Reasons to Top-Up Your CPF


The never ending debate - should you top-up your CPF or not? We discuss some reasons to top-up your CPF for you to build your retirement wealth and reap other benefits.


Here are the top six reasons for you to top-up your CPF:

1. Enjoy Tax-Relief

You can enjoy tax relief by making cash top-ups to your CPF accounts. If you're a Singaporean or Permanent Resident who made voluntary CPF cash top-ups to your own Special Account (if you're under 55) or Retirement Account (if you're 55 and above) in the preceding year under the CPF Retirement Sum Topping-Up Scheme, you're entitled to a CPF cash top-up relief of up to $8,000.

You can also get up to S$8,000 in tax relief by topping up the CPF accounts of your parents, in-laws, grandparents, or grandparents-in-law under the CPF Retirement Sum Topping-Up Scheme. If your spouse or sibling struggled financially in the previous year, you can get tax relief by topping up their accounts, as long as their taxable income was S$4,000 or less.

You can claim a maximum of up to S$16,000 in tax relief under this group, with S$8,000 for topping up your own account and up to S$8,000 for topping up a family member's account. Do remember that the personal income tax relief cap of S$80,000 applies to CPF cash top-ups as well.

2. Higher Interest Rates

Having your money sitting around in the bank may not be the best option for you, since the interest rates are relatively low. However, investing all that money elsewhere also invites risk. That's where CPF comes in.

CPF provides you with attractive interest rates, so you can have your money grow instead of letting your money sit and become a victim of inflation.

If you are under age 55, you can get up to 5% in interest on the first S$60,000 of your combined CPF balances.

If you are 55 and older, you can get up to 6% in interest on the first S$30,000 of your CPF savings, and up to 5% on the next S$30,000 of your savings.

With the effect of compound interest, any savings in your CPF accounts will grow exponentially each year. The earlier you make the top-ups into your CPF accounts, the longer the money will have to compound for your retirement benefits.

3. CPF Savings Are Safe

CPF monies and interest rates are guaranteed by the Singapore government regardless of the financial conditions. This makes CPF top-ups a safer alternative to growing your money as opposed to investing in stocks and other financial instruments.

4. Fund Your Housing

You don't have to pay your home loan in cash; instead, you can use your CPF Ordinary Account to do so (CPF OA). This applies to both when you take out an HDB loan or a bank loan. You may use your CPF to finance a private property purchase as well.

However, the amount of CPF you can use is restricted. With a bank loan, you can only borrow up to 120 per cent of your home's Valuation Limit (VL), after which you'll have to pay the loan back in cash. If and when you sell the property, you'll have to refund the CPF funds that were used with the 2.5 per cent interest rate.

You are required to contribute to your CPF anyways, therefore you may choose to use the cash on hand for other current expenses. Being able to pay off your property using CPF means you will have more liquid able cash available to you to pay for your daily expenses or emergencies.

5. Complements Retirement Portfolio

When you turn 55, you will have the option to choose from one of the following CPF Life Schemes: Standard, Escalating and Basic. Each of these schemes will provide you with a monthly payout starting when you turn 65 (you can alternatively choose to start receiving payouts when you turn 70). These monthly payouts will continue for as long as you live, so you will not have to worry about running out of CPF savings. The relative payouts of CPF Life compared to other annuity products on the market are quite attractive with similar low risk.

All Singaporeans and PRs born in 1958 or later and have S$60,000 in their CPF Retirement Account before they turn 65 are automatically enrolled into CPF Life. Those who are not automatically enrolled can sign up for it from ages 65 to 79, as long as they do so one month before turning 80.

6. Take Care of Your Children's Education

CPF members may use money in their CPF Ordinary Account (OA) to pay for tertiary tuition fees for themselves, their children, or their spouse under the CPF Education Loan Scheme. It is possible to use it to assist a sibling or other parent with justification on a case-by-case basis.

To use your CPF OA funds under the CPF Education Loan Scheme, you must meet a few basic criteria:

  1. You have plenty CPF OA savings to withdraw.
  2. You're paying for your own, your children's, or your spouse's tuition with CPF funds. It is also possible to pay for a sibling, relative, or parent, subject to approval.
  3. A full-time diploma/degree program at one of the Approved Educational Institutions is required.
  4. For this course, the student is obtaining a government tuition grant.

​More than one person can use their CPF monies to pay for the tuition fees of the same student, for example, both parents want to use their CPF savings to pay for their child's tuition under the CPF Education Loan Scheme. In this situation, deductions will be made in the order in which the applications are submitted – if the first parent does not have enough CPF funds to adequately cover the tuition fee owed, then the second parent's CPF funds will be used.

7. Giving Your Parents Allowance

There are many good reasons why topping up your Parents' CPF is a better choice than giving them an extra allowance.

  1. Topping up your parents' CPF Retirement Account will increase their CPF Life payouts and will actually pay them more as there will be a guaranteed return of up to 6 per cent.
  2. Topping up your parents' Retirement Account will provide for them for life instead of providing only to their current expenditure.
  3. You can enjoy tax relief by topping up your parents' CPF accounts.
  4. Giving your parents allowance is a form of immediate support while topping up their CPF is a form of sustainable long-term support.

Apex EP is an authorised group of Financial Adviser representatives from Professional Investment Advisory Services Pte Ltd.