Every month, our CPF monthly contributions flow into three main accounts, Ordinary Account (OA), Special Account (SA) and MediSave Account (MA). For those aged 55 years old and above, we also have a Retirement Account (RA), but CPF contributions from our salary do not go into it by default.
While OA is meant for our housing, SA and RA for our retirement, our MediSave Account (MA) is focused on covering our healthcare needs.
Unlike the Basic Retirement Sum (BRS), which is the minimum CPF savings we should set aside for our retirement after pledging our property, the Basic Healthcare Sum (BHS) is the maximum amount we can set aside in MediSave. Given that there is a limit to our MediSave account, we may be wondering what happens to our compulsory MediSave contributions when we have met our BHS – since it can no longer flow into the account.
Read Also: Why You Should Top Up Your CPF Special and MediSave Accounts Rather Than Pay Down Your Home Loan?
Our Medisave Has A Basic Healthcare Sum Cap (And It Is Fixed For Life After We Turn 65)
In 2016, CPF Board abolished the need for a MediSave Minimum Sum to simplify the rules of the scheme. Instead, MediSave continued with the Basic Healthcare Sum (BHS) which is adjusted yearly for each cohort to accommodate the rising healthcare cost. Each cohort’s BHS is set at the age of 65, and will not change for the rest of our lives.
The savings in our MediSave earn a floor interest rate of 4%. From January to March 2024, we will earn 4.08% on our MA savings (as well as our SA and RA savings)
Depending on our age, the percentage contributed to MediSave varies as shown in the table below.
Source: CPF
Assuming that we continue our MediSave contributions and do not need to use our MediSave, it is likely that we will eventually hit the maximum amount we can keep in our MediSave account. This limit is known as the Basic Healthcare Sum.
With that, the current 2024 BHS is set at $71,500. This amount is expected to provide for our basic subsidised healthcare needs in our old age, as well as our MediShield Life premiums. MediSave also allows us to pay for other national insurance schemes such as CareShield Life and ElderShield Life.
Read Also: Pros and Cons of Topping Up Your CPF MediSave Account
Contributions Beyond Our Basic Healthcare Sum Flows Into Our Special Account (or Retirement Account or Ordinary Account)
In the event we have hit the BHS in our MediSave, our excess contributions and interest earned will still be kept within our CPF accounts.
Any amount beyond the BHS ($71,500 in 2024) will flow into our other CPF accounts. This measure was put in place to prevent over-savings for MediSave. The spill-over follows a specific order which depends on our age and the amount we have in each CPF accounts.
If we are above 55 years old, the excess funds would flow into our RA first. However, if our RA account has already reached the Full Retirement Sum (FRS) or we have set aside the Basic Retirement Sum after pledging our property, the excess amount will go into our OA. For example, if our RA already has the required BRS ($102,900 in 2024) after pledging our property, the excess MediSave amount would eventually flow into our Ordinary Account.
Read Also: Complete Guide To CPF Interest Rates: Ordinary Account, Special Account, Retirement Account, MediSave Account (And Extra Interest Rates)
On the other hand, if we are below 55 years old, the excess funds would flow into our SA first. If our SA account has already reached the FRS (or $205,800 in 2024), the excess MediSave amount would then flow into our Ordinary Account.
This means that our monthly contribution allocated for MediSave (around 8% to 10.5% of our salary) plus the accumulated interest of 4% per annum on our BHS can potentially be funnelled into our OA.
While the interest in OA is at 2.5% which is relatively lower than SA, RA or even MA, our OA savings can be used for other essential needs. This includes housing, healthcare, eligible insurance payments, eligible investments, and education. Additionally, once we have hit our FRS or BRS, we can withdraw the excess CPF savings once we reach 55 years old.
Read Also: What Happens To Your CPF Monies After Transferring It To Your Retirement Account (RA) At Age 55?
This article was originally published on 24 June 2021 and updated with new information.
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