Understanding CPF
How Will The Basic Healthcare Sum (BHS) Affect Me?
We work every day and at the end of the month, we receive our wages. And part of the wage that we receive will be contributed to our CPF accounts. The MediSave account is one of the three accounts that the majority would have.
The Basic Healthcare Sum (BHS) will come into the picture when mentioning the MediSave account. Scroll down further and read more on the BHS.
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Explaining BHS
Imagine you have a plastic container. And your plastic container does have a limit. Put in water and you can only fill it up only to the brim. Any water above that will overflow.
Hence, the BHS is like the limit or the brim of your MediSave account. And the water is the CPF contribution.
The BHS is like a minimum that you should have in your MediSave account so that it would be enough for you during your retirement years.
The BHS will increase every year by approximately 5%. Therefore, even if you might have reached the BHS for this year, you would need to achieve a new BHS for the following year.
Upon reaching the age of 65, you will “hold on” to the BHS of that year forever.
Say for example:
What if you have reached your BHS?
You are doing well and at the same time, you are contributing quite a huge amount to your own CPF account.
Eventually, you will reach the BHS. And the question is, what happens to the excess amount after you have reached the BHS. Refer to the graphic below.
If the BHS for that year is at $57,200 and the amount that you have in your MediSave account is $60,000, you definitely have reached the BHS.
Thus the excess amount above your BHS will be transferred to your Special Account. That applies if you are below the age of 55.
The excess will be transferred to the Retirement Account if you are at the age of 55 and above.
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What can I do with my MediSave actually?
As you might know, there are limitations when it comes to using your CPF MediSave account. You can only use the money in the MediSave for only a few things.
The list of allowable hospital bills can be found on the Ministry of Health website.
https://www.moh.gov.sg/cost-financing/healthcare-schemes-subsidies/medisave
It does include both inpatient and outpatient expenses.
Paying for health insurance will include both the premiums for MediShield Life and even your Private Medical Insurance (also known as Shield plans).
Fortunately, you can fully pay your MediShield Life with your MediSave. On the other hand, there are limits on paying premiums for your Private Medical Insurance.
The annual limit will depend on the age of a person.
Age 1 – 40: $300
Age 41- 70: $600
Age 71 – 100: $900
Paying for long-term care insurance will include paying for the Eldershield and Eldershield supplement schemes.
You can fully pay for your Eldershield premiums but not for the Eldershield supplement. There is an annual limit of $600 to pay for your Eldershield supplement.
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More for retirement
Like mentioned above, in a case where you have reached your BHS, the excess will be transferred to your Special account.
The Special account is mainly kept for your retirement. You can also use it to invest.
Thus, with the excess money that you got from your MediSave account, you are able to compile more for your retirement.
Eventually, when you reach your Payout Eligibility Age, you will receive higher monthly payments. That would definitely be a good situation to be in.
That comes to the end of this article. Hope that this is beneficial for you and do share it with your family friends. Till next time.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
