MOM Issues Amendments to the CPF Act to Initiate Automatic Payouts at 70: Lim Swee Say

October 14, 20168:01 am901 views

Minister of Manpower, Lim Swee Say announced the bill passing amendments to the CPF Act in the Parliament this Monday. As per the amendments, CPF members will be offered the flexibility to make advance applications for lump sum withdrawal from their Retirement Account upon reaching their Payout Eligibility Age (PEA).

It further allows automatic payouts to members under the Retirement Sum Scheme, once they reach 70 years of age. The Government has agreed to implement the recommendation by the CPF Advisory Panel to allow members who turned age 55 in 2013 or later to make a lump sum withdrawal of up to 20% from their Retirement Accounts when they reach the Payout Eligibility Age (PEA).

Following this change, the members will have three options that they can avail on their lump sum withdrawal:

  • They can withdraw the lump sum starting from their PEA birthday.
  • They can defer withdrawing the lump sum beyond their payout start date for CPF LIFE or the Retirement Sum Scheme by transferring this lump sum to the Ordinary Account.
  • They can either choose to convert the lump sum into monthly payouts through CPF LIFE or the Retirement Sum Scheme.

cpf-planning-at-55

While simplifying the activation of CPF payouts for members on the Retirement Sum Scheme, as they reach 70, they are supposed to apply to start their payouts. However, it’s been observed that some of the members have not yet applied for payouts, despite receiving reminder letters from the CPF Board around two months before their PEA.

Supporting the implementation of the Basic Healthcare Sum (BHS) introduced by the Ministry of Health for CPF members to meet their basic subsidised healthcare needs in old age, which came to effect from January 1, 2016, some amendments were introduced in the CPF act.

The BHS is fixed for each cohort when they turn 65 years old. It is the maximum amount a member can set aside in his Medisave Account. Any additional Medisave contributions above the BHS are transferred to the member’s Special or Retirement Accounts to increase his retirement income. Additionally, members aged 55 and above now no longer need to top up their Medisave Accounts, before withdrawing from their ordinary and special accounts.

See: Unemployment Rises, MOM Expects Redundancies to Increase Further in 2016

To bring the above changes to effect, the CPF act has been amended to remove obsolete provisions relating to the Medisave Minimum Sum, and fix the BHS for each cohort when they turn 65 years old.

Furthermore, amendments to provide greater clarity and efficiency in the administration of some parts of the CPF system were introduced. These include replacing Minimum Sum with Retirement Sum, clarifying administrative financial penalties framework, recovery of government grants and other payments made in error and catering for members whose birthday fall on 29 February.

The bill aims to simplify the Medisave top-up process for certain family members, aged 55 and above who have already set aside their cohort Full Retirement Sum, are now required to withdraw the excess monies in their Ordinary and Special Accounts in cash, if they want to top-up the Medisave account of certain family members.

The amendment bill passed will enable members to make such top-ups directly from their Ordinary and Special Accounts to the Medisave Accounts of these family members.  Introduction of these amendments would provide greater flexibility, healthcare assurance, as well as simplify certain administrative procedures for greater convenience to CPF members. You can find more information about the CPF provisions here.

Also read: MOM Takes Action against Companies Illegally Bringing in Foreign Labour

Image credit: www.cpf.gov.sg

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