On Friday, 16th February 2024, our Singapore Deputy Prime Minister and Minister for Finance Lawrence Wong announced several CPF (Central Provident Fund) changes in Budget 2024.
As I am in my forties, some of the changes may not apply to me immediately. Having said that, the CPF Shield Hack is something I look forward to but it now seems that this Hack is no longer valid.
I will not go too in depth for each of the CPF changes as you can read them up in detail from the CPF Board. Below is a short summary of the changes:
#1 Majulah Package for “Young Seniors”
The Majulah Package is introduced for “Young Seniors”, or Singapore Citizens in their 50s and early 60s. The package will also be extended to Pioneer and Merdeka Generation seniors.
So, what is in the Majulah Package?
The package is made of 3 components:
- Earn and Save Bonus (ESB) – Working seniors will receive an annual bonus in their Special Account or Retirement Account to build up CPF retirement savings while they work.
- Retirement Saving Bonus (RSB) – Seniors will receive a one-time bonus if their retirement savings is below the Basic Retirement Sum for 2023.
- MediSave Bonus (MSB) – All seniors will receive a one time bonus in their MediSave Account.
#2 MediSave Bonus (Members Aged 21 to 50)
All Singaporeans aged 21 to 50 years old will receive a one-time MediSave Bonus of up to S$300. Since I am in my forties, I am eligible to receive this benefit.
#3 Closure of Special Account (SA) (Members Aged 55 and Above) & Increase of Enhanced Retirement Sum (ERS)
The Special Account (SA) will be closed for members aged 55 and above from early 2025. The reason stated was to better align CPF interest rates to the nature of CPF savings in each CPF account.
The Special Account (SA) funds will then be channelled to the Retirement Account (RA) to fulfil the Full Retirement Sum (FRS).
Having said that, from the year 2025, the Enhanced Retirement Sum (ERS) will also be raised to quadruple the Basic Retirement Sum (BRS). This sets the Enhanced Retirement Sum (ERS) at S$426,000!
With the announcement of the closure of Special Account (SA) at aged 55, this means that the popular CPF Shield Hack is no longer applicable!
As a Singaporean, I believe you know what is the CPF Shield Hack. But if you do not, here is a quick summary.
When we turn 55, a new Retirement Account (RA) is created for us. Our Full Retirement Sum will be transferred from our Special Account (SA) and Ordinary Account (OA) into the Retirement Account (RA). The monies from our Special Account (SA) will be transferred first.
We shield our Special Account (SA) account by using the monies to purchase short term bonds before we turn 55 and sell it shortly after we turn 55 to return the monies to the Special Account (SA). The intent is to “shield” the monies in the Special Account (SA) from being transferred to the Retirement Account (RA) as it earns a higher interest of 4% per annum.
If you want to read more about CPF shielding, read up the reference at the end of this blog post.
#4 Increase in CPF Contribution Rates
From 1st January 2025, the employer and employee contribution rates for employees aged above 55 to 65 (Senior Workers) will be raised by 0.5 percentage point and 1 percentage point respectively.
#5 Increase in Income Threshold of Spouse/Siblings for Tax Relief from Cash Top-Ups
From 1st January 2024 onwards, the income threshold to qualify for tax relief for cash top-ups made to spouse/siblings will be increased from $4,000 to $8,000 in Year of Assessment (YA) 2025 for top-ups made.
References:
CPFB | Budget Highlights 2024, accessed on 18th February 2024
Budget 2024 Singapore Summary in 3 minutes: Key Highlights (seedly.sg), accessed on 18th February 2024
CPF Shielding Hacks (Special Account & Ordinary Account): Do They Really Make Sense? (dollarsandsense.sg), accessed on 18th February 2024
Latest CPF Changes Announced at Budget 2024 & How it Affects CPF SA Shielding? (seedly.sg), accessed on 18th February 2024
9 CPF ‘hacks’ to grow your nest egg | DBS Singapore, accessed on 18th February 2024