Singapore Budget 2024: Closure of SA account, MediSave top-ups and ABSD changes

From the closure of CPF SA for those 55 and above to ABSD concession for seniors, here are the CPF and property tax changes announced in Budget 2024.

In his Budget 2024 speech, DPM Lawrence Wong announced several major changes to CPF and property tax, including some that have raised eyebrows. 

In this article, we’ll give you an overview of all the CPF and property tax-related changes announced in Budget 2024.

Table of contents:

• Changes to CPF accounts
  • Closing of CPF SA
  • Increase of CPF ERS
  • Additional 1.5% in CPF contribution rates
• CPF top-ups
• Home ownership
  • Changes in property tax
  • ABSD changes
  • BTO flats

Changes to CPF accounts

Perhaps the biggest surprise made in DPM Lawrence Wong’s Budget 2024 speech was the closure of the CPF SA for those aged 55 and above from 2025 onwards.

For context, savings in the CPF Ordinary Account (OA) will earn an interest of 2.5% p.a., while savings in the CPF Special Account (SA) and Retirement Account (RA) will earn an approximate interest rate of 4% p.a.

1. Closing of CPF Special Account (SA)

The amounts in your CPF SA — meant for retirement and investments — will now be transferred to your CPF Retirement Account (RA), up to the Full Retirement Sum (FRS). Any remaining CPF SA savings will be transferred to your CPF Ordinary Account (OA).

For the uninitiated, when you turn 55 years old, your CPF RA will be formed. As the name suggests, your CPF RA is meant for your retirement, and savings from your CPF SA, followed by your CPF OA, will be transferred to your newly opened CPF RA. The amount transferred to your CPF RA is capped at the FRS, which will be S$213,000 in 2025. The FRS is two times the Basic Retirement Sum (BRS). 

According to the CPF Board, the FRS serves as an ideal point of reference of how much you need for your retirement. The amount in your CPF RA will also determine your future monthly payouts when you reach 65 years old. 

Since both the SA and RA currently earn 4.08% p.a., which is higher compared to the OA’s 2.5% p.a., savvy CPF members who want to maximise their CPF savings employ the CPF SA Shielding strategy before they turn 55. 

This is done by withdrawing the money from their CPF SA to invest under the CPF Investment Scheme (CPFIS) and liquidating it afterwards so that they can enjoy better rates. By doing so, this allows more funds in CPF OA to fund CPF RA rather than CPF SA, thus ensuring that more of their CPF money earns 4.08% p.a. rather than 2.5% p.a.

(That said, keep in mind that you can’t completely deplete your CPF SA savings for investments, as you must retain at least S$40,000 before you can invest under the CPFIS. Likewise, the first S$20,000 in your CPF OA is also ineligible for investments. Also, you can’t transfer funds from your CPF OA to your CPF SA once you turn 55.) 

The closure of the CPF SA thus effectively closes this loophole. CPF members who currently have their SA funds in other investments will also see the proceeds returned to their RA or their OA if the FRS has been reached.

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2. Increase of the CPF Enhanced Retirement Sum (ERS) from 2025

The ERS is the maximum amount CPF members can put into their CPF RAs to accrue interest and receive payouts. Currently, this amount is set at three times the BRS, but as announced in Budget 2024, it will be quadrupled from 2025 onwards. 

According to DPM Lawrence Wong, this will allow CPF members 55 years and above to commit to their accumulated CPF savings to receive higher payouts. With this change, the ERS in 2025 will be capped at S$426,000, up from the current S$319,500. The higher ERS ceiling translates to bigger CPF LIFE payouts during your golden years. 

For example, a CPF member turning 55 in 2025 will be able to receive monthly payouts of S$3,330 instead of S$2,530 from the current ERS. 

However, if you’re 55 and above, you can still maximise the interest earned in your CPF RA by transferring your CPF OA savings to your CPF RA at any time, up to the ERS. 

Aside from that, you can also make cash top-ups to your CPF RA via the Retirement Sum Top-Up (RSTU) scheme, up to the ERS, for higher CPF LIFE payouts. 

