In Singapore, the Central Provident Fund (CPF) serves as a safety net for supporting retirement, healthcare and housing.
While we dutifully contribute to our CPF accounts, there’s one aspect that often goes overlooked: CPF nomination.
This guide aims to shed light on the importance of CPF nomination and how it can ensure peace of mind for you and your loved ones.
What is Central Provident Fund?
The Central Provident Fund (CPF) stands as Singapore’s mandatory social security savings scheme, ensuring a robust financial foundation for Singaporeans and Permanent Residents.
Upon reaching 55, you gain the flexibility to make partial withdrawals, provided you’ve set aside a designated amount known as the Full Retirement Sum (FRS) or Basic Retirement Sum (BRS) with a property pledge in your Retirement Account. The subsequent stage, at 65, marks the commencement of monthly payouts.
The CPF consists of three main accounts:
Ordinary Account (OA)
Primarily used for housing, investment, insurance, and education.
Medisave Account (MA)
Set aside for hospitalisation expenses and approved medical insurance.
Special Account (SA) / Retirement Account
Geared towards retirement savings. Funds from the SA are transferred to the Retirement Account once an individual turns 55.
To ensure that your CPF savings goes to the right people after you pass away, it is important to make a CPF nomination. CPF savings are different from other assets and are not automatically covered by your Will or inheritance laws. If you do not make a nomination, intestacy laws may apply, which could cause delays and disagreements among your heirs.
Unveiling the Importance of CPF Nomination
The act of making a CPF nomination transcends a mere formality; it’s a strategic move that shields your savings from the complexities of intestacy laws or the Inheritance Certificate for Muslims.
Without a CPF nomination, the path to distributing your funds becomes a labyrinth, introducing unnecessary complications for your loved ones. Worse still, this lack of direction may lead to a distribution misaligned with your true intentions.
A CPF nomination serves as a guardian of your wishes, ensuring:
In the absence of a CPF nomination, your savings in the fund will be subjected to intestacy laws or the Inheritance Certificate for Muslims. This not only complicates the process for your loved ones but also means that the distribution might not reflect your true intentions.
Moreover, a CPF nomination ensures:
- Your CPF savings are distributed timely without delay.
- Your exact wishes regarding the distribution are followed.
- Clarity in distribution, ensuring harmony among loved ones.
Who Can You Nominate?
Your CPF nomination isn’t limited to immediate family members. You have the liberty to nominate:
- Any individual, regardless of their relationship with you.
- Any organisation, including charitable entities.
- As many beneficiaries as you wish, specifying the exact share for each.
How to Make a CPF Nomination
Making a CPF nomination is essential in prudent financial planning in Singapore. It ensures that your CPF savings are distributed in accordance with your wishes upon your demise. Thankfully, the process has been made straightforward by the CPF Board, allowing you to make informed decisions about the future of your funds. Here’s a step-by-step guide to help you through the nomination process:
Determine Your Eligibility:
Before you can make a CPF nomination, ensure you meet the basic criteria:
• You must be 16 years of age or older.
• You should be of sound mind, meaning you fully understand the implications of your nomination.
Decide on the Type of Nomination:
There are three main types of CPF nominations:
• Cash Nomination: Your nominees will receive the CPF savings in cash.
• Enhanced Nomination Scheme (ENS): This scheme allows you to specify the accounts (OA, SA, MA) into which you want the CPF savings to be credited for each nominee.
• Special Needs Savings Scheme (SNSS): This is designed for parents with special needs children, ensuring they receive CPF savings regularly as a source of financial support.
Choose Your Nominees:
You have the freedom to nominate any person, organisation, or even a non-profit entity as your beneficiary. Be precise about the names to prevent any future disputes. You can also specify the exact percentage of your savings each nominee should receive.
Fill Out the CPF Nomination Form:
The CPF nomination form can be obtained:
• From any CPF Service Centre.
• Online, through the official CPF website.
Complete the form with accurate details of yourself and your nominees.
Witnessing the Nomination:
Your CPF nomination must be witnessed by two individuals. These witnesses must be:
• At least 21 years old.
• Neither should be beneficiaries in the nomination you’re making.
• Both witnesses must be present when you sign the form.
Submitting the Form::
• If you’re completing a physical form, submit it to any CPF Service Centre.
• For online submissions, follow the instructions on the CPF website. This method often requires authentication via SingPass.
Once the CPF Board processes your nomination, you will receive a notification confirming the successful registration of your nomination.
Review and Update:
Life circumstances change. Whether it is the birth of a new family member, marriage, or other significant life events, it is advisable to regularly review your CPF nomination. If necessary, you can make changes to reflect your current wishes.
What Happens If I Do Not Make a CPF Nomination?
If no CPF Nomination was done, your CPF savings will not automatically go to your chosen recipients. Instead, they’ll be distributed according to Singapore’s intestacy laws.
For non-Muslims, it follows the Intestate Succession Act, and for Muslims, it’s based on the Inheritance Certificate (Faraid).
This process can be slow. Without a nomination, your CPF savings don’t go through your Will and aren’t part of your estate. Instead, the CPF Board releases funds to the Public Trustee’s Office (PTO) for distribution. The PTO then takes charge of finding your rightful beneficiaries. This can take a while, especially if there are disputes. Plus, when the PTO handles distribution, there’s an administration fee, which varies based on your CPF savings. With a nomination, you can skip this process and avoid the extra cost.
The Legacy of Thoughtful Planning
While making a CPF nomination might seem like an optional step in your financial journey, the implications of skipping it are significant.
Ensuring this legacy is passed down smoothly, just as you envision, is an act of care and responsibility. The decisions you make today, from CPF nominations to other Estate Planning measures, resonate into the future, shaping the lives of those you cherish.
At PreceptsGroup, we understand the complexities of wealth distribution, succession, and estate administration. Our commitment is to provide tailored solutions, safeguarding and preserving your legacy.
With our expertise in Estate Planning, you can confidently stride into the future, knowing your wealth and your loved ones are in capable hands.
Secure your legacy with PreceptsGroup.