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CHANGES IN CPF MINIMUM SUM, MEDISAVE MINIMUM SUM AND MEDISAVE CONTRIBUTION CEILING FROM 1 JULY 2008

News Release by:
Central Provident Fund Board

16 June 2008 --

CPF Minimum Sum
The CPF Board announced today that the new CPF Minimum Sum (MS) from 1 July 2008 would be $106,000. The new MS would apply to CPF members who turn 55 from 1 July 08 to 30 June 09. Members who set aside the $106,000 cash savings in their Retirement Account will receive a monthly payout of $910 from age 64 for about 20 years.

The current MS, which applies to members who turn 55 from 1 July 07 to 30 June 08, is $99,600. The corresponding monthly payout is $790.

The new MS is in line with the announcements made in August 03 that the CPF MS will be raised gradually to reach $120,000 (in 2003 dollars) in 2013. The increase in MS, which includes an adjustment for inflation, is to ensure that Singaporeans set aside sufficient savings for their retirement.

Medisave Minimum Sum and Medisave Contribution Ceiling
From 1 July 08, the new Medisave Minimum Sum (MMS) would be $29,500. Members will have to set aside this amount, or the actual Medisave balance, whichever is lower, in their Medisave Account, when they withdraw their CPF at or after 55 years old.

The current MMS is $28,500.

In addition, the Medisave Contribution Ceiling (MCC) would be increased to $34,500 from 1 July 08. This is the maximum balance each member may have in his Medisave Account. Any Medisave contribution in excess of the prevailing MCC will be transferred to the member’s Special Account if he is below age 55. If he is above age 55, the Medisave contribution in excess of the prevailing MCC will be transferred to his Retirement Account if he has a Minimum Sum shortfall.

The current MCC is $33,500.

The revisions to MMS and MCC are to ensure that Singaporeans have sufficient savings to meet their hospitalisation expenses, and have been adjusted for inflation.

Phasing Out 50% Withdrawal Rule
Currently, members who are unable to meet the full CPF MS at age 55 are allowed to withdraw the first $5,000 or 50% of their savings in their CPF Accounts1, whichever is higher. Members who are able to meet the full MS will be allowed to withdraw the remaining monies in their CPF Accounts.

As announced in 2003, from 1 January 09, the percentage for withdrawal will decrease from the current 50% to 40%, and thereafter be further reduced every year by 10 percentage points. Therefore, from 1 January 2013, CPF members must meet the CPF and Medisave Minimum Sums first before they can withdraw their remaining Ordinary Account and Special Account balances at age 55. However, CPF members can continue to withdraw the first $5,000 from their Ordinary Account and Special Account balances.

The change in the withdrawal rule will enable members turning age 55 from 1 Jan 09 to set aside more savings for their retirement.

Please refer to Annex A for examples on what happens when members reach age 55 and how the MS scheme works.

1 CPF Accounts refer to monies in the Ordinary and Special Accounts and monies in excess of the Medisave Minimum Sum in the Medisave Account.

PUBLIC ENQUIRIES
Members with enquiries may call the CPF Call Centre on 1800-227 1188.

Annex A

Example 1
Member A turns 55 on 14 July 2008. He can withdraw his CPF after setting aside the CPF Minimum Sum (MS). The MS applicable to him is $106,000. His current balances are as follows:

Special Account
(SA)
Ordinary Account
(OA)
Medisave Account
(MA)
$80,000 $150,000 $34,500
(note: this amount is also the Medisave Contribution Ceiling (MCC))

The Board will create a new account for him called the Retirement Account (RA), which will be used to set aside his CPF MS.

The MS is drawn from his balances in his SA and OA. In his case, his entire SA balance of $80,000 will be transferred to his RA to meet part of the MS of $106,000. The remaining $26,000 will be taken from his OA savings and transferred to his RA. He can choose to withdraw the remaining amount of $124,000 in his OA.

His balances when he reaches 55 will be as follows:

SA OA MA Retirement Account (RA)
$0
($80,000 - $80,000)
$124,000
($150,000 - $26,000)
$34,500 $106,000
(made up of $80,000 from his SA and $26,000 from his OA)

At age 55, he is also required to set aside the Medisave Minimum Sum (MMS) of $29,500, or the actual balance in his MA, whichever is lower. In this case, after retaining the MMS of $29,500, he can withdraw the amount in excess, ie. $5,000 in addition to his entire OA balance of $124,000.

Assuming he makes these withdrawals, his balances will be as follows:

SA OA MA RA
$0 $0
(after withdrawing $124,000)
$29,500
(after withdrawing $5,000)
$106,000

Example 2
Member B turns 55 on 1 August 2008. He does not have sufficient savings in his OA and SA to meet the full MS of $106,000. The MS applicable to him is $106,000. His current balances are as follows:

Special Account
(SA)
Ordinary Account
(OA)
Medisave Account
(MA)
$30,000 $50,000 $10,000

The MS is drawn from his balances in his SA and OA to create his new Retirement Account. In his case, as he has insufficient balance to set aside $106,000, 50% of his combined SA and OA savings of $80,000 ($30,000 from the SA and $10,000 from the OA) will be used to set aside his MS. There is therefore a shortfall of $66,000 ($106,000 - $40,000) in his MS.

His balances when he reaches 55 will be as follows:

SA OA MA Retirement Account (RA)
$0
($30,000 - $30,000)
$40,000
($50,000 - $10,000)
$10,000 $40,000

He can withdraw the remaining OA balance of $40,000. As there is a shortfall in his MS, for subsequent withdrawals, he will only be able to withdraw half of the new contributions he receives. The remaining half of the contributions will be channeled to his RA to make up the required MS.

Example 3
Member C turns 55 on 1 January 2009. He does not have sufficient savings in his OA and SA to meet the full MS of $106,000. The MS applicable to him is $106,000. His current balances are as follows:

Special Account
(SA)
Ordinary Account
(OA)
Medisave Account
(MA)
$30,000 $50,000 $10,000

The MS is drawn from his balances in his SA and OA to create his new Retirement Account. In his case, as he has insufficient balance to set aside $106,000, 60% of his combined SA and OA savings of $80,000 ($30,000 and $18,000 from his SA and OA respectively) will be used to set aside his MS. There is therefore a shortfall of $58,000 ($106,000 - $48,000) in his MS.

His balances when he reaches 55 will be as follows:

SA OA MA Retirement Account (RA)
$0
($30,000 - $30,000)
$32,000
($50,000 - $18,000)
$10,000 $48,000

He can withdraw the remaining OA balance of $32,000. As there is a shortfall in his MS, for subsequent withdrawals, he will only be able to withdraw 40% of the new contributions he receives. The remaining 60% of the contributions will be channeled to his RA to make up the required MS.

 Last Updated on: Thursday, June 30, 2011 at 5:48 PM
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