By S Ramesh, Channel NewsAsia, 12 April 2012
Singapore's Central Provident Fund Board has extended the Minimum Sum Topping-Up scheme to also benefit parents-in-law and grandparents-in-law.
From January next year, cash top-ups to the accounts of these categories of Singaporeans into their special or retirement accounts will enjoy tax relief.
The Minimum Sum Topping-Up scheme, which provides tax relief for voluntary contributions to the CPF savings of family members, was introduced to help Singaporeans contribute to their loved ones, especially their parents and grandparents.
Such top-ups, if made in cash will qualify for tax relief of up to S$7,000 for top-ups to family members, and double the tax relief of S$14,000 when top-ups to one's own CPF account is included.
Minister of State for Manpower, Tan Chuan Jin said there have been public requests to further extend the top-up scheme to other categories in the family.
So come January 2013, parents-in law and grandparents-in law will also benefit from the scheme.
He added that the government would need to amend the CPF Act and the Income Tax Act later this year to effect the change.
According to CPF, there were 38,200 Minimum Sum Top-Up transactions amounting to S$215.6 million in 2011.
Top-up for parents were most popular with 58 per cent of top-ups going into parents' accounts.
A significant improvement of the Minimum Sum Top-Up scheme is CPF LIFE. While the Minimum Sum Top-Up Scheme is expected to make payouts for up to 20 years, the CPF LIFE is lifelong. And the Manpower Ministry believes a significant number of Singaporeans are expected to benefit from CPF LIFE thanks to greater longevity.
Mr Tan noted that some Singaporeans have voiced concerns that they would lose out under CPF LIFE as their payouts may be lower, as compared to the Minimum Sum Top-Up scheme.
"A member who is under the Minimum Sum Scheme may well have to end up saving a portion of his or her monthly payouts in case he lives beyond the point where his CPF payouts run out. But with CPF LIFE, you can have peace of mind because the payouts will continue for as long as he lives," said Mr Tan.
"The CPF system would cater fully for the retirement needs of those who are slightly below middle income, and at the same time it will cater significantly for the retirement needs of the middle income group," he added.
A significant improvement of the Minimum Sum Top-Up scheme is CPF LIFE. While the Minimum Sum Top-Up Scheme is expected to make payouts for up to 20 years, the CPF LIFE is lifelong. And the Manpower Ministry believes a significant number of Singaporeans are expected to benefit from CPF LIFE thanks to greater longevity.
Mr Tan noted that some Singaporeans have voiced concerns that they would lose out under CPF LIFE as their payouts may be lower, as compared to the Minimum Sum Top-Up scheme.
"A member who is under the Minimum Sum Scheme may well have to end up saving a portion of his or her monthly payouts in case he lives beyond the point where his CPF payouts run out. But with CPF LIFE, you can have peace of mind because the payouts will continue for as long as he lives," said Mr Tan.
"The CPF system would cater fully for the retirement needs of those who are slightly below middle income, and at the same time it will cater significantly for the retirement needs of the middle income group," he added.
But as longevity increases, experts said there is room to do more to plan early for retirement.
Professor Michael Sherris, an expert in population ageing research, said: "If you look around the world, the different schemes, they generally develop a private market in terms of annuity products, and they try and innovate with variable annuities, products that give you an investment opportunity as well so that you can earn higher returns."
Mr Tan has urged the finance industry to play an important role in helping Singaporeans save outside of the CPF especially those in the higher income bracket.
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