Malaysians who leave Singapore for good but choose to keep their CPF savings in the city-state can look beyond CPF nominations to distribute their savings after they are gone, says EPPL’s Ooi Sen Tee.
Despite continuing pandemic-induced travel restrictions, Malaysians can now set up a Trust in Singapore without going through the hassle of cross-border travel. EPPL Digital has enabled the advent of digital Trusts for Malaysians. Those who maintain a CPF account in Singapore can consider setting up a digital Trust for their CPF savings.
Many Malaysians and Singapore permanent residents have built their careers in Singapore over many years. Many have contributed to their CPF accounts for a long time and grown a valuable Singapore dollar-denominated nest egg. When they decide to return to Malaysia for good, they will typically have to make a decision about what to do with their CPF savings.
According to CPF Board rules, when people renounce citizenship or permanent residency in Singapore, they are entitled to withdraw all the money in their CPF accounts. However, the CPF Board implements specific conditions on CPF savings withdrawal for Malaysians leaving Singapore to reside in West Malaysia, East Malaysia, and other countries. (See CPFB | Account closure by Malaysians in West Malaysia for detailed information.)
Keeping CPF funds in Singapore
Now, there are those who may wish to maintain their CPF savings as status quo and may not opt to withdraw their CPF savings after renouncing their citizenship or permanent residence status. This makes financial sense, especially amid the current global economic uncertainties, persistently low-interest rates, and volatility in foreign exchange markets.
The Monetary Authority of Singapore, however, is committed to keeping the Singapore dollar stable, which helps to make CPF savings a safe-haven asset. Another plus for CPF savings is that they can earn account holders higher interest than they would receive from bank deposits, while returns are relatively risk-free. Hence, CPF savings can be considered a growing portfolio with compounding effects, and without taking unnecessary risks.
Rationale for establishing a Trust for CPF savings
When a person is leaving Singapore for good, it is important to plan for eventualities. Part of the person’s estate, namely his CPF savings, will now be in a foreign country. If the person has drawn up a Will, it cannot cover CPF savings as CPF nominations are the only way to ensure that CPF savings are distributed efficiently to intended beneficiaries.
With a Trust, the distribution options are expanded. CPF account holders can put in instructions via a Trust to pay out their CPF savings over a period of time, at a frequency that suits the beneficiaries’ circumstances, or at a later vesting age. This can largely address concerns that arise from potential squandering, poor money management, and other inheritance pitfalls. The trustee, whoever is appointed, can hold the CPF savings in trust or as a means of asset diversification. At any time, the money could be transferred from Singapore to a Malaysian account.
These are some of the benefits of a digital Trust that a Malaysian can set up in Singapore remotely. The two-year pandemic has accelerated many digital initiatives across industries, and digital Trust is just one of these initiatives. With ProviTrust and online nominations, Malaysians who wish to maintain their CPF accounts in Singapore can now better plan the distribution of their CPF savings to their loved ones.
Find out more about digital Trusts at digital@epplasia.com or contact us at info@epplasia.com
The above article first appeared on EPPL’s The Custodian, Issue 21.
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