Why CPF Policies Make the
Rich Richer?
#1. First obvious CPF Policy
to make the rich richer is CPF@55
loophole/HACK where the rich can stop CPFB from transferring their
Special Account (RA) monies to Retirement Account (RA) at 55.
Ms
Lorna Tan shared her exploitation of this loophole in the Sunday
Times on October 20, 2019.
If you read the CPF FAQ on
CPF withdrawal rules and its rationale carefully, you will notice
that there is a conflict of interest by CPFB Policy writers. Below is
extracted from the CPF website:
CPF rule quote:
"The
savings in members’ various CPF accounts attract different interest
rates according to whether they are long term
or short term funds. .......
When
members turn age 55, their Special Account savings up to the
Full Retirement Sum, is transferred and set aside in the Retirement
Account, to provide them monthly payouts to supplement their living
expenses when they reach their payout eligibility age. The
remaining savings in the Special Account become withdrawable at any
time. Strictly speaking,
the withdrawable Special Account savings should attract a lower
interest rate. This explains why when members make a
withdrawal, the monies from the Special Account will be deducted
first before the Ordinary Account."
CPF
rule unquote.
So
"Strictly speaking", CPFB should not allow this SA
Hack to happen at all, unless there is a conflict of interest. But
they are aware of this big loophole they created and allow only those
who know and have built their monies in SA/OA to stop CPF from
transferring their SA monies to RA.
Consequently these group of Rich
CPF members continue to earn high interest rates of 4% on their SA
which they make it their long term funds, instead of short term funds
(which CPF is aware but close one eye). Again making the rich
richer!
So
what should CPFB do, strictly speaking?
Drop the SA interest to 2.5%
after 55 so these group of Rich members will not be “siphoning”
Singapore's investments/tax reserves/whatever you call it, earning at
higher interest rate of 4% forever, at the expense of the less able???
#2. CPF rule for
accounting/handling of monies in excess of Medisave Account Ceiling
(ie BHS). Those rich will continue their annual direct cash topup
to the MA to get annual annual tax relief plus push their MA to
above BHS so that the excess monies will overflow to their SA. This
continues to earn 4% interest and help them to do their SA Hack
explained in #1 above. (If their SA hit the FRS, the monies will
overflow to OA). Making the rich richer and richer at 55. (triple
benefits to make the rich richer?)
Today in the Straits Times
forum, a reader who is self employed “complain” about this
overflow accounting rule for MA (BHS). So to stop the rich from
getting richer, should CPF stop the overflow rule for MA until after
65?
#3. Those who are rich
can do direct cash topup to their SA to earn 4% compound interest
until 55 and get annual tax relief. Helping them to prepare monies
to do the Hack in #1 (triple benefits to make the rich richer!)
#4. Those rich can play
with their parents RA account to earn up to 6% interest and
potentially withdrawing their OA balances earlier than allowed thru
their parent's RA monthly payout. They can then continue to put this
mthy payout back into their parents RA account (if still got ERS
limit) potentially increasing the mthly payouts and earn more
interest.
What other CPFB rules make
the rich richer?
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