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Topping up your parents’ CPF Retirement Account has long been a way to offer financial support to family members. Now, you might be able to get money from the government when you do it.

The upcoming CPF Matched Retirement Savings Scheme (MRSS) is a new scheme that will run for five years from 2021 to 2025. Under the scheme, the government will match contributions made to eligible CPF accounts under the Retirement Sum Top-up Scheme.

In light of the COVID-19 pandemic and the huge dent it’s going to make in many of our wallets for years to come, this is the government’s “no handouts” way of ensuring retirement readiness without completely removing personal responsibility.

Other than the government’s dollar-for-dollar matching of transfers, your contributions will also enjoy CPF interest rates. The Retirement Account interest rate for those aged 55 and above is a sweet 4% per annum + an additional 1% on the first $60,000. For an older person with presumably a lower risk tolerance, that is about as high as it gets.

The MRSS will also run alongside the existing CPF LIFE scheme, which offers lifelong payouts for the rest of your life. However, your parents will not be automatically enrolled in CPF LIFE if they were born prior to 1958 or don’t meet the minimum Retirement Account balance requirements.

One final benefit is that you get to enjoy tax relief for your MRSS contributions.

Whether or not your parents need your financial support, it’s a good idea to know what’s on offer and see if your family can benefit.

What is the CPF Matched Retirement Savings Scheme (MRSS)?

Under the MRSS, every cash top-up you make to an eligible family member’s (or your own) CPF account under the Retirement Sum Topping-Up Scheme will benefit from dollar-for-dollar matching by the government.

You can top up your recipients’ accounts either using cash or by transferring your own CPF savings.

But before you run off and deposit wads of cash into your parents’ CPF, you must first make sure that your recipients are eligible for the MRSS in the first place.

To qualify for MRSS, your recipient must satisfy these criteria:

  • Be aged 55 to 70
  • Have an average monthly income of not more than $4,000
  • Live in a property with an annual value of not more than $13,000 (all HDB flats satisfy this criteria)
  • Own not more than one property

To satisfy the Retirement Sum Topping-Up Scheme’s criteria, you must be transferring money to the account of one of the following people:

  • Yourself
  • Your parents
  • Your parents-in-law
  • Your grandparents-in-law
  • Your spouse
  • Your sibling

As you can see, if you are aged over 55 and satisfy all of the above criteria, you can even make MRSS top-ups to yourself and benefit from the government’s dollar-for-dollar matching.

How the CPF Matched Retirement Savings Scheme (MRSS) works

Credit: Money Smart

As mentioned earlier, the government will match dollar-for-dollar any contributions made to eligible members’ CPF accounts under the Retirement Sum Topping-Up Scheme from 2021 to 2025.

The cap for dollar-to-dollar matching is $600 per year. So, you can receive a maximum of $3,000 free from the government over 5 years.

The matching grant will be automatically credited into the recipient’s Retirement Account by the first quarter of the following year.

So, let’s say you deposit $600 into your mother’s CPF Retirement Account in 2021. The government will pay an additional $600 into your mother’s CPF Retirement Account by the first quarter of 2022.

Top up your CPF Retirement Account with the Matched Retirement Savings Scheme (MRSS)

If you or your parents have a less-than-ideal CPF account balance, now is a great time to make up for it.

When a CPF member turns 55, their Special and Ordinary Accounts will merge to form their Retirement Account. The cash in this Retirement Account will form the retirement sum, which will in turn determine the amount they will receive in monthly payouts.

If your parents were born before 1958 and have not opted in to CPF LIFE, they are on the old Retirement Sum scheme. That means their payouts will depend on whether they have reached the Basic Retirement Sum, Full Retirement Sum or Enhanced Retirement Sum. For those turning 55 in 2022, these three tiers of account balances are $96,000, $192,000 and $288,000 respectively. 

The Enhanced Retirement Sum is the maximum you can keep in your Retirement Account; any amounts in excess can be withdrawn freely or left in the account to earn interest.

For those who are automatically enrolled in CPF LIFE, the amount of money you have in your Retirement Account will determine the payouts you receive. For instance, you would need an estimated $141,500 in order to receive monthly payouts of $750 to $810 under the Standard Plan. To receive monthly payouts of about $1,390 to $1,490 under the Standard Plan, you would need an estimated balance of $272,900.

So in order to maximise your CPF account’s potential as a source of retirement income, you have to make sure you meet certain balance thresholds. For those whose parents qualify for MRSS, now is an excellent time to do some strategic top-ups.

Receive tax reliefs when you contribute to the Matched Retirement Savings Scheme (MRSS)

The person making MRSS top-ups can enjoy up to $14,000 worth of tax relief under the Retirement Sum Topping-Up Scheme category.

The maximum of $14,000 tax relief is allocated as follows:

  • $7,000 for top-ups made to yourself or by your employer on your behalf
  • $7,000 for top-ups made to your parents or other family members (top-ups to spouses or siblings do not qualify for tax relief, unless their income from all sources was not more than $4,000 in the preceding year, or they are physically or mentally handicapped)

Text: Joanne Poh / Money Smart