All You Need To Know About CPF Voluntary Contributions and CPF Retirement Sum Topping-Up Scheme

This was originally posted on Planner Bee.

There are many methods to grow your nest egg. Tapping on the CPF Voluntary Contributions and CPF Retirement Sum Topping-Up Scheme are some of the most popular ways. But what’s the difference between both of them? Read on to find out more.

Your Central Provident Fund (CPF) is a key source of money for many major expenses, such as education fees, medical bills, and housing loans. But it’s also one of the most important places to store and grow your retirement funds.

Among the nearly 400,000 CPF members with at least S$500,000 in their accounts, about 8,500 of them were aged 40 and below. It may not seem like a ton of people, but it shows that it’s possible to save half a million by the time you hit 40.

If you want to be one of them, first you need to know the difference between CPF Voluntary Contributions and the CPF Retirement Sum Topping-Up Scheme, so you can make well-informed decisions as you plan your finances.

What are CPF Voluntary Contributions?

While you may already be working and making monthly contributions to your CPF account, you can still boost your CPF savings with cash top-ups. These are known as CPF Voluntary Contributions that supplement your monthly contribution to your Ordinary Account, MediSave Account, and Special Account. These cash top-ups are an especially handy way for freelancers and people working overseas to save.

These top-ups earn a guaranteed interest of 2.5% in your Ordinary Account, and 4% in your MediSave Account and Special Account.

What is the CPF Retirement Sum Topping-Up Scheme?

The Retirement Sum Topping-Up Scheme boosts your CPF savings so that you will have bigger monthly payouts when you retire. You can either top up your own CPF account, or your loved ones’ CPF Special Account (if they are below 55 years old) or CPF Retirement Account (if they are above 55 years old).

Read more: A Beginner’s Guide to CPF: Contributions, Account Types and Interest Rates

How are they different?

1. Topping up method

A CPF Voluntary Contribution can only be made with cash.

But for CPF Retirement Sum top-ups, you can transfer funds from your own CPF account. If you are below the age of 55, you can transfer any amount from your Ordinary Account to your Special Account. If you are 55 years old or older, you can transfer any amount of your CPF savings to your RA.

By transferring the funds from your Ordinary Account to your Special Account, you funds will earn a higher base interest of 4%. In your Ordinary Account, it would just be 2.5%. CPF transfers can also be made to your spouse, siblings, parents, parents-in-law, grandparents, and grandparents-in-law. If you transfer funds to a loved one, your CPF balance will have to exceed the Basic Retirement Sum first. You can also choose to top up your CPF Retirement Sum using cash.

2. Where the top-ups go

Top-ups under the CPF Retirement Sum scheme go to your Special Account (if you are below 55 years old), or your CPF Retirement Account (if you are above 55 years old).

CPF Voluntary Contribution lets you decide which account you want your money to go to — only your MediSave Account, or all three CPF accounts. However, there is a limit to how much voluntary contributions you can make. The maximum sum you can top up voluntarily to your MediSave Account is the difference between the CPF Annual Limit of S$37,740 and the mandatory CPF contributions made that year.

Use this calculator to calculate how much of your top-ups will be allocated to each account.

Read more: How CPF Interest Rates Can Help Grow Your Money

3. Tax relief

One big reason why people like to save through CPF is to get tax reliefs. But remember not all top-ups are tax deductible.

There are other situations where there will be no tax reliefs. For example, for people over 55 years old, cash top-ups exceeding the Full Retirement Sum less your Retirement Account savings will not be eligible for tax reliefs.

How do I make a top-up?

CPF Transfers

If you want to transfer your CPF savings under the CPF Retirement Sum Topping-Up Scheme, you have to go through the myCPF portal and follow these steps:

1. Use SingPass to log into your myCPF mobile app
2. Choose the “Retirement Top-Up” option from the navigation bar
3. Select “CPF Transfer” and the recipient type
4. Key in your desired transfer amount. Note that you will have to upload supporting documents for a first-time transfer to a loved one
5. Confirm the details of your transfer

You can also make a CPF transfer through myCPF Online Services.

Cash Top-Ups

To make a cash transfer through myCPF, follow these steps:

1. Use SingPass to log into your myCPF mobile app
2. Choose the “Retirement Top-Up” option from the navigation bar
3. Select “Cash Top-Up” and the recipient type
4. Key in your desired transfer amount. When you make a cash top-up to your sibling or spouse, choose “Yes” or “No” and declare his or her previous year’s income status
5. Confirm the details of your transfer and wait to be redirected to the payment gateway

You can also make a cash top-up using PayNow QR, GIRO, OCBC PayAnyone (CPF mobile app), or e-Cashier on the CPF website.

Top up, or not?

While both schemes vary, their ultimate goal is to provide us with options to make the most out of our CPF savings and prepare for retirement.

But remember, top-ups are not reversible, so make sure you have sufficient cash on hand before you move your money.

Read more: 5 Reasons To Top Up Your CPF