below age 65.

Apart from taking care of your future healthcare expenses, you can also enjoy tax relief when you contribute voluntarily to your MediSave Account.

However, this is where it becomes a little bit complicated, the amount of tax relief you can enjoy depends on which is the lowest among the following:

  • The amount you contributed to your MediSave Account
  • Current Annual CPF Annual Limit minus Your Mandatory Contribution
  • Current Basic Healthcare Sum minus Balance in Your Medisave Account before VC
Infographic explaining what happens after you hit basic healthcare sum
Source: CPF Board

In the event that the amount in your MediSave Account hits the Basic Healthcare Sum, subsequent mandatory contributions (if any) and interest earned will go to your Special Account.

If your Special Account reaches the Full Retirement Sum, subsequent mandatory contributions (if any) and interest earned will go to your Ordinary Account.

Retirement Sum Topping-Up Scheme (RSTU)

CPF Transfers

Before you get too excited, CPF transfers only apply when you have enough savings in your Ordinary and Special Accounts to meet the Basic Retirement Sum (BRS), currently at $88,000.

Similarly, the Basic Retirement Sum will be adjusted accordingly to meet the rising costs of living.

The good thing is, CPF is rather flexible about who you can transfer your CPF monies to – just not to your children. There are different criteria and amount transferrable for different recipients to safeguard your own retirement.

Recipient(s)AgeAmount Transferrable
Spouse Below 55 years oldOA savings after setting aside the current Basic Retirement Sum
55 years old & aboveCPF savings after setting aside your Basic Retirement Sum
Parents & GrandparentsBelow 55 years oldOA savings after setting aside the current Basic Retirement Sum
- If you can meet the current Full Retirement Sum with OA & SA savings, nett amount withdrawn for investments and property

OA savings after setting aside the current Full Retirement Sum
- If you do not have a property
55 years old & aboveCPF savings after setting aside your Basic Retirement Sum
- If you can meet the current Full Retirement Sum with OA & SA savings, nett amount withdrawn for investments and property

CPF savings after setting aside your Full Retirement Sum
- If you do not have a property
Siblings, Parents-in-law & Grandparents-in-lawBelow 55 years oldOA savings after setting aside the current Full Retirement Sum
55 years old & aboveOA savings after setting aside your Full Retirement Sum

Cash Top-Up

Similarly to Voluntary Contributions, you can also do cash top-up under the RSTU. And this is subjected to limits as well.

Unlike RSTU CPF Transfers, you are able to top-up your children’s Special Account in cash even if they have not started working.

AgeAccountTop-Up Limit
Below 55 years oldSpecial AccountUp to current Full Retirement Sum
- Including nett SA savings under CPF Investment Scheme
55 years old and aboveRetirement AccountUp to current Enhanced Retirement Sum

Likewise, you can also enjoy tax relief when making cash top-ups for yourself and your loved ones.

As with all tax relief, there are some criteria and limits to your tax relief for making cash top-up under the RSTU scheme, depending on the age group and recipients.

RecipientAgeEligibilityAmount of Tax ReliefConditions
YourselfBelow 55 years oldCurrent Full Retirement Sum
- Including SA savings & nett SA savings under CPF Investment Scheme
Equivalent to amount of top-up madeCapped at $7,000 per calendar year
55 years old and aboveCurrent Full Retirement Sum minus RA savings
Spouse, Parents, Grandparents, Siblings, Parents-in-law, Grandparents-in-lawBelow 55 years oldCurrent Full Retirement Sum
- Including SA savings & nett SA savings under CPF Investment Scheme
Equivalent to amount of top-up madeCapped at $7,000 per calendar year

Topping-up for spouse/siblings if:
- their annual income does not exceed $4,000 OR
- they are handicapped
55 years old and aboveCurrent Full Retirement Sum minus RA savings

Why Should I Do It Then?

Lower Your Payable Income Tax

illustration for taxes

As you’ve seen from above, you can enjoy tax relief by making cash top-ups to your CPF accounts.

It’s a win-win situation: you save for your retirement AND pay lesser income tax!

But just remember, the personal income tax relief cap of $80,000 applies to all cash top-ups made as well, so plan well to optimise it!

Attractive Interest Rates

illustration of interest rate

You probably already know by now that it is not a wise move to put all your money in the bank since the interest rates are relatively low.

But at the same time, if you were to invest… with higher interest rates comes more risk.

Making voluntary contributions to your CPF accounts can help to grow your savings over time as they offer rather attractive interest rates, minus the risk (somewhat)!

CPF AccountInterest Rate
Ordinary AccountUp to 3.5% per annum
MediSave AccountUp to 5% per annum
Special Account
Retirement Account

Fund Your Housing (Especially If You Are Self-Employed!)

illustration of red apartment building

While Singaporeans are extremely lucky to have subsidised housing, it’s still a hefty sum to deal with when the cost of living continues to rise!

This is a classic “save your money for a rainy day” example.

jake and finn holding umbrellas in rain
Source: giphy

If you’re currently employed, you’re already making mandatory contributions to your Ordinary Account, which you can use to pay your HDB housing loan.

