Savings scheme

CPF Matching Retirement Savings Plan: Who Is Eligible and How It Works, Money News

Reloading your parents’ CPF Retirement Account has long been a way of providing financial support to members of your family. Now you might be able to get money from the government when you do.

The CPF Matching retirement savings plan (MRSS) is a new device that will run over five years, from 2021 to 2025.

Under this program, the government will match dollar-for-dollar contributions made to eligible CPF accounts that do not match the retirement base amount ($ 93,000 in 2021).

In light of the Covid-19 pandemic and the huge dent it will make in many of our portfolios for years to come, this is the government’s ‘no-handout’ way of ensuring preparedness. retirement without completely eliminating personal responsibility.

Here’s a quick guide to the Matching Retirement Savings Plan and how you can benefit from it.

What is the Twinned Retirement Savings?

As part of the CPF twin retirement savings plan, the government will match dollar for dollar all contributions made to the CPF accounts of eligible seniors under the retirement capital supplement plan from 2021 to 2025.

It is intended to help elderly Singaporeans who do not have enough retirement savings to reach the retirement base sum ($ 93,000 in 2021).

The dollar-dollar matching cap is $ 600 per year. Thus, you can receive a maximum of $ 3,000 free from the government over 5 years.

As this is a retirement savings plan, it only applies to Singaporeans aged 55 to 70. Not yet 55? That’s okay, you can still get that free money by recharging your family members’ accounts.

ALSO READ: The CPF Twinned Retirement Savings: Another way to supplement your parents’ CPF

Eligibility criteria for the Twinned Retirement Savings Plan

But before you run out and deposit wads of money into your parents’ CPF, you must first make sure that your beneficiaries are eligible for MRSS in the first place.

Age 55 to 70 (both included)
Retirement account (RA) Savings Below the basic retirement amount ($ 93,000 in 2021)
Average monthly income No more than $ 4,000
Annual value of the residence No more than $ 13,000 – covers most HDB apartments
Property Do not own more than one property

As part of the retirement capital supplement plan, you can transfer money to the CPF account of any of the following:

  • Yourself
  • Your parents
  • Your in-laws
  • Your in-laws
  • Your partner
  • Your brother

As you can see, if you are over 55 and meet all of the above criteria, you can even do MRSS top-ups for yourself and benefit from the government dollar-for-dollar pairing.

How does the Twinning Retirement Savings Work?

First, check if you / your beneficiary is eligible for the dollar-for-dollar matching program above. Make sure to check if the beneficiary’s CPF balance is less than the retirement base amount of $ 93,000.

Then reload the CPF accounts of your recipients with vsash.

The matching grant will automatically be credited to the beneficiary’s retirement account before the first quarter of the following year.

So let’s say you deposit $ 600 into your mother’s CPF retirement account in 2021. The government will pay an additional $ 600 into your mother’s CPF retirement account by the first quarter of 2022.

You can repeat this every year until 2025 to get the government maximum of $ 3,000.

What are the other benefits of recharging?

In addition to the dollar-for-dollar matching of government transfers, here are some additional benefits you get:

  • Contributions earn high interest rates to the CPF (4% or more)
  • Works with the CPF LIFE device for retirement benefits
  • Tax breaks of up to $ 14,000 per year if you top up with cash

Although the Paired Retirement Savings Plan is capped at $ 600 per year, you may want to consider supplementing more given the low interest rates offered by banks.

Your contributions will benefit from the interest rates of the CPF, more attractive than ever. The retirement account interest rate for people aged 55 and over is 4% per annum + 1% additional on the first $ 60,000.

For an older person with a likely lower tolerance for risk, this is about as high as it gets.

ALSO READ: Here’s what your CPF retirement capital might look like at 55

Twinned Retirement Savings & CPF VIE

The Twinned Retirement Savings are compatible and coexist with the existing CPF LIFE plan, which offers lifetime payments for the rest of your life.

Seniors born in 1958 or later, who have at least $ 40,000 or $ 60,000 (depending on age) in their retirement account, will automatically be enrolled in CPF VIE. If your parents are not automatically enrolled, they can join the program any time before the age of 80.

The functioning of CPF LIFE is:

  • When you turn 55, your special and regular accounts will merge to form a retirement account
  • You can withdraw from the retirement account above the basic or full retirement sum
  • From 65 to 70 years old, you can start your CPF VIE plan
  • At this point, the remaining balance of the RA will be used to pay a lump sum premium for CPF LIFE

For those who are enrolled in CPF LIFE, the amount of money you have in your retirement account will determine the payments you will receive.

Although you can join the CPF LIFE plan with less than the basic retirement amount in your RA, your monthly payments will be proportionately low, as shown in this screenshot from CPF.

To increase your retirement benefits and live more comfortably in expensive Singapore, you should aim to save at least the basic sum for retirement or more, if possible.

What if my parents are not on CPF LIFE?

If your parents were born before 1958 and did not join the CPF VIE, they are affiliated to the old retirement capital.

This means that their payments are staggered depending on whether or not they have reached:

  • Basic retirement sum: $ 93,000 for those turning 55 in 2021
  • Full retirement sum: $ 186,000 for those who will be 55 years old in 2021
  • Enhanced retirement amount: $ 279,000 for those turning 55 in 2021

(The enhanced retirement sum is the maximum you can keep in your retirement account; any excess amount can be withdrawn freely or left in the account to earn interest.)

So, in order to maximize the potential of your CPF account as a source of retirement income, you need to make sure you meet certain balance thresholds.

Note that the old retirement capital scheme only pays up to age 90, while CPF LIFE pays for life, regardless of your age. It is definitely worth considering a change, which you can do until you are 80.

Bonus: Up to USD 14,000 in tax relief under the Retirement Capital Supplement scheme

A final advantage is that you benefit from tax relief for your contributions to the MRSS.

The person doing MRSS top-ups can take advantage of tax relief of up to $ 14,000 under the Retirement Sum Topping-Up Scheme.

The maximum of $ 14,000 in tax relief is distributed as follows:

  • $ 7,000 for supplements made to yourself or by your employer on your behalf
  • $ 7,000 for supplements paid to your parents or other family members (supplements paid to spouse or siblings are not eligible for tax relief, unless their income from all sources has not more than $ 4000 the previous year, or whether they are physically or mentally disabled)

Overall, if you or your parents qualify for the Matching Retirement Savings Program, now is a great time to top up strategically.

This article first appeared in MoneySmart.

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