Are your sure your BHS is capped? I ask this because I noticed something quirky with the BHS and CPF transactions on 1 Jan. My BHS is capped by the end of the calendar year. I've also already reached my FRS, and am employed, so have CPF contributions going in every month. Now take this year as an example of what happens in my account every year. On 31 Dec my BHS was capped at $68,500. Interest was then credited to the account of $2,729.87 taking the total in the MA to $71,229.87, more than the cap for 2023. Come 1 Jan 2024, where there is now a new BHS cap of $71,500, i.e., $3,000 more than 2023, so now the total in my MA is not capped.
However, on 1 Jan 2024 the quirky thing happens. The interest that was accrued in 2023 and paid in 2023, i.e., the $2,729.87 is transferred out of the MA and into my OA! Why transfer it out? The BHS cap for 2024 is $71,500, not $68,500! Why transfer it out in 2024? I don't get it. Anyway, this quirk provides an opportunity to top up the MA account by the full $3,000 ($3,000 being the difference between the BHS for 2023 and 2024) if you can do it before CPF is paid into your account from your salary.
The good thing about keeping your MA capped before your CPF contributions go in is that it's possible to effectively get this cash back, plus interest AND benefit from the tax relief for the top-ups, once you turn 55, or if you are over 55, pretty much any time provided you are already at the FRS and have a salary that's high enough to cap your BHS at some point during the year.
Here's how that works. Let's say I didn't top up my MA in Jan 2024. My MA starts out with $68,500 in it on 1 Jan thanks to the transfer out of the interest accrued in 2023. As the year passes by, my CPF contributions from my salary go into the usual SA, OA and MA. At some point during the year my MA reaches the BHS for 2024. At this point further CPF contributions only go into the SA and OA because the MA is capped at the BHS. Now since I'm already at the FRS I can withdraw my CPF over the FRS in the SA and OA at 55, or at any time after 55. Because I didn't top-up my MA to the BHS I can only withdraw my CPF contributions from my salary less the $3,000 needed to cap my MA. If I do top-up my MA by $3,000, I will get this $3,000 tax relief, and as the year goes by the money that would have gone into my MA now goes into my OA and SA, which I can withdraw. So, I put $3,000 into the MA in Jan 2024 and, say, in Jan 2025 I can just withdraw this out of the OA and SA (you can't withdraw from your MA - ever), plus the accrued interest on it and enjoy the $3,000 tax relief for the 2024 tax year.
Sadly, you can only really do this if all those conditions I mentioned above hold. That is, you're already at the FRS and BHS for the previous year and your CPF contributions from your pay in the current year are enough to cap your MA at some point during the year if you didn't actually top-up your MA at the start of the year.
Are your sure your BHS is capped? I ask this because I noticed something quirky with the BHS and CPF transactions on 1 Jan. My BHS is capped by the end of the calendar year. I've also already reached my FRS, and am employed, so have CPF contributions going in every month. Now take this year as an example of what happens in my account every year. On 31 Dec my BHS was capped at $68,500. Interest was then credited to the account of $2,729.87 taking the total in the MA to $71,229.87, more than the cap for 2023. Come 1 Jan 2024, where there is now a new BHS cap of $71,500, i.e., $3,000 more than 2023, so now the total in my MA is not capped.
However, on 1 Jan 2024 the quirky thing happens. The interest that was accrued in 2023 and paid in 2023, i.e., the $2,729.87 is transferred out of the MA and into my OA! Why transfer it out? The BHS cap for 2024 is $71,500, not $68,500! Why transfer it out in 2024? I don't get it. Anyway, this quirk provides an opportunity to top up the MA account by the full $3,000 ($3,000 being the difference between the BHS for 2023 and 2024) if you can do it before CPF is paid into your account from your salary.
The good thing about keeping your MA capped before your CPF contributions go in is that it's possible to effectively get this cash back, plus interest AND benefit from the tax relief for the top-ups, once you turn 55, or if you are over 55, pretty much any time provided you are already at the FRS and have a salary that's high enough to cap your BHS at some point during the year.
Here's how that works. Let's say I didn't top up my MA in Jan 2024. My MA starts out with $68,500 in it on 1 Jan thanks to the transfer out of the interest accrued in 2023. As the year passes by, my CPF contributions from my salary go into the usual SA, OA and MA. At some point during the year my MA reaches the BHS for 2024. At this point further CPF contributions only go into the SA and OA because the MA is capped at the BHS. Now since I'm already at the FRS I can withdraw my CPF over the FRS in the SA and OA at 55, or at any time after 55. Because I didn't top-up my MA to the BHS I can only withdraw my CPF contributions from my salary less the $3,000 needed to cap my MA. If I do top-up my MA by $3,000, I will get this $3,000 tax relief, and as the year goes by the money that would have gone into my MA now goes into my OA and SA, which I can withdraw. So, I put $3,000 into the MA in Jan 2024 and, say, in Jan 2025 I can just withdraw this out of the OA and SA (you can't withdraw from your MA - ever), plus the accrued interest on it and enjoy the $3,000 tax relief for the 2024 tax year.
Sadly, you can only really do this if all those conditions I mentioned above hold. That is, you're already at the FRS and BHS for the previous year and your CPF contributions from your pay in the current year are enough to cap your MA at some point during the year if you didn't actually top-up your MA at the start of the year.