Using yr CPF OA as a savings account

In CPF, Financial competency, Financial planning on 05/12/2011 at 5:49 am

If you are in a position to withdraw money at age 55 from your CPF accounts, given the pathetic S$ interest rates offered by the banks, you may want to use your CPF Ordinary Account as a savings account that pays higher than S$ bank or finance company fixed deposit rates.

But make sure you know how often a year you can withdraw your money if you want to use your OA as a savings account, or more accurately as a “betterest” way of managing your cash. The laziest way to find out is to call up the CPF help line.

You also have to be aware of the following:

THE scheme is stated in the Central Provident Fund (CPF) website.

But Mr Jerry Low, 58, was not aware of it.

So the retired bank trader got a surprise when the CPF Board transferred $10,000 into his Medisave Account (MA) without his permission, after he applied to withdraw $37,000 from his Ordinary Account (OA) in June this year.

Mr Low had chosen to not withdraw all his money from his OA when he turned 55.

He opted for a partial withdrawal, leaving some money in his OA as the CPF interest rate of 2.5 per cent was higher than what the banks were offering.

He could do this as his Medisave Account and Retirement Account (RA) had the required amount.

Since 2008, Mr Low had used his Medisave to pay for some medical expenses, whittling away his Medisave Required Amount (MRA), which was $14,000 as of Jan 1, 2008.

However, the required amount was raised to $27,500 as of Jan 1 this year [2011].

Said Mr Low: “I was shocked to find that $10,000 from my OA had been moved to my MA without my approval.

“I did not even know that the money was moved, let alone the amount moved.”

As to the danger of the government not allowing you to withdraw your money by changing the rules yet again, assess the risk of the government taking this action in the light of it only getting 60% of the popular vote in the May 2011 GE, and it’s determination to win back Aljunied. Besides, the government actions, so far, on CPF issues, are never retrospective.

As to the CPF being or going bankrupt, remember that Tan Jee Say (25% of voters voted for him at the 2011 presidential election and he was once a senior civil servant specialising in economic matters) doesn’t worry about the solvency of the CPF system. To him, the S$60bn he proposed spending on his plans was “small change”. So the CPF amount due to members, as of August 2011, S$204 billion, cannot be an issue, despite what the SDP (his ex-party) and his supporters at TR and Singapore Election Watch say. Reminder: they say that the CPF is bankrupt because of the losses at Temasek and GIC. Hence the introduction of the Minimum Sum and CPF Life Plans schemes.

Did you know that until a few years ago, once you reached 55, the staff there hassled people to withdraw their surplus funds? It happened to a friend in 2004. He told them he as a Nantah graduate and retired central bank employee, trusted the S’pore government.

Now, the staff encourage people to keep funds they don’t need in their OAs.

Aftertot 5th December 2011 at 12.55pm

See abc’s comment below. He has a point on Medisave increases. My counterpoint is that Medisave account sure to be used and anyway it attracts 4% interest a yr.

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  1. Strange?
    Actually Taxpayers’ money is our money.
    How come almost all of it becomes PAPAYA’s money?
    When you have no money in your MA think again what will happen?
    Who will pay your medical bills?
    PAPAYA or your poor children, relatives, friends and even from the public?

  2. If you leave money in OA after 55, very high chance you will not get out 100% later.

    1. Good chance you will use Medisave for medical expenses after 55, necessitating topping up of MA from OA before you can take out.

    2. Medisave Required Amount increases EVERY year on 1st Jan, in line with medical inflation during the previous 12 months. This has resulted about 5%-7% annual increase in MRA for the past few years.

    So even if you don’t touch your Medisave after 55, you will need to top up the ever-increasing Medisave Required Amount before you’re allowed to withdraw your OA.
    Unless your OA amount is large enough such that the yearly interests are sufficient to cover the yearly increase in MRA. But then, this will effectively reduce the 2.5%. Which defeats the purpose for why you left money in OA in the first place.

    Which brings me to my comment 2 articles ago….
    Dump your OA into property during your younger years when you still have steady income. Any leftover in OA just take out at 55.
    The rest of your money in CPF just let it rot inside.

    • “If you leave money in OA after 55, very high chance you will not get out 100% later.”

      i agree 100%.
      But with today bank’s deposit rates, we have very little choice.
      Like what you said, “Unless your OA amount is large enough such that the yearly interests are sufficient to cover the yearly increase in MRA.”
      Very good point.
      i believe all our PAPAYA’s will leave their CPF now when they reach 55.
      No sweat to them.

  3. […] CPF – Thoughts of a Cynical Investor: Using yr CPF OA as a savings account […]

  4. All CPF monies belong to each and every Singapore Citizen and should be paid out in full on demand when due, but it seems that this is not the case. The CPF Authorities try in all ways to manipulate with the monies to try and avoid paying out in full amount when demanded by individuals upon maturity, whereby time and again time delaying tactic was applied to withhold with all kinds of reasons given and even implemented LAWS to prevent full withdrawls. Even they have prevented the full use of your own money for each’s own medical purposes and proposed LAWS TO MAINTIAN AND BE KEPT WITH, THE MEDISAVE MONIES TILL ONE PASSES. WHAT KIND OF A LAW IS THIS, IS THIS BASED ON THE RULES OF LAW OR IS THIS LAW BEING PLUCK FROM NO WHERE AND PLANTED INTO THE SINGAPORE SYSTEM.

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