Recent updates in 2023 include major changes to your CPF. The changes are new rules for keeping your CPF accounts and increases to the CPF salary cap.
Keeping your CPF accounts
Previously, you were able to keep your CPF accounts while not being an active Permanent Resident or Singapore Citizen. Examples included keeping CPF after surrendering your PR or being an EP holder with an active CPF account from legacy regulations.
This was very advantageous for those who planned to stay in the region, even in retirement, with a secure pension through CPF Life. It also made it easier to return to Singapore and reapply for either PR or Citizenship. When you reapply, you must replace all amounts in your CPF accounts, including any interest that would have been earned if you had not left.
From April 1, 2023, onward, only those with an active PR or SG Citizenship will be able to keep their CPF accounts. By April 1, 2024, all others with CPF accounts will need to contact the CPF Board, fill out an application, and make arrangements for their account balances to be transferred to their personal bank accounts.
If you already have a CPF Life pension, you may still have some or part of your savings returned to you. CPF will complete calculations on the amount to be returned once they receive your closure application.
Increasing the CPF Salary Cap
From September 1, 2023, the CPF salary cap will increase and continue to increase at regular intervals through 2026. This will help increase savings for CPF as the increase applies to both employee and employer contributions. It also means that personal contributions from salaries will increase on a regular basis, meaning additional cash flow considerations.
The schedule for increases is as follows:
- From September 1, 2023 Cap increases to SGD 6,300 per month
- From January 1, 2024 Cap increases to SGD 6,800 per month
- From January 1, 2025 Cap increases to SGD 7,400 per month
- From January 1, 2026 Cap increases to SGD 8,000 per month
While contributions to CPF do change based on age, this will mean that for the rest of 2023 there will be an increase of SGD 51 per month from salaries taken for CPF savings for those age 55 and below. This will increase to SGD 400 additional per month by 2026 for the same age group, with annual contributions increasing SGD 4,800 per year.
Implications For Your Wealth Plan
For those who currently have a CPF Life pension or were planning on using CPF for retirement income, the regulatory changes are challenging. Please speak with your wealth planner to discuss income replacement options. Recreating pension income needs special advice, has tax implications depending on your country of residence, and can have time limits if you are close to retirement.
As CPF increases its salary cap, this does mean more savings to CPF, but less available monthly for liquidity. This is important to consider as increasing interest rates potentially affect monthly costs such as mortgage repayments, margin lending, car loans, or other floating rate debt.
If you need assistance with your long-term wealth planning or will be significantly affected by these changes, Avrio Wealth will review your options with you.
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