Singapore's CPF system ensures that working Singaporeans and Permanent Residents put aside a portion of their earnings each month, to ensure that this money to form the foundation for monthly payouts during retirement – through either CPF LIFE or the CPF Retirement Sum Scheme.
To give a reference baseline, the government sets (and regularly reviews) milestone levels for our CPF savings: The Basic Retirement Sum (BRS), Full Retirement Sum (2 x BRS) and Enhanced Retirement Sum (3 x BRS). For all those turning 55 in 2021, the entire Retirement Sum is $181,000.
Unfortunately, there's a segment of seniors who might still fall way short of the BRS at the time of their retirement, which means they would be drawing on very modest payouts each month, which are grossly inadequate for basic sustenance. According to the Secretary of state for Manpower, which administers CPF, about 435,000 seniors fall into this category.
In order to encourage and support seniors in building up their CPF balances, and thus their retirement adequacy, the federal government announced in Budget 2021 the introduction of the Matched Retirement Savings Scheme (MRSS), which will take effect from 2021.
Here's what you need to know about the scheme and to make the most of the government contribution matching and prevailing income tax deductions.
What Is The Matched Retirement Savings Scheme (MRSS)?
Matched Retirement Savings Scheme (MRSS) was announced in Budget 2021. Underneath the scheme, the government provides dollar-for-dollar matching to eligible seniors for voluntary CPF cash top-ups underneath the CPF Retirement Sum Topping-Up (RTSU) scheme, as much as an annual limit of $600.
MRSS will be implemented for 5 years – from 2021. You will be assessed yearly and notified through the CPF Board about your eligibility by February. Listed here are the eligibility criteria for MRSS:
– Aged 55 to 70 (inclusive)
– CPF Retirement Account savings is less than the prevailing Basic Retirement Sum (the BRS for seniors turning 55 in 2021 is $93,000)
– Average monthly salary of not more than $4,000
– Annual Value (AV) of residence being only $13,000
– Do not own more than one property
MRSS is definitely an incentive on top of the RTSU, however, despite the fact that RTSU contributions can be made in cash or transfers out of your own Ordinary Account, MRSS matching is only applicable for cash top-ups.
The cash top-ups can be made in a lump sum, or in modest amounts throughout the year, including via GIRO. At the end of each calendar year, the total topped-up amount will be computed, and the matching grant (capped at $600 annually) will be credited through the first quarter of the following year.
MRSS grant payouts receive to seniors, so it does not matter who makes the cash top-ups – it can be seniors themselves, their loved ones, or perhaps their employer. Those making top-ups would then be eligible for prevailing benefits of RTSU cash top-ups, for example income tax deductions.
MRSS Grant Matching Can Be Used With Existing RTSU Tax Deductions
On top of the dollar-for-dollar matching provided by the government, you (or those topping on your behalf) can also enjoy prevailing tax benefits for making RTSU contributions.
The tax reliefs on top-ups made to your own CPF RA or by employers for you amounts to $7,000 per twelve months.
Those making top-ups to the CPF RA of their loved ones (parents, parents-in-law, grandparents, grandparents-in-law) can receive an additional $7,000 in tax reliefs per calendar year. This tax relief pertains to top-ups to the CPF RA of your spouse/siblings if their income (from all sources) does not exceed $4,000 within the preceding year, or if they are handicapped (mentally or physically incapacitated).
Note the yearly personal income tax relief cap of $80,000 pertains to all tax reliefs claimed, including cash top-ups made under RSTU.
Employers that make top-ups to the CPF RA of their employees will also receive full tax deductions on their own top-ups.
Eligible Seniors Will Be Notified At the beginning of The Year
As the eligibility for MRSS is assessed every year, you may be able to change your eligibility if your income changes or if you change your residence. Do note that the AV is based on your place of residence (as reflected in your NRIC), this means that if you move from your HDB to your child’s condominium (and change your NRIC address), you might no longer be eligible.
For those who have not received the annual notification, you can also check your eligibility on CPF’s website.