Whenever the Central Provident Fund (CPF) system is tweaked, every aspect of the changes is scrutinised in great detail by members.

That is hardly surprising, of course, given that the CPF is an integral part of the retirement plans of people here.

Recently, some confusion arose over the important issue of how CPF savings are distributed when a member dies.

The muddle arose from an e-mail which did the rounds, that erroneously stated that when a CPF member makes a nomination in relation to the beneficiary of his funds, that nomination does not include the savings in his Medisave Account.

The e-mail, which made its way to various firms and the media, stated: ‘The CPF nomination that we have done is only for the Ordinary Account. We have to make a separate nomination for the Medisave funds, otherwise the funds are automatically given to charities.’

When contacted, the CPF Board said the e-mail got it wrong.

‘Where a valid nomination has been made, upon a member’s death, all his CPF savings in his Ordinary, Special and Medisave accounts will be distributed to his nominees according to the proportion stated in his nomination form,’ said the board.

It added that it has contacted the originator of the e-mail who has since clarified with her e-mail recipients that the information was inaccurate.

Here’s what you need to know about making a CPF nomination and what it covers.

Q: What is the scope of the CPF?

Set up in 1955, the CPF is a comprehensive social security savings plan that aims, among other goals, to enable Singaporeans to have a secure retirement.

Over the years, the overall scope of the CPF has grown to include wealth accumulation through the CPF Investment Scheme (CPFIS), home ownership and health care.

Working Singaporeans and their employers make monthly contributions to the CPF which go into three accounts. They are:

The Ordinary Account where the savings can be used to buy a home, pay for insurance, investment and education;
The Special Account where the savings are set aside for old age and investment in retirement-related financial products; and
The Medisave Account where the savings can be used for hospitalisation expenses and approved medical insurance.
When your reach 55, a Retirement Account is set up to meet your basic needs during your old age. Your savings in your Ordinary and Special Accounts, up to the prevailing Minimum Sum, will be set aside in this account.

Q: What happens to my CPF savings after I die?

If you have not made a nomination in relation to your CPF savings, they will be distributed to your family according to intestacy laws.

This means that if you leave a spouse with no children or parents, your spouse will get all your CPF savings. But if you have a spouse and children, your spouse will get half of your CPF savings leaving the balance to be split equally among your children.

If you are single and have not made a nomination, your money will be distributed according to intestacy laws. So if you are single with no children, your CPF savings will be shared equally between your surviving parents.

Your CPF monies will go to the Government only in the absence of a spouse, children, siblings, grandparents, an uncle or aunt.

Do note that if you are a Muslim, your CPF funds will be distributed differently, in accordance with the Inheritance Certificate which can be obtained from the Syariah Court.

Q: What is covered by the CPF nomination?

If you have a valid CPF nomination, the following will be distributed to your nominees, in the proportion stated in your CPF nomination, upon your death:

(a) Savings in the Ordinary, Special, Medisave and Retirement Accounts; and

(b) Discounted SingTel shares bought in 1993 when SingTel went public.

The following assets are not covered by CPF nomination:

(a) Cash and investments held in the CPF Investment Account under the CPFIS-Ordinary Account;

(b) Investments held under the CPFIS-Special Account;

(c) Dependants’ Protection Scheme (DPS) claim proceeds; and

(d) Properties bought with CPF savings.

For items (a) and (b), you may wish to cover them under a will, otherwise they would be distributed according to intestacy laws.

Your DPS proceeds can also be covered under a will but if you are an NTUC Income DPS policyholder, you can opt to nominate under the Cooperative Societies Act.

In the case of properties, it depends on their holding status. If the property is held with the legal status of ‘joint tenancy’, the deceased’s share of the property will pass to the remaining surviving owner(s). Otherwise, the share of the property will form part of the deceased’s estate.

Q: What is the CPFIS?

The CPFIS comprises the CPFIS-Ordinary Account and CPFIS-Special Account. It gives CPF members more options for investing their CPF savings, while meeting the long-term objective of financial security in old age.

