I discovered that individuals had been exploiting a loophole within the CPF system again in 2017 and on the time, some individuals advised me it wasn’t a loophole and that it was working as supposed.
I’m referring to what’s popularly often called “CPF Shielding” the place members who’ve ample funds of their CPF OA drain their CPF SA funds simply earlier than turning 55 years previous in order that their CPF RA shall be made up of cash from their CPF OA as a substitute.
Shortly after turning 55, they may refund cash to their CPF SA in order that they may take pleasure in larger curiosity earnings from their CPF financial savings general.
This to me has at all times gave the impression of a loophole because the CPF is supposed to assist the plenty and specifically poorer CPF members.
For this reason there’s a restrict on CPF annual contribution.
For this reason we can not do CPF SA prime ups as soon as the prevailing FRS is hit.
For this reason upon turning 55 years previous, the primary 30K of our CPF financial savings enjoys further 2% curiosity and the following 30K of our CPF financial savings enjoys further 1% curiosity.
That is to assist members who’ve decrease CPF financial savings with retirement funding.
The CPF system will not be meant to make the wealthy richer.
CPF members who’re in a position to do “CPF Shielding” are those that are higher off financially and so they shouldn’t be overly reliant on the CPF to fund their retirement.
I do know many wealthy individuals who want to park more cash of their CPF accounts however they aren’t allowed to.
Let the CPF system assist those that want the assistance most.
Sadly, fairly often, individuals who want the assistance most are essentially the most cussed.
They’d resist the CPF system as a substitute of constructing use of the system to assist themselves.
I mentioned this in 2018 in reply to a reader’s touch upon “CPF Shielding” right here:
“The extra individuals discuss this, the extra individuals do that, the extra this loophole could possibly be plugged.”
AUGUST 17, 2018 AT 5:44 PM
It appears that evidently that is lastly taking place.
“The times of exploiting loopholes within the nationwide retirement scheme could possibly be over quickly, after the Central Provident Fund (CPF) Board posted a warning on its web site.
“Specifically, it’s taking purpose on the act of “shielding”, which is promoted by some monetary advisers to avoid the switch of funds from members’ Particular Account (SA) to their Retirement Account after they hit 55.”
The final time I blogged about “CPF Shielding” was in December 2019.
I nonetheless assume that the CPF will be our greatest pal in our golden years however our greatest pal doesn’t respect being exploited. 😉