5 Common CPF Myths You Probably Heard

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Myth 1: CPF makes you Pay “Double Premiums” for MediShield Life and your personal Integrated Shield Plan (IP)

As a Singaporean/PR, you are automatically insured with MediShield Life and premiums are already being deducted from your CPF Medisave account. (see table below)

Source: https://www.moh.gov.sg/

By subscribing to an Integrated Shield Plan with a Private Insurer, this gives you access to better Healthcare, where most of the premiums can be sourced from your CPF Medisave account up to respective withdrawal limits.

You see that you are not paying double premiums, but 2 separate premiums; 1 for MediShield Life, and 1 for Integrated Shield Plan.

Myth 2: When You Sell Your House, All the Money Goes Back to CPF

If you used CPF-OA savings to fund your property, after the sale of your property, only the principal sum (amount withdrawn from CPF-Savings), plus the accrued interest has to be returned. Any profit in excess is cash for you to keep.

If the sales proceeds from your property is less than the principal and accrued interest amount, you do not need to make up the difference to meet the required refund after you sold your property at market value. If you are buying another property, you can use your CPF savings again.

If you are 55 years old and above, and have pledged your property to withdraw your Retirement Account (RA) savings in cash, you will need to refund the pledged amount on top of the principal sum and accrued interest. The amount refunded to your CPF account will be used to meet your Full Retirement Sum in your RA. After this, any balance housing refunds will be paid to you in cash.

Myth 3: Retirement Sum Top Ups can be withdrawn in cash or redirected for other purposes.

Top-up monies are set aside specifically for retirement needs and can only be used for monthly payouts under the Retirement Sum Scheme, or CPF LIFE. It cannot be withdrawn in cash or used for any other purposes such as education, investment, insurance premium payments, housing etc.

Top ups cannot be withdrawn even given these conditions:

(i) Members who own a property and wish to withdraw RA savings above their BRS through sufficient CPF property charge or pledge

(ii) Members who wish to withdraw RA savings above their BRS for housing

(iii) Members who wish to transfer RA savings above their BRS to their spouse’s CPF account, under the Retirement Sum Topping-Up scheme

Myth 4: You are Not Entitled to CPF LIFE if you don’t have enough to meet even the Basic Retirement Sum.

If you meet the Retirement Account balances to be auto-included in CPF LIFE, you will start receiving monthly payouts for life upon age 65 (at current point in writing).

However, what if your CPF balances fall below even the Basic Retirement Sum of $90,500?

You will still be placed on CPF LIFE with $60,000 in your Retirement Account when you are near your payout eligibility age. Failing which, a request can still be made to CPF to be placed on CPF LIFE.

Myth 5: CPF Interest Rates are Guaranteed forever and Will Never be Revised.

While we can assume that the CPF savings is risk-free because it is backed by the government, we should not assume the interest rate will remain unchanged.

Ordinary Account (OA) savings earn either the legislated minimum 2.5%, or the 3-month average of major local banks’ interest rates, whichever is higher, adjusted quarterly.

Special Account and Medisave Accounts (SMA) savings are invested in Special Singapore Government Securities (SSGS) which currently earn either 4% per annum or the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, whichever is the higher, adjusted quarterly.

It’s true that the CPF has been paying a stable interest rate for 2 decades, but they only guarantee your interest for the next quarter or the next year.

You can find the latest declared interest rates from the CPF website via this link.

Get in touch with me for a complimentary 1-1 consultation to help you plan to meet your financial needs at all stages in your life. Schedule your appointment now via Whatsapp at https://wa.me/6592218526

Disclaimer: The views expressed here are solely those of the author in his private capacity and not necessarily to the author’s employer, organization, committee, or other group or individual.

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About Me

Hi, my name is
Joshua Hoong
I’m a Chartered Financial Consultant (ChFC) at ACTS Advisory Group, IPP Financial Advisers specialising in comprehensive Retirement Planning, as well as a Million Dollar Round Table (MDRT) member.

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