Of CPF schemes…

Singapore March 11th, 2008

There was another article in the papers regarding some new rules for some saving schemes. Frankly, there are so many schemes now that I am totally lost. So what’s going to happen is that I’m just going to ignore whatever that’s in the CPF accounts because I am sure it now belongs to the almighty government at the end of the day. It’s no wonder that when people apply for jobs, they may be more concerned with the actual take home pay (80% of monthly pay) instead of caring how much they get in their CPF. Of course, the one good thing that CPF can do is that it can be used to buy housing, although I suspect that that is going to change some time soon (limiting how much you can use?).

However, apparently, this new ruling is supposed to be in favour of the CPF members – that is, the common working people. What I am concerned about though – is by the time I am old and senile and have no kids, would I still know or bother to use these funds? Sigh. Morbid, ya?

FROM Oct 1 this year, employers can top up the Supplementary Retirement Scheme (SRS) accounts of their employees and enjoy tax exemptions.

Workers can also top up their own accounts beyond the retirement age of 62.

In addition, those who did not earn a salary in the previous year, such as housewives who receive income from renting out a room, can also top up their accounts in the current year.

The Finance Ministry yesterday announced details on the enhancements to the SRS to encourage Singaporeans to save more for retirement.

The voluntary retirement savings programme complements the Central Provident Fund savings scheme.

Contributions to the SRS are tax exempted.

There is tax relief as well when the savings are taken out.

Only 50 per cent of the amount taken out of the SRS is taxable. But those who make a withdrawal before the age of 62 will be taxed 100 per cent of the sum withdrawn and must pay a 5 per cent penalty.

Currently, members are given a 10-year period to withdraw their savings and it starts from the retirement age of 62.

However, with the latest changes, the 10-year withdrawal period has been modified.

It will start only when an SRS member makes his or her first withdrawal, instead of kicking in automatically at age 62.

Also, a one-off concession will be given to members aged 62 or older on Oct 1, so that they can take advantage of the new rules.

Those who have made penalty-free withdrawals or closed their accounts before Oct 1 may top up their accounts. But it must be done between Oct 1 and Dec 31.

They can withdraw their money any time after that. But they will not be able to top up the account again after the first penalty-free withdrawal.

Top-ups will still be capped at $11,475 for Singapore citizens and permanent residents, and at $26,775 for foreigners, regardless of who makes the top-ups.

The ministry expects the SRS to grow with the enhancements and the increasing awareness of the need to save for retirement.

The seven-year-old scheme has been growing at an annual average rate of 25 per cent in the last three years. There are more than 41,000 accounts worth $1.44 billion.

More details can be found on the ministry’s website.

Article obtained from straitstimes.com on 11th March 2008



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