SINGAPORE: Proposed changes to the Central Provident Fund (CPF) Act will lower barriers for members to transfer funds to their parents and grandparents for their retirement.
The CPF Amendment Bill 2017 was introduced for its first reading in Parliament on Monday (Oct 2).
After amendments to the CPF Act are passed, members will have to set aside a lower sum before they can transfer CPF savings in their accounts to their parents and grandparents, the Ministry of Manpower (MOM) said in a press release.
Members will be able to transfer savings from their CPF accounts to their parents or grandparents after setting aside the basic retirement sum if they have property pledges or charges to meet the full retirement sum, MOM said.
Currently, CPF members have to set aside the full retirement sum before they can transfer their excess CPF savings to their parents and grandparents.
The basic retirement sum is half that of the full retirement sum. For those turning 55 this year, for example, the full retirement sum is S$166,000, while the basic retirement sum is S$83,000.
The latest concession will "give members who are providing for their parents and grandparents more options to strengthen their parents’ and grandparents’ retirement adequacy", the ministry said.
Mr M Salim, CEO of financial advisory firm Avallis Financial, said the proposed change would allow those who want to transfer CPF funds to their parents or grandparents to be able to do it earlier.
"In certain cases, there is the urgency to do so because their parents are of age," he explained.
However, he warned that CPF members who choose to do so should be conscious of how this will impact their retirement income. "It means that you would have to start probably being more mindful of accumulating funds in CPF."
OTHER CHANGES TO CPF ACT
The change in the CPF transfer rules for parents and grandparents is part of a "series of enhancements" to the Retirement Sum Topping-Up Scheme which will provide CPF members more flexibility to help themselves and their family members plan for retirement, MOM said.
The Bill also includes an amendment to update the payout benchmark for the retirement sum exemption.
The current rules allow members to apply to be fully exempted from setting aside their retirement sum if their private annuity or pension is equivalent to the monthly payout that they can receive after setting aside the full retirement sum under the Retirement Sum Scheme (RSS).
This payout benchmark for full exemption will now be changed to the monthly payout that a member is expected to receive under CPF LIFE. This is because CPF LIFE, which was introduced in 2009, has replaced RSS as the default scheme for CPF retirement payouts, MOM said.
Under the Bill, the CPF Act will also be amended to provide "greater clarity and efficiency in the administration of the CPF system", according to the ministry.
More details on the amendments will be released at the second reading of the Bill in November this year, MOM said.
Additional reporting by Janice Lim