The first $60,000 of your combined CPF accounts earns an extra 1 per cent interest. To enable members to earn extra interest, you can invest your CPF savings only after setting aside $20,000 in your Ordinary Account and $30,000 in your Special Account.

From July, the Special Account amount to be set aside will be raised to $40,000. If you have already bought investments under CPFIS-Special Account but do not have $40,000 in your Special Account, you will not be required to sell them. However, when you liquidate these investments, you would not be able to re-invest in them unless you have at least $40,000 in your Special Account.

Instruments that can be invested in under CPFIS include fixed deposits, Singapore Government bonds and treasury bills, annuities, endowment and investment- linked insurance plans, unit trusts, and exchange traded funds.

Q: Are my CPF savings protected from creditors?

The balance in your CPF is protected from creditors. But any CPF savings used for investments will not be protected from your creditors upon your death.

So if you have creditors, you may want to consider liquidating any CPF investments before death so that the monies are transferred back as your CPF balance and protected from your creditors.

Q: What happens if my spouse and I only nominate each other and we die at the same time?

Under such circumstances, the older spouse is deemed to have died first. If you are the older spouse, your CPF savings will be paid to your spouse’s estate.

If you are the younger spouse, you have no nominee since your spouse is considered to have died before you. Your CPF savings will be distributed according to intestacy laws.

Q: How do I make a CPF nomination?

You can print a copy of the nomination form from www.cpf.gov.sg or collect the form from any CPF centre. You should ensure that your witnesses are at least 21 years old. You and your nominees cannot act as witnesses.

Your nominee can be under 18 years of age but if he is below 18 at the time of claim, his share will be forwarded to the public trustee until he turns 18.

You may nominate someone who is not a family member. If your nominee is not residing here, write your nominee’s identity card/passport number and address clearly on the nomination form.

You may also nominate organisations such as churches, mosques, temples and charitable organisations, provided they are registered as a legal entity.

Q: When do I make a CPF nomination?

You don’t need to submit a CPF nomination if you have no qualms about your CPF savings being distributed to your family according to intestacy laws.

But if you wish to distribute your CPF savings differently, make a CPF nomination. You can then decide who your beneficiaries or nominees will be, as well as the proportion of CPF savings you would like them to receive upon your death.

Do take note that you should make a new CPF nomination when one of your nominees dies; if you wish to add a new child or relative to your nomination; when you marry or re-marry; and upon divorce.

Getting married renders any earlier CPF nomination invalid. This means that if you do not make a fresh nomination, your CPF savings will be distributed to your family under intestacy laws.

Unlike marriage, divorce does not revoke your previous nomination. This is because you may still wish to provide for your ex-spouse and children. But you may wish to re-nominate when a divorce takes place.

If you do not make a fresh nomination after one of your nominees dies, his share will be given to the remaining nominees in the same proportion as their specified shares.

Q: Does the court have the power to make or revoke CPF nominations on behalf of a member who lacks capacity?

Under the new Mental Capacity Act, the CPF nominations rules have been amended to allow the court to make or revoke CPF nominations on behalf of a member who lacks capacity.

As such, you may want to apply for a lasting power of attorney (LPA) which allows you to plan how your affairs will be managed when you are still alive, but without mental capacity.

The LPA has to be lodged with the Office of the Public Guardian, which is under the Ministry of Community Development, Youth and Sports.

Q: How do I check if I have made a CPF nomination?

Your nomination status is indicated in the Statement of Account that you receive from the CPF Board annually. You can also check your nomination details via its website under ‘my cpf online services – my requests’, or visit a CPF centre.

Q: How do I cancel a previous nomination?

You can do so by submitting a Notice of Revocation of Nomination. Bear in mind that once you do that, your CPF savings will be distributed according to intestacy laws unless you re-nominate someone else.

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Who gets your money

If you have not made a nomination in relation to your CPF savings, they will be distributed to your beneficiaries according to intestacy laws.

