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Do online contribution to Medisave and get $88 Ang Bao.

Sunday, January 8, 2017


The Basic Healthcare Sum (BHS) which was known as the Medisave Contribution Ceiling (MCC) in the past has been raised from $49,800 to $52,000 in 2017. This means that we can voluntarily contribute $2,200 now. Of course, for those who are gainfully employed, this contribution will enjoy income tax relief.

For people like me whose CPF-SA has already hit or exceeded the prevailing Minimum Sum or Full Retirement Sum, this is about the only avenue we have to pump more money into our CPF to earn a 4% interest. 

Of course, for those of us whose mandatory contributions (from earned income) are lower than the CPF Annual Limit ($37,740), we can also do regular voluntary contributions for the difference, maxing out the CPF Annual Limit. The CPFB will apportion the contribution to our OA, SA and MA. How much goes into each account will depend on our age group.




I am so glad to be promoted to the next age bracket which means more of my regular voluntary contributions will go to my CPF-SA which is paid a higher interest. One of the reasons for me to be happy with ageing.

We can do a contribution to our CPF-MA online. Here is how to do it:
Go to CPF e-Cashier homepage.


Enter details and choice.


Check allowable contribution
$2,200 this time of year.

Contribute online using eNETS

It is done!

I contributed only $2,000 because that is the daily limit for me.

How much interest will $2,200 earn in a year? At 4%, that is $88.

Some people might say $88 is not a lot of money. What will AK say? It is still money and good money from the government too.


How do we build wealth through saving money? Slowly and steadily, every dollar adds up.


From my FB wall.
Don't underestimate the power of saving a few dollars a day, every day. Don't underestimate the power of compound interest.

What? Don't have $2,200 to contribute to your CPF-MA? Oh, you need the money buy your daily cup of Starbucks coffee? OK lor. You are free to choose.


I choose to have free medical insurance. It is such a no brainer.

I forgot to mention that 88 is such an auspicious number too. Huat, huat ah!
Related post:

How to get free medical insurance?

36 comments:

JD said...

Hi AK,

I had understood the Medisave account topup is counted as part of VC. If this additional topup exceeds the Mandatory Contribution limit, does that mean it will be refunded next year without interest? Thanks in advance! Having trouble calculating my room for VC.

Cindy said...
This comment has been removed by the author.
JD said...

HI AK,

I had understood top ups to Medisave is counted as VC of which maximum amount is determined by the CPF Annual Limit. How do we calculate whether this medisave topup does not exceed the CPF Annual Limit? Understood from CPF Board that any excess VC will refunded without interest next year. Asking as I think may have overcontributed VC early last year and lost out on opportunity cost. Thanks in advance!

AK71 said...

Hi JD,

Yes, it is part of the CPF Annual Limit. If we should exceed, there will be a refund next year without interest. Happened to me a couple of times before. :(

Cindy said...

HI ASSI

Chanced upon this blog and it was a shame that I didnt come across earlier. Anyhow, better late than never.

I just did a voluntary contribution to MA upon reading this and am glad that it is tax deductible. I never knew that! I only thought that voluntary SA contribution is tax deductible. I did voluntary SA contribution only last year as a way to reduce my income tax. I also did a transfer from OA to SA account to earn the higher interest, though I am didnt max the SA limit yet. One thing that I am still debating is if I should max the SA limit or continue to do voluntary contribution annually to get the tax deduction. I can save 11% tax on the $7K contribution which to me is a good deal but I am not sure if maxing out SA limit at the 4% compounding might work out to be a better deal in the later years. C

Would you care to share?

AK71 said...

Hi Cindy,

Recipient of such a contribution gets income tax relief.

You might be interested in what Venkatesan said in the comments section of this blog post:
Why worry about hitting CPF MS?

Cindy said...

HI AK

Thanks! Venkatesan has exactly the same questions as me!

K said...

Hi AK,

This is not necesarity bad..