If you’re self-employed, you are only required to contribute to your MediSave Account. However, you can choose to make contributions to your Ordinary Account as well in order to enjoy more interest on your savings and use them to pay off your HDB housing loan – if you choose to, of course.

More savings in your Ordinary Account can also tide you through potential periods of unemployment or financial difficulties which should help defray the cost of your housing loan. (Choy, touchwood!)

Complement Retirement Portfolio (For Yourself And Your Loved Ones)

illustration of rocking chair and money bag

It’s never too early to plan and set aside funds for your retirement!

With the prevailing interest rates of your SA and RA, along with the magic of compound interest, a small amount of money can eventually grow into a substantial amount.

Also, by having sufficient savings in your RA six months before you reach your payout eligibility age (PEA), you will automatically be placed on CPF LIFE.

You can also choose the plan and when you want to start receiving your monthly payouts:

Retirement Account Savings at 55Standard PlanEscalating PlanBasic Plan
Basic Retirement Sum
$88,00
$730 - $790$570 - $620
(initial amount)
Payouts increase by 2% every year ​
$690 - $720
Full Retirement Sum
$176,000
$1,350 - $1,450$1,040 - $1,140​
(initial amount)
Payouts increase by 2% every year ​
$1,280 - $1,320
Enhanced Retirement Sum
$264,000
$1,960 - $2,110​$1,510 - $1,660
(initial amount)
Payouts increase by 2% every year ​
$1,860 - $1,920​

I’m sure you can see why some might choose to top up their CPF savings as it’ll help eventually grow and increase the amount you will receive when you retire.

Although there are many other products out there to help in your retirement planning, this should at least form a complementary base to build your ideal retirement lifestyle.

Similarly, when you contribute now to help grow your parents’ CPF savings to meet the Full or Enhanced Retirement Sum in the future, you’re ensuring that they have a steady source of income in their golden years.

This should ideally offload some of the financial responsibility that you would have to bear if you’re the sole breadwinner of the family.

Fund Your Children’s Education

illustration of graduation hat and certificate

If you can eliminate a big financial worry in life, why wouldn’t you?

Under the CPF Education Scheme, if you have sufficient savings in your Ordinary Account, you are able to apply for an education loan with your Ordinary Account savings to pay for your child’s diploma or degree programme.

But of course, with all loans come repayment.

A year upon graduation, your child can either make a lump sum cash payment or work out a monthly instalment plan.


Is There A Reason Why I Shouldn’t Do A Top Up To CPF?

Yes, of course!

While CPF is arguably a safe way to grow your funds, there are some downsides to making voluntary contributions and top-ups as well.

Withdrawal Age And Amount

illustration of old couple

That’s right, you can only start withdrawing your CPF monies when you are 55 years old.

But wait, it’s NOT ALL OF IT.

You are only able to withdraw $5,000 or your remaining Ordinary and Special Accounts savings after setting aside your Full Retirement Sum, whichever is higher.

Note: the only time you can withdraw all of your Ordinary and Special Account savings is when you have less than $5,000 in both accounts. Which is not a very pleasant scenario, right?

Balance in OA & SA at 55Amount which you can withdraw at 55
$5,000 or lessAll your Ordinary and Special Account savings
Between $5,000 and your Full Retirement Sum$5,000
More than your Retirement Sum$5,000
or
Ordinary and Special Account savings after setting aside your Full Retirement Sum
*whichever is higher

The FRS will be slowly dispensed to you via whichever CPF LIFE scheme you choose. So that means that the money you have locked in your CPF is purely for your retirement.

This brings me to my next point.

Your Cash Flow Is Affected

illustration of money bag and coin

Ladies and gentlemen, in case you aren’t aware, voluntary contributions and top-ups are irreversible. Meaning there is no turning back once you’ve done it. Even if you need the money suddenly.

So like the saying goes, don’t put all your eggs in the same basket!

It’s extremely important to first set aside an emergency fund (most agree that you need enough to cover at least 3 to 6 months of your monthly expenses) just in case of any unexpected situations where you might need a large sum of money to tide you over.

Any extra cash that you have can then considered to be put into buffing up your CPF accounts.

(Potentially) Better Financial Products In The Market

illustration of increasing earnings

Yes, I know, there are obviously other financial products out there that can potentially beat the returns guaranteed by CPF.

But such products are risky and the returns may not always be guaranteed.

Read also: The Ultimate Guide To Investing In Singapore

Personally, I don’t have a huge appetite for risk so I would be extremely careful if I choose to bank on other products to grow my retirement fund instead of my CPF.

However, if you do your research, talk to your advisors, understand your risk appetite as well as the products you choose to invest in, then you’re always free to consider other options to build your retirement nest egg!


Closing Thoughts

I might seem a little naggy, but remember: As great as CPF potentially can be, it shouldn’t be the only aspect in your retirement portfolio!

Also, everyone’s financial situation and circumstances are different, so only you will know if making voluntary top-ups and contributions to your CPF is best for you.

If you’d like suggestions or more perspectives on the matter, why not ask our friendly community in the Seedly Q&A? If you’re really shy, you can also ask anonymously!

Ask Your CPF-Related Questions Now!

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