Recently, I was fortunate to be invited by the Member of Parliament (MP) of Sembawang GRC Mariam Jaafar and the People Association team from Woodlands CC to share about savings and investments, from a Singaporean Muslim perspective.
As a Singaporean Muslim, we have to acknowledge that we have a unique set of beliefs especially when it comes to finance.
However, that should not stop us from integrating that with the financial schemes and initiatives that the government has rolled out for us.
What was the event about?
The focus of the event was mainly to bring awareness about the MRSS scheme and hopefully, to get the eligible people to take up the offer.
So… what is this MRSS Scheme about?
MRSS stands for Matched Retirement Savings Scheme which aims to help senior Singaporeans who have yet to meet the Basic Retirement Sum save more for retirement.
How you may ask?
For a start, this MRSS will run from 2021 to 2025.
Under this scheme, the Government will do a one-for-one matching of cash top-ups made to eligible members up to an annual amount of $600 per year, which translates to $3000 over 5 years.
How do I qualify for the MRSS Scheme?
Of course there are conditions you’ve to meet in order to be eligible for it.
Here’s a table summary:
| CPF Matched Retirement Savings Scheme (MRSS) | |
| Age | Age 55 to 70 (both inclusive) |
| Retirement Account (RA) Savings* | Less than the Prevailing BasicRetirement Sum (BRS) – The prevailing BRS for 2021 is $93,000 |
| Average Monthly Income | Not more than S$4,000 |
| Annual Value of Residence | Not more than $13,000(covers all HDB flats) |
| Property Ownership | Own not more than one property |
*RA savings refer to the cash set aside in the RA (excluding amounts such as interest earned, any government grants received) plus amounts withdrawn such as monthly payouts and lump sum withdrawals.
Is there a catch in the Scheme, if any?
Aside from the knowledge that topping up CPF is an irreversible plan till you reach the eligible age for the payout, there is nothing major I can think of.
Also, the government will only match a maximum $600 each year. Of course, there’s no stopping you to top up more than $600 if you would like to.
So what did I covered during the event?
There were 3 main takeaways I hope the audience would be able to bring home.
Firstly, treat CPF as our safety net (especially when everything else fails)
I used the same pyramid shared in this article but mainly focused on the foundation, which is the CPF component.
Think about it this way.
As we’re adulting, we may have ambitions to grow our money in many different ways.
Some might want to invest in stocks, some might prefer to do property investing, some might delve into cryptocurrencies and some might start their own businesses.
Whichever investments or asset classes you’re going for, there are different levels of risks that you need to take into account.
And because of these risks, there is a chance that you might lose the capital that you’ve invested in (or even more).
Hence regardless of which investments you’re going for, think about the worst case scenario.
That’s where CPF comes in.
As a safety net.
The fact that it is ‘untouchable’ and you do not see it in your bank account, that is a good thing.
From a Muslim perspective, think about it as your ‘halal bond or sukuk’ component of your portfolio, which is almost ‘risk-free’ as guaranteed by the AAA rating of the Singapore government while getting as high as 6% return per annum.
By the time you reach 55, you’re able to withdraw a sum of money.
And if you choose the CPF Life payout, you can get as high as $2K per month from 65 onwards till for the rest of your life, if you choose the Enhanced Retirement Scheme (ERS).
Now ask yourself.
Is having a safety net of $2K per month during my retirement years good enough?
And if your other investments worked out, that is a bonus on top of it.
Secondly, the compounding growth is the 8th wonder of the world
As someone famous once said,
Just ignore the word ‘interest’ and focus on the word’ compound’.
I showed the audience the graph below.
Assuming you have $10,000 at 55 after years of working (which is realistically possible for many, and in fact more) and having to top-up the maximum $600 on a yearly basis for the next 5 years, you will have $36,080 by then.
Think about it a second.
You’ve only contributed an additional $3,000, but you got back an additional $26,080 within 15 years instead.
For the same $13,000 kept under the pillow at home, it would still be $13,000 15 years later.
I would say, go for it – especially if that $600 cash contribution on a yearly basis is something that you do not need urgently.
And lastly, CPF monies is Halal
Interests are considered gifts from the government, as concluded by our MUIS Fatwa committee back in 2003.
Hence, our CPF monies are Halal.
I’ve also written an article about it here
I decided to take it a step further by taking into consideration if someone is still cautious about the halalness of the CPF monies.
My suggestion would be to donate it as zakat.
As mentioned on MUIS fatwa, we are obligated to donate 2.5% of our CPF monies so long the haul and nisab conditions are met.
This particularly applies to our lump sum that we may get at 55.
For example if you get a $100,000 lump sum at 55, you are obligated to pay your zakat og $2,500 (2.5%).
On the other hand, the monthly payout from the CPF Life you’re getting at 65 is not compulsory to do so as the condition of haul is not met.
However, if you would like to do so, there’s nothing preventing you from giving 2.5% of it away as zakat too.
In a nutshell…
I had interesting insights listening to some of the questions asked by the residents, and I feel there is much more room to grow in terms of awareness in maximising your CPF savings.
To learn more about this MRSS scheme, you can read up on the CPF website itself here.
Now I want to turn it over to you.
Would you recommend this scheme to your parents, makciks and pakciks?
Or do you think it is better off to keep their savings in cash?
Let me know in the comment section below.
