During the Singapore Budget earlier this year, an announcement was made pertaining to the Medisave Account. Starting from 1 January 2016, there will no longer be any Medisave Minimum Sum (MMS) in place for CPF members.
With 2016 approaching, we decide to revisit this change and look at how it would impact Singaporeans, especially those who are approaching the age of 55.
Scrapping Of The Medisave Minimum Sum
Under the previous scheme, CPF members would need to ensure that they have hit the MMS ($43,500 in 2015) before being able to withdraw excess funds (funds above what is set aside for the Retirement Account) from their CPF Special and Ordinary Account. If they have not hit the MMS level, they will need to provide a top-up from the other CPF accounts to their Medisave first.
From 2016 onwards, there would no longer be any MMS. Essentially, what this means is that CPF members can choose to withdraw monies from their Ordinary and Special Accounts at the age of 55 after having set aside for their Retirement Account (RA).
An Illustration
For illustration purposes, let’s assume 54-year old has the following assets in his CPF Accounts
| CPF Account | Before 55 | After 55 (Old Scheme) | After 55 (New Scheme) |
|---|---|---|---|
| Ordinary Account & Special Account | $120,000 | $26,000 | $39,500 |
| Retirement Account | $0 | * $80,500 | * $80,500 |
| Medisave | $30,000 | $43,500 (top-up of $13,500) | $30,000 (no top-up) |
| Total | $150,000 | $150,000 | $150,000 |
In our example, the individual is able to withdraw an extra $13,500 because he no longer needs to top-up his Medisave Account.
Medisave Contribution Ceiling Becomes Basic Healthcare Retirement Sum
For those of you who do not know, there is currently a Medisave Contribution Ceiling (MCC), which is $48,500 as at 2015. That means that even if you want to, your Medisave Account cannot go beyond $48,500.
Any further contributions made to Medisave after your MCC has been reached will automatically be diverted to your Special Account instead.
In true Singapore spirit, we will be renaming the MCC from one acronym to another. So we will be going from the MCC to the BHS, which stands for the Basic Healthcare Retirement. Don’t get confused; they are essentially the same thing.
One thing to note about the MCC BHS is that in order to stay relevant with the inevitable rise in healthcare cost in the future, the BHS will be reviewed and adjusted annually.
What Does All These Means To Us?
Whenever we contribute monthly to our CPF accounts, it goes into three different accounts, Ordinary, Special and Medisave. All of these accounts serve different purposes, with Medisave being used for health-related expenses incurred by the individual.
The scrapping of the Medisave Minimum Sum means that regardless of how little you have in your Medisave account, it would have no impact on the money you can withdraw from your Ordinary and Special Accounts after 55. It would require no extra top-ups; aside from the contributions it receives as part of the CPF monthly contributions when the individual is working.
Planning for our healthcare needs is an important aspect of personal finance planning. In this aspect, your Medisave Account is an independent, stand-alone account created to help cover your hospitalisation and healthcare needs.
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