Personal tax planning 2: CPF Cash Top-up


Welcome to part 2 of my basic personal income tax planning series! In this series of posts I hope to cover the following topics:

  1. Tax reliefs
  2. CPF Cash Top Up
  3. Supplementary Retirement Scheme
  4. Bringing it all together – How to best utilise these reliefs to your advantage

In this part, I will cover how topping up your CPF can be used as a tool to mitigate your tax bill. As mentioned in Part 1, there are 2 ways to top up your CPF to obtain reliefs:

  1. Top up your / your family member’s Special Account (SA) / Retirement Account (RA)
  2. Voluntary contributions to your Medisave Account (MA)

Topping up of SA / RA

The Retirement Sum Topping Up Scheme (RSTU) allows you to top up your / your family member’s SA / RA with cash gives you a dollar for dollar tax relief of up to $14,000 ($7,000 for your own account, $7,000 for your family member’s account). The amount of relief you will obtain is subject to the following limit on cash top-up as well:


Source: IRAS

The current FRS for 2018 is $171,000, this cap will be readjusted annually until you turn 55.

Do note that tax relief for topping up your spouse or sibling’s SA / RA is only applicable if he / she had $4,000 or less income (including tax exempt income like interest and SG dividends) in the Year of Assessment.

Voluntary contributions to your MA

There are 2 ways to perform voluntary CPF contributions annually:

  1. Contribute generally to your CPF OA, SA and MA accounts in accordance with prevailing allocation rates.
  2. Contribute specifically to your MA.

The advantage to contributing specifically to your MA vs general voluntary contributions is the dollar for dollar tax relief given for contributing to your MA. The amount of tax relief is limited to the lowest of the following:

  1. Voluntary cash contribution to your MA; or
  2. Annual CPF contribution cap (currently $37.740 p.a.) less mandatory contributions
  3. Prevailing Basic Healthcare sum (currently $54,500) less MA balance before voluntary contributions

Pros and Cons of Contributing to your CPF SA / RA / MA

Topping up your CPF accounts is non-refundable and you should take the requisite time to weigh the following before acting:

Pros and Cons

Some people say that you can view your CPF SA and MA contributions as investing in a 30 year Government Treasury yielding minimum 4% and they do it in place of the bond component in their investment portfolio. For me, I’ve yet to voluntarily contribute to my CPF as I’m not at a high income tax bracket currently and I wish to retain the flexibility of capital to deploy opportunistically. Whether you choose to contribute or not is very much dependent on your tax situation and risk appetite. I will elaborate on this in my final post of this series.

Contribute to SA or MA?

There is no specific advantage of topping up your SA over contributing to your MA as both earn 4% in interest p.a. and both give the same amount of dollar for dollar relief (subject to caps). It depends on your personal preference, bearing in mind the purpose of the SA and MA.

The SA is set up specifically for your retirement. You can use the funds for the CPF Investment Scheme (CPFIS) if you have a minimum balance of $40,000 if you choose to. When you turn 55, the FRS is deducted first from your SA and if insufficient, then from your OA. The funds are transferred to your RA to fund CPF Life.

The MA is used mainly to help fund healthcare costs and pay for Medishield Life and your Integrated Shield plans. The money will stay there and not be used to fund your retirement, be it via cash withdrawal at 55 or to fund CPF Life.

As such, ultimately you have to decide for yourself – fund my retirement or fund my medical / insurance bills?


Contributing to your CPF is a tool you can use to mitigate your tax bill with some planning. It has however, many facets to consider prior to contributing, over and beyond just tax benefits. I will discuss how to best utilise this tax relief in the final post of this series.

Till my next post in this series on the Supplementary Retirement Scheme.

Happy Hunting,


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