For someone who is employed, if you contribute $37,740 into CPF Jan 2017, you will be earn the CPF interest for the whole of 2017. If you make $6k/month, it will take you 17 months to reach $37,740. My point is even if you over contribute to CPF and get a refund from CPF, you are still likely to get more interest than putting it with a bank.

By the way, does CPF refund you the following month after you exceed the Annual Limit (AL) or they will refund only in the following year?

Cheers,
K
Blogger AK71 said...
Hi JD,

Yes, it is part of the CPF Annual Limit. If we should exceed, there will be a refund next year without interest. Happened to me a couple of times before. :(

January 8, 2017 at 1:52 PM

AK71 said...

Hi K,

The following year. :)
See:
The CPF is really a national PONZI scheme!

simplyme said...

Hi AK, when will excess contributions (above the 37,740 limit) be returned? I'd made a slight excess (1k+) but haven't received the excess in my bank accts or deductions in my CPF statements (asking as u'd also made similar excess topups before). Thanks :)

AK71 said...

Hi simplyme,

It will be soon. See the link I gave K above. ;)

K said...

Hi AK,

I am curious how CPF calculates interest when the contribution amount goes above the Annual Limit. I believe it should be CPF will pay interest on the first $37,740 that is contributed into the CPF account for the year. Anything after that does not earn interest and will be returned the next year.

AK71 said...

Just contributed the balance $200. Yeah! :D

AK71 said...

Hi K,

I am inclined to agree with you.

I don't mind over contributing by a bit each year. Unlike overfilling a mug which leads to waste, at least the money is coming back to us. LOL. Less stressful this way too as I don't have to worry about being accurate in my calculations. Agar agar can liao.

simplyme said...

Eeks, feb! I shall patiently wait for my letter from CPF :) doing another VCMA end-Jan (not yet at the BHS)

Ying said...

Hi AK, I understand that VC to SA enjoys 7k tax deduction annually. If I do VC to MA, is that mean another 7k tax decution on top of the VC to SA?

ED said...

Hi AK,

I am so glad that you blog about this. I missed the announcement by CPF board. For your readers who like to read about it. The link is below.

https://www.gov.sg/~/sgpcmedia/media_releases/cpfb/press_release/P-20161129-1/attachment/CPF%20interest%20rates%20(Q1%202017)%20and%202017%20BHS%20-%2029Nov16.pdf

Actually, it might interest your readers that they will not 'only get' $88. If we compound $2,200 at 4% for 10 years, the amount will come up to $3,256.54. That's $1,056.54 Ang Bao. Or for 15 years, its $3,962.08, an Ang Bao of $1,762.08. Or for 20 years, its $4,820.47, a bigger Ang Bao of $2,620.47.

So, it really depends on the age of your reader and the time they can let the Magic of Compounding do its work.

Thanks again for blogging. You've helped this reader in many ways!

Cheers,
ED

AK71 said...

Hi Ying,

You are referring to the Minimum Sum Top Up (MSTU) to the SA. First $7K annually gets income tax relief.

If you voluntarily contribute to your MA, you will get income tax relief too. This is in addition to the MSTU to the SA. :)

AK71 said...

Hi ED,

I love compound interest but I was going for the huat factor with CNY just round the corner. LOL. Huat ah! ;p

Loser Trader said...

wah boss you account getting bigger and bigger. That's the power of compound interest. The eight wonder of the world. :)

AK71 said...

Hi LT,

The heavy lifting is done by time. I am a lazy guy. ;p

sweetcl05 said...

HI AK,

If do VC to MA where it will hit 52k, the exceed future mthly contribution to MA will go to OA or SA? Cos now all exceed MA mthly work contribution go to OA...

AK71 said...

Hi sweet,

In my case, as the SA has exceeded the full retirement sum, the MA contribution should go to the OA.

JD said...

