SINGAPORE: The Minimum Sums for both the CPF and Medisave accounts are set to be raised.
CPF members who turn 55 between this July (2012) and June next year (2013) will have to set aside S$139,000, up from the S$131,000 in 2011.
The CPF Board and Ministry of Manpower (MOM) said the amount has been adjusted over the years to account for inflation, longer life expectancies and Singaporeans’ rising expectations of their quality of life after retirement.
They said that since 2004, the MS has been increased by S$4,000 each year to reach S$120,000 in 2013, as recommended by the Economic Review Committee in 2003.
The actual increases in MS are also adjusted for inflation each year.
The S$120,000 target in 2003 dollars is effectively S$120,000, adjusted for inflation between 2003 and the time the target is met.
Doing so preserves the real value of the target.
Based on 2011 inflation and incorporating the annual S$4,000 (in 2003 dollars) adjustment, the increase in MS due this year would have been S$12,000, which is relatively large compared with previous years.
The Medisave Minimum Sum (MMS) will also be raised from S$36,000 to S$38,500 from July 1 — making it an increase of 7 per cent.
The ministry said the move will help Singaporeans plan for their long—term healthcare needs.
The CPF Board and MOM said they’ll spread out the remaining MS increases needed to reach their S$120,000 target over a longer period of four years.
This means they’ll reach the target in 2015, instead of 2013.
With this change, the 2012 MS will be S$139,000, an increase of 6 per cent, or S$8,000, over 2011.
Without the change, the 2012 MS would have been S$143,000, or a 9 per cent increase, over 2011.
Changes will also be made for contributions to the Medisave Minimum Sum (MMS) to help Singaporeans plan for their long—term healthcare needs.
From July 1, the MMS will be raised to S$38,500, from S$36,000 — an increase of 7 per cent.
The MMS is the amount that a person who turns 55 needs to set aside for hospitalisation expenses in subsidised Class B2 and C wards, subsidised outpatient treatment for selected chronic conditions and basic MediShield and ElderShield premiums.
Members will be able to withdraw their Medisave savings in excess of the MMS at or after age 55.
Another change — also from July — is in the Medisave Contribution Ceiling (MCC).
It’s the maximum balance a member may have in his Medisave Account.
This is set at S$5,000 above MMS and would be increased correspondingly to S$43,500, from S$41,000.
Any Medisave contribution in excess of the prevailing MCC will be transferred to the Special Account if the member is below age 55, or to his Retirement Account if he is above age 55 and has a MS shortfall.
In a blog post, Minister of State for Manpower Tan Chuan—Jin said that the minimum sum exists to help Singaporeans set aside enough to meet a basic level of needs in retirement.
That sum needs to be adjusted to account for inflation and also members’ growing expectations of their quality of life during retirement.
Mr Tan added that it is encouraging to note that despite the rising minimum sum, the percentage of active CPF members meeting their minimum sum at age 55 has improved over the years.
In 2011, nearly one in two CPF members (45 per cent) met their minimum sum, compared to about two in five members in 2007 (36 per cent).
He added that among those starting work now, about 70 to 80 per cent should be able to attain the current level set for the minimum sum in cash (adjusted for inflation), by the time they retire, even after they have withdrawn money for a home.
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