This means that, if you leave a spouse with no children or parents, your spouse will get all your CPF savings.

But if you have a spouse and children, your spouse will get half of your CPF savings leaving the balance to be split equally among your children.

Source: Sunday Times, 23 May 2010

The new ceiling of the CPF minimum sum will be $123,000, up from the current $117,000.

Those who turn 55 from July 1 and do not have $123,000 can withdraw only a proportion of their CPF savings. If their balance is $5,000 or less, they can withdraw the full amount.

The latest revision is in line with the plan announced in August 2003 to gradually raise the CPF minimum sum to $120,000 by 2013, a ceiling that will be adjusted for inflation.

The aim of the change is to ensure that Singaporeans have enough savings for their retirement, the CPF Board said in a statement yesterday.

Similarly, the minimum sum in the Medisave Account will go up to ensure Singaporeans have enough savings for hospitalisation expenses.

It will be $34,500 from July 1, up from $32,000 now. Any excess amount can be withdrawn at age 55 or older. A CPF member, however, can opt to have $5,000 more than the minimum sum in Medisave.

This higher balance is referred to as the Medisave contribution ceiling and it too will be raised, from $37,000 to $39,500.

The Medisave, Special and Retirement accounts earn 4 per cent interest – higher than the 2.5 per cent paid on money in the Ordinary Account.

The CPF Board also said members who have the full CPF minimum sum will receive about $1,100 a month when they reach their draw-down age. For those who turn 55 between July 1 this year and June 30 next year, their draw-down age is 65.

Members reaching age 55 can attend one of three seminars the CPF Board is organising next month.

The seminars, to mark CPF turning 55 in July, will inform members what happens to their CPF savings when they reach 55, and they can learn about the new CPF Life scheme.

They will be held at Suntec City. The first seminar on June 26 is fully booked. The next two are on June 27.

Source: Straits Times, 15 May 2010

The prevailing CPF Minimum Sum (MS) will be raised to $123,000, up from $117,000. This is in adherence to the Ministry of Manpower’s announcement in August 2003 that the MS will be raised gradually to reach $120,000 (in 2003 dollars) in 2013.

The increase in MS, which includes an adjustment for inflation, is to ensure that Singaporeans set aside sufficient savings for their retirement.

Members who can set aside the full MS will receive about $1,100 per month when they reach their draw-down age. The new MS will apply to CPF members who turn 55 from July 1, 2010 to June 30, 2011.

In addition, the Medisave Minimum Sum (MMS) will be raised to $34,500 from $32,000. Members will be able to withdraw their Medisave savings in excess of the MMS at or after 55 years of age.

As a result of this, the Medisave Contribution Ceiling (MCC) – the maximum balance a member may have in his Medisave Account – will be increased correspondingly to $39,500, from $37,000. The MCC is fixed at $5,000 above MMS.

The CPF Board also reiterated in its announcement that any Medisave contribution in excess of the prevailing MCC will be transferred to the member’s Special Account if he is below age 55. This would go to his Retirement Account if he is above age 55 and has an MS shortfall.

The CPF Board is also launching three complimentary mega seminars at Suntec City on June 26 and June 27, in conjunction with its turning 55 on July 1.

At each seminar, members will find out what happens to their CPF savings when they reach 55, and learn about the new CPF LIFE scheme. Go to www.cpf.gov.sg for details.

Source: Business Times, 15 May 2010

The interest rate is derived from major local banks’ savings and 12-month deposit rates from Feb 1 to April 30 this year.

The rate for that period worked out to 0.41 per cent per annum.

However, those with CPF accounts receive the minimum rate of 2.5 per cent, which is mandated in the CPF Act.

For home buyers, the concessionary interest rate for Housing Board mortgage loans will remain at 2.6 per cent per annum from July 1 to Sept 30.

The rate is pegged at 0.1 percentage point above the CPF interest rate for Ordinary Accounts.

Source: Straits Times, 13 May 2010

The aim is to strengthen the message that property is an asset for one’s old age.