Hello AK,

I just received a letter from CPFB today telling me that indeed I had overcontributed VC as i suspected :/

However, what i was surprised is that the amount of overcontribution is much less than what i expected. Just to be sure, i went to double checked my employer CPF contributions history for 2016 and the total 2016 Jan-Dec employer contributions (including bonuses) is more than what was stated in the CPF letter. I went to play with the numbers and the figure stated in the letter is possible if CPFB did not include the Dec contribution which included CPF for AWS. Is it possible that CPFB made a mistake in the calculation or is there some way of calculating mandatory contributions i am not aware of? Do not really want to check with CPFB in case it's really a mistake and they want to refund me even more VC XD

AK71 said...

Hi JD,

Hush, hush. LOL. ;p

If it really bothers you, then, give CPFB a call. :)

JT said...

Hi AK,

I know my mandatory contributions for the year (employee + employer) will definitely exceed the Annual Limit. Now my MA is $49800, does it still make sense for me to VC $2200 to my MA. Will the subsequent refund for exceeding Annual Limit, be to me or to my employer? Will this refund cause problem for my company's HR?

Thanks in advance,
JT

AK71 said...

Hi JT,

Wah! You have a happy problem. ;)

I don't know if your HR will black face or not. Better check with them first. :)

simplyme said...

Hi JT, i've asked CPF this before. The priority is always mandatory contributions then VC. It's not possible for mandatory contributions alone to exceed the annual limit based on normal monthly CPF contributions (since there's a salary cap on the applicable %). If say your mandatory con will definitely hit the annual limit of 37,740 then there's little in doing a VCMA unless u want to earn the 4% interest on your MA from the start of the year.

Separately, just to confirm my suspicion, you dont mean that your CPF MA contributions will reach the 52k BHS limit and not the annual limit right?

simplyme said...

Hi JD, not all CPF contributions are subject to the 37,740 annua limit. E.g. GST voucher medisave, NS home awards (medisave), etc. only working contributions are subject to the limit. I'd checked this last year as i was also worried about exceeding the annual limit due to NS home :)

AK71 said...

Hi simplyme,

Thanks for sharing. :)

"only working contributions are subject to the limit."

More accurately, Mandatory Contributions + Voluntary Contributions in a year cannot exceed the CPF Annual Limit. :)

JT said...

Hi simplyme,

Yes, I know I will hit the annual limit of 37740 within the year. With the BHS limit revised to 52k, it will be a few months before my MA hits 52k. So I intend to VC 2200 to hit 52k to earn the 4% interest from the start of the year. With my monthly mandatory contributions, my MA will overflow to SA/OA, and also eventually in the year I will exceed the annual limit. How will the refund happen, is it back to my employer since it is the mandatory contribution that trigger the hitting of Annual Limit. Dont really want to annoy the HR;-)

JT said...

Hi simplyme and AK,

Thks. Yes I will hit the AL later within the year and I am thinking of VC MA 2000 to hit the BHS upfront to earn the 4%.

Eventually the refund for exceeding the AL, will it be a refunding for the initial VC of 2000 or for the overcontributed 2000 in the last MC?

Thanks in advance,
JT

simplyme said...

Hi JT, even though your VCMA came first (before your employer's contributions), your VCMA will be the one that will be refunded without interest. Hence my previous reply that mandatory contributions always taking priority in the calculations for annual limit. This applies regardless of the order/month of contributions. If you're certain that your annual mandatory contributions from yourself/employer will definitely hit the annual limit, you wouldn't be able to take advantage of the VCMA tax relief by topping up the difference between the old and new BHS. This is usually done by those who can't hit the AL.

AK71 said...

Hi JT,

Like I said, you have a happy problem. ;p

jasper quek said...


Hi AK,
just in case if you are not aware your "self-chat" has been uploaded to following financial website.

http://cj.sharesinv.com/20170111/42755/

Regards
JQ

AK71 said...

Hi JQ,

I don't go there, actually. Thanks for letting me know. ;)

They reproduce some of my blogs in Chinese. No compensation for me but I agreed to this arrangement as it is doing something good for the Chinese educated.

I can speak Mandarin well enough. When it comes to reading and writing, especially writing, I am quite happy to let someone else do it for me. ;p

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