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Tax relief widened in CPF top-up scheme

Tax relief for top-ups to the Central Provident Fund (CPF) accounts of members’ parents-in-law and grandparents-in-law will be granted starting next year.

Currently, CPF top-ups can only be made to the accounts of spouses, siblings, parents and grandparents.
Under the Minimum Sum Topping-Up (MSTU) Scheme, CPF members may get tax relief of up to S$7,000 if they make their top-ups in cash. Together with cash top-ups into one’s own CPF account, members can enjoy up to $14,000 tax relief.

In response to requests from the public, by January next year, members will also be able to make cash top ups to the special or retirement accounts of their parents-in-law and grandparents-in-laws.

Minister of State of Manpower and National Development Tan Chuan Jin, who announced the move on Thursday, said the CPF Act and Income Tax Act would be amended later this year to effect the change.

Speaking at a conference on “Improving Retirement Security in Singapore”, Tan noted that Singaporeans’ longer life span due to better health and nutrition means that a substantial proportion of CPF members today and in the future are likely to outlive their CPF savings if they remain on the Minimum Sum Scheme.

Government statistics showed that half of Singaporean residents aged 55 in 2010 will live to be at least 85 years old, while a third will live to 90 years or more, he said.

“The increasing life expectancies mean that we need to change how we draw down on our savings in retirement,” he noted.

He cited the government’s recent initiatives to tackle the issue. In February, the Silver Housing Bonus and the Enhanced Lease Buyback Scheme were introduced to help elderly homeowners defray the costs when moving to a new home.

Last month, the number of plans offered under CPF LIFE, which was designed to give members a monthly income in retirement years for as long as they live, was cut down to two from four. The move was to make it simpler for members to choose the LIFE plans to best met their needs, Tan said.