For those below 55, there are three ways you can boost your CPF savings and reach your retirement sums faster:

1. Transfer your CPF OA savings to CPF SA (which earns a higher interest). But note that this is irreversible
2. Make voluntary contributions to your/ or family CPF SA accounts via the RSTU scheme. This also allows you to enjoy up to S$16,000 in tax reliefs in a year
3. Invest your CPF OA and SA funds in CPFIS for potentially higher returns. Investment instruments that you can invest in include stocks, unit trusts, ETFs, bonds, fixed deposits, ILPs, annuities, and T-bills. 

3. Additional 1.5% in CPF contribution rates

To support the retirement needs of seniors, the CPF contribution rates for those aged 55 to 65 will also increase by a further 1.5% from 2025 onwards. 1% of the increase will be contributed by workers and employers will contribute the other 0.5% of the increase. 

This is in line with the recommendation from the Tripartite Workgroup on Older Workers in 2019, where the government announced that the CPF contribution rates will be raised gradually each year until 2030 for workers 55 to 70 years old. 

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CPF top-ups

To support the seniors, the government has also announced that they will be giving a one-time retirement savings bonus of between S$1,000 and S$1,500 to those whose retirement savings fall below the BHS.

On top of that, a one-time MediSave Bonus will be given to those born in 1983 or earlier. Young seniors with lesser means will be given S$1,500, while the rest will receive S$750.

Meanwhile, all Singaporeans aged between 21 and 50 will also be given a one-time MediSave Bonus ranging between S$100 and S$300, which will be paid in December 2024.

Home Ownership

Changes in property tax

DPM Lawrence Wong also announced that the government will raise the AV band threshold to alleviate the cost of home ownership. 

From 2025, the lowest AV band threshold will be raised from S$8,000 to S$12,000, while the highest threshold will increase from over S$100,000 to over S$140,000.

As such, homeowners, namely young households of owner-occupied properties, can expect to pay the same or lower property tax at each band, assuming there’s no change to their AVs and before any rebates.

Property tax is a tax that’s calculated based on the AV, which is the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings, and maintenance fees. 

It’s determined based on the estimated market rentals of similar or comparable properties and not the actual rental income received. As such, property tax is levied on both owner-occupied and non-owner-occupied properties, regardless of whether they’re vacant or rented out.

Prior to the COVID-19 pandemic, most properties had an AV of S$30,000 which meant the homeowners only paid 4% of property tax. 

However, with the surge in rents due to strong demand and construction delays caused by the COVID-19 pandemic, saw AVs increasing as well, resulting in higher property taxes for homeowners.

In Budget 2022, the government announced a two-step increase in property tax in the form of a wealth tax on investment and higher-end owner-occupied properties, which took place in 2023 and 2024. 

But while the government expected the changes to affect the top 7% of owner-occupied properties, the growth in rental prices saw AVs increasing as well, which affected nearly 13% of owner-occupied properties.  

Therefore, this move to increase the AV band threshold is to achieve the original 7% target, without causing too much pain for the remaining owner-occupied residential properties, according to Mr See Wei Hwa from professional accounting firm KPMG. 

Additional Buyer’s Stamp Duty (ABSD) changes

Currently, Singaporean married couples are entitled to getting a refund of the additional buyer's stamp duty (ABSD) paid on a second property only if they sell their first property within six months.

However, as announced during Budget, this concession will be extended to single Singaporeans aged 55 and above to support young seniors who want to “right-size” their homes.

They will be able to claim an ABSD refund if they sell their first property within six months of buying their second private residential property, which has to be a lower-value replacement private property if the unit is completed.

But if the unit is not completed at the time of purchase, they can claim a refund of their ABSD within six months after the temporary occupation permit or certificate of statutory completion of the replacement residential property is issued, whichever is earlier.

Build-To-Order (BTO) flats

To help Singaporeans build their family and attain their dream home, the government has pledged to help first-time families by working towards increasing the BTO flat supply and giving these families higher priority. 

They will also look into making "choicer" BTO flats more affordable for Singaporean families through he Prime Plus and Standard framework, starting from late this year's upcoming BTO flats.

On top of that, the government will also be giving a PHS (Open Market) Voucher for a year to support eligible families who rent a HDB flat in the open market.