Voluntary CPF Top-ups Not Meant As Income Source

Voluntary CPF Top-ups Not Meant As Income Source   
- My Paper, 10 December 2008

We refer to the letter by Mr Jolly Wee ("Change rules to boost CPF top-ups”, My Paper, 24 Nov 08 and “Encouraging CPF top-ups”, The Straits Times, 5 Dec 08), proposing the withdrawal of interest earned on voluntary top-ups to the CPF Special Account.

2.   The purpose of the voluntary CPF topping-up scheme is to encourage members to make cash top-ups to enhance their retirement savings. It is not intended to provide an income stream available for immediate drawdown. Interest earned on the Special Account should be retained, so that they can be compounded and enhance the member's retirement savings.

3.   We would also like to highlight that the topping-up scheme already contains incentives to encourage participation. Those making cash top-ups to their accounts can enjoy up to $7,000 in tax relief. In addition, if a member makes cash top-ups to family members (parents, grandparents, siblings or spouses earning less than $2,000 in the preceding year), he or she would enjoy an additional tax relief of up to $7,000.

Change rules to boost CPF top-ups
- My Paper, 24 November 2008

Encouraging CPF top-ups
- The Straits Times, 05 December 2008

The CPF Board could be more successful in attracting members to top up their accounts voluntarily, if it were prepared to make some fundamental changes to its withdrawal policy.

For example, more could be done to draw CPF members saving for old age to withdraw the money from other financial institutions and use it to top up their Special Accounts – where they can enjoy an interest rate of 4 per cent – and also allow them to withdraw the interest earned from voluntary top-ups. The interest earned could be paid on demand, or yearly or half-yearly.

The application of the new rule could be confined to CPF members who have made voluntary contributions.