Changes to CPF Act passed to streamline retirement payouts, simplify top-ups

SINGAPORE: A Central Provident Fund (Amendment) Bill was passed in Parliament on Tuesday (Nov 2) to simplify some procedures for receiving retirement payouts and for topping up CPF accounts.

Currently, Retirement Sum Scheme members who have depleted their Retirement Account (RA) savings can only continue receiving payouts if they apply to transfer remaining funds in their Ordinary Accounts (OA) or Special Accounts (SA) to their Retirement Accounts. 

With the change, the CPF Board will automatically disburse OA and SA savings to members when they have used up their RA savings “to ensure no disruption to their payouts”. 

“Some members are not aware they can transfer these funds into their Retirement Account, and continue to receive a monthly payout. With this amendment, we will make it easier for them,” said Manpower Minister Tan See Leng in a speech in Parliament on Monday.

This will affect 83,000 members when it starts in the first quarter of 2022.

Separately, for about 75,000 CPF members who are currently receiving CPF LIFE payouts, they need to apply to add any inflows to their Retirement Account to their LIFE payouts. This will be automated this month.

Dr Tan emphasised in Parliament on Monday that there are no changes to the rules for lump sum withdrawals of CPF savings.

CHANGES TO TOP-UPS

The CPF Board said it will also simplify rules to top up the Retirement Sum and MediSave Accounts, with changes to apply from Jan 1 next year.

Two main changes are to the tax reliefs provided and to voluntary contributions to MediSave.

Currently, tax reliefs for voluntary top-ups to the retirement sum are given to the person who tops up while tax reliefs for top-ups to MediSave are given to the recipient.

To “align the rules” for both schemes, tax relief will be provided to the giver who tops up the account, for MediSave as well, from next year.

This affects the cap for the tax reliefs, which will be set at S$8,000 in total for top-ups to the Retirement Sum and to MediSave. The cap is separate for top-ups to the members themselves, and to loved ones, making a total of S$16,000 a year.

The rules for the top-up limits for MediSave will also be simplified. Now, members have to refer to both the Basic Healthcare Sum and the CPF Annual Limit and take the lower of the two.

The Basic Healthcare Sum is the estimated savings needed in the MediSave Account for basic subsidised healthcare needs in old age. The prevailing rate for the Sum is S$63,000.

The CPF Annual Limit is now S$37,740, and is the maximum amount one can put in all three accounts in a year.

The amendment means that members can make voluntary contributions to MediSave up to the Basic Healthcare Sum without taking into account the Annual Limit. Mandatory contributions are still subject to the Annual Limit.

“As members can only know whether they have reached the Annual Limit at the end of each year, this creates some uncertainty for members. Therefore, going forward, the top-up limit for employees will be simplified to depend only on the Basic Healthcare Sum,” said Dr Tan.

He added that 2020 saw a record amount of top-ups via the Retirement Sum Topping-Up scheme – about S$3 billion across 140,000 members.

DISBURSEMENT OF FUNDS AFTER DEATH

Dr Tan also explained other changes to streamline the administration of CPF schemes, making it easier to disburse bequeathed discounted Singtel shares and to disburse unnominated CPF funds under S$10,000.

One of the main changes is to allow for a beneficiary representative to receive the unnominated CPF funds of a deceased person on behalf of other beneficiaries, if they are all agreeable.

Under the current process, all eligible beneficiaries must submit their information and supporting documents to the Public Trustee’s Office (PTO) under the Ministry of Law (MinLaw). 

MinLaw said that it received feedback that this process can involve significant time and effort, and can be streamlined to be more efficient, particularly for smaller amounts.

Under the new approach, a representative may be appointed to represent all eligible beneficiaries and make one consolidated claim for the deceased CPF member’s unnominated CPF monies. 

In the event of a dispute over the nomination of a representative, the PTO will not proceed with the application until a consensus has been reached among the beneficiaries. 

And if they fail to reach an agreement, they will need to re-submit their application under the standard administration process. This is due to be implemented by the second quarter of 2022.

Responding to some MPs’ concerns that this process may lead to disputes, Minister for Law Edwin Tong said that MinLaw is introducing safeguards to ensure that the beneficiaries’ rights and interests remain protected.

The beneficiary representative must declare that he or she is either a sole beneficiary or that he or she has obtained the consent of all the other beneficiaries.

“The PTO will then confirm with the other eligible beneficiaries directly that they have given their consent before the PTO pays out any unnominated funds, CPF monies to the (beneficiary representative),” he said.

He added that if there are disputes that surface after the funds are disbursed to the representative, beneficiaries can seek recourse under the law.

The limit of S$10,000 will affect about half of current cases handled. “We believe that of this half a substantial number will be uncontentious and will benefit from an expedited scheme,” said Mr Tong.

SHORTER TIME FOR CPF FUNDS TO BE RETAINED

Dr Tan said that with these developments, there is no longer a need to allow for the retention of unclaimed CPF monies over such a long period. 

The CPF Board will therefore shorten this duration from seven years to six months after the Board is notified of the member’s death. 

Should a nominee not make claims within six months, the money will be transferred out of the deceased member’s CPF accounts, and no interest will be payable from then. However, nominees continue to have the right to claim the nominated monies at any time.

“I want to reassure all members that if the CPF Board subsequently learns that a dormant member is alive, the Board will restore the monies to the member’s original accounts with interest,” he said.

The new durations will apply from Apr 1, 2022. Dr Tan added that over the last five years, about 98 per cent of CPF monies have been distributed to beneficiaries.

Another technical update caters for recovery of grants given to members who later become ineligible for the grant.

For example, if a member gets a matching grant for topping up the account of a loved one under the Matched Retirement Savings Scheme, but later appeals for a reversal, the grant will be recovered.

Dr Tan said in conclusion that changes will be made to simplify the CPF Act for better readability, while assuring members that this does not change any existing withdrawal policies.