Prime Minister Lee Hsien Loong said this at a forum organised by REACH, the government’s feedback unit.

It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit.

Prime Minister Lee said this goes against the aim of these homes as assets for life.

“When we help people to own a home, it’s really for you for life,” Mr Lee said. “When you’re not so old, and you’ve bought the house, and now you see that the pot of gold is down there and you ignore the ‘please don’t break the glass sign’ and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?”

Hence, the government wants to strengthen the CPF route in the buying and selling of flats.

“Like what we’ve been doing with the Additional Housing Grant – that grant we give you into your CPF, you can use it to buy a house,” explained the Prime Minister.

“If you sell the house, the money goes back into the CPF. So if you’re buying another house, you can use that for another house. If you’re not buying another house, the money is there for your old age.”

On tackling income inequality, the Prime Minister said the point was not to measure the size of the gap, but to look at how the poor can be made better off.

Access to a good education and a high rate of home ownership are two of the best things the government has done.

However, Mr Lee noted there are some people who will be left behind.

“And my advice is, please try to help yourself. And particularly, please help your children to break out of this cycle,” he said. “The government will help them, but you must help them too.”

Said Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports: “It’s not just about dollars. It’s how you deliver the dollars, how you deliver assistance so that people make the right decisions for themselves and their children.

“If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can’t afford it, we will have meals delivered to you. You will get healthcare.

“Do not lose sight of the fundamentals. And I am confident that we have done our duty for the people who need our help.”

The hour-long dialogue also saw questions on the teaching of the Chinese language, and more help for singles.

In response to a question on casino entry fees, Mr Lee said the aim was not to prevent Singaporeans and permanent residents from gambling. He added that gambling was not harmful if seen as a form of entertainment, but it does become a concern when people get addicted.

The dialogue session is part of a forum on securing Singapore’s future.

Source: Channel News Asia, 27 Mar 2010

The CPF board said yesterday the interest rate as derived from those of the major local banks from August to October this year worked out to 0.42 per cent a year. But interest of 2.5 per cent will be paid, as this is the minimum rate provided for under the CPF Act.

With the Housing & Development Board, the CPF Board also said the concessionary interest rate for HDB mortgage loans will remain at 2.6 per cent a year from January to March next year.

For the Medisave, Special and Retirement accounts, the interest rate will be announced in December, after the 12-month average yield of the 10-year Singapore Government Security has been computed.

The CPF interest rate for the Special, Medisave and Retirement Accounts is pegged at one per cent above the yield rate. The current rate of 4 per cent for the October-December period will be kept as the floor until Dec 31 next year, to ‘help members adjust to this floating rate’. In addition, an extra one per cent interest will be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account.

Source: Business Times, 17 Nov 2009

In newspaper articles and on the website of the Central Provident Fund (CPF).

What does it mean?

The CPF Minimum Sum (MS) is the amount you have to set aside, in your Retirement Account (RA), for retirement needs. It need not be all in cash. Up to 50 per cent of this sum can be a property pledge.

Your RA is set up when you reach 55 and it comprises savings from your Ordinary and Special accounts.

Why is it important?

People are living longer and so need enough savings to see them through a longer retirement period.

The CPF Minimum Sum Scheme provides members with monthly payouts to support a modest standard of living in their old age.

Currently, older CPF members may participate in the CPF Life annuity scheme or buy approved life annuities with their MS to give them a guaranteed life income.

Alternatively, they may place their savings with approved banks or continue to keep the money with the CPF Board.

The MS left with the Board earns a 4 per cent annual interest rate till December next year.

The sum was set at $80,000 in 2003 and will be raised gradually until it reaches $120,000 (in 2003 dollars) in 2013.

These amounts will be adjusted yearly for inflation. The prevailing MS is $117,000.

So you want to use the term. Just say…

‘My financial adviser says I should top up my CPF Minimum Sum if I have a shortfall.’

Source: Sunday Times, 13 Sep 09