CPF Retirement Planning

All You Need to Know About CPF Top Up via the RSTU Scheme

bySusan Lau
  • Aug 26, 2021
  • 7 mins

CPF top ups via the RSTU scheme can be a strategic way to build up your own and a loved one’s retirement funds in the long-term, while getting financial benefits today from tax reliefs.
 
Additionally, individuals of all ages can take advantage of the RSTU scheme. This article will cover the benefits and limitations of CPF top ups along with step-by-step instructions on how you can top up your own account, as well as a family member’s!
 
Already know everything about RSTU? Jump to our step-by-step guide on how you can top up your and a family member’s CPF account here.

The Retirement Sum Topping-Up Scheme (RSTU) aims to help Singaporeans to build upon their retirement savings through higher monthly payout and/or longer period of payout. It’s also possible to help grow your loved ones’ retirement savings.

The types of top-ups available include:

Cash top-up to any recipient

  • SA (for recipients under 55 years old) up to current Full Retirement Sum
  • RA (for recipients above 55 years old) to current Enhanced Retirement Sum

CPF transfers to eligible recipients

  • You’re able to make CPF transfers to yourself, your wife/husband, parents, parents-in-law, grandparents, grandparents-in-law and siblings
  • You’re unable to transfer CPF savings to your kids but it’s possible to top up their CPF accounts with cash

Topping up yours or a loved ones’ CPF helps to build SA savings. If the recipient of the top up is below 55 years old, this amount can be up to the current Full Retirement Sum (FRS), which is S$186,000 if they’re 55 in 2021.

To build up RA savings where the recipient is above 55 years old, you can top up to the current Enhanced Retirement Sum (ERS), which is S$279,000 if they’re 55 in 2021.

Tax reliefs

Enjoy tax relief of up to S$7,000 per year if you’re topping up for yourself and additional tax relief of up to S$7,000 per year if you top up for your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings.

To qualify for tax relief for cash top ups for your spouse or siblings’ CPF account, your recipients must either:

  • Have income not exceeding S$4,000 in the year prior to the year of top up
  • Be handicapped

Additionally, for recipients under the age of 55, the top up must be made within this cap – current FRS, minus the sum of SA savings and net SA savings withdrawn under the CPF Investment Scheme.

For recipients over the age of 55, the top ups made must be within this cap – current FRS, minus RA savings. Do note that personal income tax relief cap is at S$80,000 and it applies to total amount of all tax reliefs claimed, including relief on RSTU Scheme cash top ups.

Interest rates

SA and RA savings can earn up to 6% interest per year. SA and RA savings receive a base interest of 4%, with an extra 1% interest given on the first S$60,000 of your combined CPF balances. Additionally, if you’re aged 55 years old and above, receive an additional 1% interest on the first S$30,000 of your combined CPF balances. To find out more, read our article on CPF Interest Rates.

The early bird gets the worm and it’s the same with topping up your CPF savings. Did you know that CPF interest is computed monthly, but credited and compounded annually? The interest earned in the year is credited to your CPF accounts by 1 January of the next year.

This means that you could earn more interest on your CPF savings if you top up in January compared to in December. Here are a few scenarios to better illustrate why you should top up your CPF balances early.

Example 1: Lump sum top up of S$7,000 in January vs lump sum top up of S$7,000 in December over 10 years

Assuming CPF balances are S$0 and SA/RA interest rates of up to 6%* per year.
*CPF savings in SA and RA currently earn 4% interest per year. First S$60,000 of combined CPF balances earn additional 1% per year. For those above 55 years old, an extra 1% interest paid on first S$30,000 of combined CPF balances.

Example 2: Monthly top up of $100 (starting from January) vs lump sum top up of S$1,200 in December

Month

Interest Earned on Monthly Top Up of $100 from January

(Months To Earn Interest x 4%/12 x $100)

Interest Earned on Lump Sum Top Up of $1,200 in December

(Months To Earn Interest x 4%/12 x $100)

January $3.67 -
February $3.33 -
March $3.00 -
April $2.67 -
May $2.33 -
June $2.00 -
July $1.67 -
August $1.33 -
September $1.00 -
October $0.67 -
November $0.33 -
December $0 $0
Total $22.00 $0

This table shows that because you contributed since January, you earned S$22 more in interest compared to if you made a lump sum contribution in December.
*Contributions (like cash top ups) received this month will only start earning interest in the next month.
*Assuming CPF balances are S$0 and applying base SA and RA interest rates of 4% per year.

Source: Central Provident Fund Board

Higher monthly payouts

An additional benefit to topping up your CPF is that you’ll be able to enjoy higher monthly payouts. This is a combination of a higher retirement sum and compound interest.

Help a family member

This is also an opportunity to help a family member with a small CPF account, or those without the ability to earn income due to disability.

Although it sounds like an amazing way to grow your CPF or your loved ones’ CPF, it has a few limitations. The limitations of CPF top ups include:

  • The top-up money is strictly for retirement and it is not refundable so you won’t be able to access it until you’re of retirement age. Money in SA/RA have higher interest rate of 4% because it’s locked in for long term.
  • Top-up money can’t be withdrawn because it’s specifically set aside for retirement needs and can only be used for monthly payouts under the Retirement Sum Scheme or CPF LIFE. It can’t be withdrawn for other purposes such as education, investment, insurance premium payments, and housing.

Building an ample retirement fund ensures that you’ll be able to retire comfortably and reduce the financial burden on your children. Topping up your CPF is one of the best ways to grow your retirement fund and receive higher payouts when you retire.

If you need more help in planning out your retirement finances, Income’s financial advisors are just a click away!

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