Effective Jan 1, 2019 the Basic Healthcare Sum (BHS) has increased from S$54,500 to S$57,200. Funds in the Medisave Account (MA) and Special Account (SA) earns 4% p.a, while funds in the Ordinary Account (OA) earns 2.5% p.a.
Assuming you have hit the $54,500 limit in 2018, we can take the opportunity to top up $2700 to our Medisave Account by this month using cash to leverage on the following benefits:
- Tax deductions if you use cash to top up your MA. Note the annual cap on CPF deductions, so if your income is over the limit, voluntary MA contributions will not bring tax benefits.
- When your MA has been maxed out, your monthly CPF contribution from your salary and employer will flow over to your SA. This account also earns you an interest of 5% p.a. Once your SA has met the met the Full Retirement Sum (FRS), the funds will flow over to your Ordinary Account, which earns you a 3.5% interest rate p.a.
In summary, whenever the government increases the Basic Healthcare Sum, quickly max out your MA in Jan (if you haven’t hit the CPF income limit), then the SA in Jan too.
Jan 29, 2019: Updated some details after speaking with IRAS. I realize I am over the CPF income cap, so I won’t be doing this in the future.