By Leong Sze Hian
The “big” news – DPS or MRA?
I refer to the article “CPF Board to distribute S$29m of surplus from DPS” (Channel NewsAsia, Dec 13).
MRA increased to $40,500
It states that “The board also said the Medisave Required Amount (MRA) will be S$40,500 from 1 January 2014, up from the current S$38,500.
MRA merged into MMS
On the same date, MRA will be merged into the Medisave Minimum Save (MMS), and be adjusted together.”
What are the implications of the above for Singaporeans?
Cohort vs Prevailing?
Well, since the MRA is on a cohort basis and the MMS is on a prevailing basis, does it mean that the sum that will be retained or transferred from the Ordinary Account (OA) to your Medisave after age 55, may increase as you get older to follow the yearly increase in the MMS?
You see, the MRA is cohort based – which means that it is fixed depending on the MRA amount when you turn 55. However, the MMS is prevailing based – which means that it will increase as you age after 55.
In this connection, the relevant extracts from the CPF web site are as follows:
MMS keep increasing after you reach 55?
“The Medisave Minimum Sum is the amount you need to retain in your Medisave Account, before any excess Medisave savings can be withdrawn, whenever you make a withdrawal of your CPF monies at age 55 and above
If you have met the CPF Minimum Sum and have a MRA shortfall at the point of withdrawal, you need to make a top-up to your Medisave Account with part of the balances from your Special Account and Ordinary Account to meet the current MRA”
Don’t withdraw what you can at 55 – beware?
I have come across people who did not withdraw their CPF amount that they were entitled to at age 55 – only to discover later when they wanted to withdraw – that the amount was reduced by the increasing MMS, i.e. more of their OA was transferred to their Medisave.
Important policy change, but hardly anybody know the significance?
Arguably, shouldn’t such an important change be at least explained to the media or announced in Parliament, instead of just a mere mention in the news together with the DPS?
When changes to the CPF Act was passed in Parliament recently, to enable the CPF Board to facilitate the making of administrative changes to CPF withdrawals more flexible – did any parliamentarians raise their concerns?
How many can meet MS and MMS?
So, how many Singaporeans who reach 55 will have the MS (currently $148,000) and MMS (currently $40,500) – making a total of $188,500?
My previous estimate was about 1 in 8 Singaporeans – maybe now it may become 1 in 9?
So, for example, if you have say $200,000 in your OA and SA, but zero in your Medisave at 55, you can only withdraw $11,500. And if you decide not to withdraw this $11,500, when you do decide to withdraw at say 60, you may not be able to withdraw anything anymore – if the MMS continues to increase at its current rate of about 7% per annum?
MMS increase again in just 6 months?
By the way, since the MMS is increased every 1 July, does it mean the now MRA merged with the MMS, may see yet another increase in just 6 months time?