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Why CPF Policies Make the Rich Richer?


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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