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You asked us what are some of the pros and cons of transferring money from your CPF Ordinary Account (OA) to your CPF Medisave Account (MA).
Here is the result of our research.
If would like to know what is your Medisave Account for, click HERE.
But, long story short:
You can use it to pay for your medical bills, family members’ medical bills, as well as pay for medical insurance schemes like MediShield Life.
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So why would anyone want to transfer money from your CPF OA to CPF MA, here are some of the reasons.
1. Extra interest
CPF (OA) pays 2.5%+ interest per year.
CPF (MA) pays 4%+ interest per year.
Just moving money from your OA to your MA gives you extra 1.5% interest per year.
2. Has a cap
Your MA savings is subjected to a cap, known as the Basic Healthcare Sum (BHS).
As of 2021, the BHS is set at $63,000 for those 65 years old and below.
Any amount that is in excess of your BHS will flow over to your
- CPF Special Account (SA) – if you are below 55 years old
- CPF Retirement Account (RA) – if you are 55 years old and above
So, technically, your CPF MA money is not a bottomlessly pit where money keeps going in without no way to take out unless you are hospitalised
Your CPF MA will reach a cap, after which money will flow into your CPF SA or CPF RA, where it can be withdrawn (if other conditions are met of course 😉)
For more information on the BHS, click HERE.
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While you will get higher interest by making the transfer, there are also cons associated with it.
Here are the cons of transferring money from your CPF OA to CPF MA.
1. One-way street
You cannot un-do the transfer.
Once you transfer from your CPF OA to your CPF MA, you cannot transfer it back from your CPF MA to your CPF OA.
2. No tax benefits
If you do a voluntary CPF MA top-up using cash, the amount that you top up is tax deductible.
However, if you transferred it from your CPF OA to CPF MA, there is no tax benefit.
3. Less ways to use your funds in CPF
If you kept the money in your CPF OA, you can use it for housing, education, insurance premiums, and other purposes.
But if you transfer the money to your CPF MA, you can only use it for medical purposes or to pay for medical insurance premiums.
If you are currently paying your home loan using CPF, if you make a transfer to your CPF MA and cause your CPF OA to have insufficient funds to pay your monthly mortgage, then you might have to pay your mortgage in cash.
In which case, it might be better if you just top up cash into your CPF MA (since this is tax deductible) while paying your mortgage is not.
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There’s no one-size fits all solution.
For example, if you got sufficient funds in your CPF OA to pay your mortgage, and would like to grow your CPF MA faster and maximise the interest you are earning from CPF, then you can consider making the transfer.
But, there is no hard-and-fast rule.
Whether or not to transfer the money from your CPF OA to your CPF MA, depends heavily on your circumstances.
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