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More details on the rationale behind the closure of the SA for members aged 55 and from effective early 2025, how much one can withdraw from their CPF, and more.
In his Budget 2024 speech on 16 February (Friday), Singapore's Deputy Prime Minister and Minister of Finance Lawrence Wong announced a series of changes related to CPF that residents are to take note of in the coming years.
Some of the highlights include:
- Introduction of the 'Majulah Package'
- MediSave bonus will be issued to members aged 21 to 50
- Special Account (SA) will be closed for Singaporeans aged 55 and above
To better align the CPF interest rates to the nature of CPF savings in each CPF account, the SA will be closed for members aged 55 and above, effective early 2025.
SA savings that contribute to members' retirement payouts and therefore are non-withdrawable on demand will be transferred into the Retirement Account (RA) up to the Full Retirement Sum, where they will continue to earn long-term interest rates.
The remaining SA savings that are withdrawable on demand will be transferred to the Ordinary Account (OA) and earn the short-term interest rate. Members will be allowed to voluntarily transfer their savings from the OA to the RA at any time, up to the prevailing Enhanced Retirement Sum, to earn higher interest and receive higher retirement payouts.
Members will be notified after the transfer of all their SA savings to their RA and/or OA, and closure of their SA, in early 2025. They will also be able to check the amounts transferred from their CPF statement. Members are not required to take any action for now.
For a quick reference, HRO has compiled the 10 top commonly asked questions on the closure of SA listed below, as shared on the CPF Board's website:
Q. I am below age 55. How does the closure of Special Account affect me?
If you are below 55 in early 2025, you will not be immediately affected. Your SA will only be closed when you turn 55 when your RA is created.
Q. Once I meet my Full Retirement Sum, my Special Account savings will be transferred to the Ordinary Account which pays lower interest. What can I do to continue earning the interest rate that the Special Account pays?
If you wish to earn higher interest and receive higher retirement payouts, you may transfer your SA savings that were channelled to the OA due to the closure of SA, to the RA, up to the prevailing Enhanced Retirement Sum (ERS). The RA interest rate is the same as the SA.
From 1 January 2025, the ERS will be raised to four times of the Basic Retirement Sum (BRS) to allow members to save more in the RA and receive higher payouts, if they want.
With the change, the ERS in 2025 would be S$426,000, up from S$308,700 in 2024. Hence, if you are aged 55 and above in 2025, you can save up to S$426,000 in the RA.
The raised ERS would allow more than 99% of members aged 55 and above today to transfer all their SA savings to the RA.
Please note that CPF transfers are irreversible, and the savings are set aside to boost your monthly payouts in retirement. Thus, the amount transferred cannot be withdrawn for any other purpose such as housing, investment, or immediate needs after age 55.
You can also invest the OA savings in low-risk investments, such as T-bills and fixed deposits, under the CPF Investment Scheme (CPFIS).
Q. Will the closure of my Special Account affect how much I can withdraw from my CPF?
When your SA is closed, the amount that you could have withdrawn from your SA will be transferred to your OA and remains withdrawable.
Q. Can I choose to transfer more savings from the Special Account to the Ordinary Account since I am still servicing my housing loan/education loan etc.?
When your SA is closed, the savings in your SA will be transferred to the RA, up to your Full Retirement Sum (FRS) to increase your retirement payouts. Any remaining savings that are withdrawable on demand will be transferred to your OA.
You may use the portion transferred to your OA for your housing loan/education loan (subject to applicable limits) or choose to withdraw them anytime for your immediate needs. You cannot choose to allocate more SA savings or your future RA contributions to your OA to service your housing/education loan, etc.
Q. With the closure of the Special Account for CPF members aged 55 and above, which account will my CPF contributions be allocated to?
With the closure of the SA, CPF contributions that go to the SA currently, as well as any increase in CPF contributions allocated to SA from 1 January 2025, will be fully allocated to the member’s RA instead, up to the FRS, to boost retirement payouts. For members who have set aside the FRS in the RA, these contributions will be channelled to the OA.
This will ensure that the additional contributions continue to earn the highest possible CPF interest rate to provide an even bigger boost to retirement payouts. RA balances currently earn a minimum interest rate of 4% a year, compared to a minimum of 2.5% in the OA. Plus, members aged 55 and above earn an extra interest of 2% per annum on the first S$30,000 and 1% per annum on the next S$30,000 of their combined CPF balances (capped at S$20,000 for OA).
Q. Does the closure of my Special Account affect the retirement sum that I need to set aside?
Your FRS and BRS is determined when you turn 55 and will remain the same for the rest of your life. It is not affected by the closure of your Special Account.
Q. If I am aged 55 and above, when will my Special Account be closed?
Your SA will be closed by early 2025. More details on the implementation date will be shared in the second half of 2024.
Q. Will I be notified about the closure of my Special Account?
You will be notified after your SA has been closed. You will also be able to check your CPF statement for the amounts that have been transferred from your SA to your RA and OA.
Q. What is the Retirement Account for?
The savings in your RA is meant to provide you with payouts in retirement. You can start your payouts anytime from your payout eligibility age of 65.
Q. What are the retirement sums - Basic Retirement Sum (BRS), Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS)?
Planning for your retirement is easier with the retirement sums – BRS, FRS, and ERS. They provide a guide on the CPF savings you need to reach your desired monthly payouts in retirement.
The BRS is meant to provide you with monthly payouts in retirement to cover basic living needs, excluding rental expenses.
The FRS is two times of BRS and can provide you with higher monthly payouts that also cover rental expenses. That is why when you turn 55, your CPF savings up to your FRS is set aside in your Retirement Account (RA) to provide you with monthly payouts in retirement.
If you own a property in Singapore with remaining lease that lasts you until you are 95 or older, you have the flexibility to meet your FRS with a mixture of property (up to half your FRS) and cash, and can apply to withdraw part of your RA savings down to your BRS using your property.
If you wish to receive even higher payouts for your desired retirement lifestyle, you can choose to set aside more by making a top-up, up to the current ERS. The ERS is the maximum amount that you can top up to your RA, and is increased yearly for those who wish to receive higher payouts. From 2025, the ERS will be raised from three times the BRS to four times to enable members to voluntarily commit more savings for even higher payouts. To find out how much you can top up, log in to your Retirement dashboard.
Ultimately, how much you set aside depends on your CPF balances and desired monthly payouts. It’s important to plan ahead by assessing how much payouts you need to meet your expenses in retirement. Find out using the CPF LIFE Estimator.
READ MORE: FAQs on Singapore's SimplyGo initiative
Lead image / Ministry of Manpower Facebook
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