I refer to Miss Sharon Lim's letter, 'Can the CPF Board help us 'lucky few'?' (June 20). She has suggested the CPF Board allow willing employers to contribute more to help their employees set aside savings for retirement.

She may wish to know that from Nov 1 this year, employers can contribute to their employees' CPF Special or Retirement Account through the Minimum Sum (MS) Topping-Up Scheme, to top up their employees' retirement balances to the prevailing MS of $106,000.

The Voluntary Contribution (VC) cap of $26,393 a year will not apply to the MS Topping-Up Scheme. Employers will also enjoy a full tax deduction for the top-ups.

While the MS Topping-Up Scheme contributions go into either the Special or Retirement Account which are kept for long-term use and for which withdrawal is restricted, VC contributions are distributed across the CPF member's Ordinary, Special and Medisave Accounts.

Since money in the Ordinary Account can be withdrawn on demand for housing, investment and education, VC contributions are subject to a cap of $26,393 a year.

The VC cap serves to limit the amount of funds that enjoy the attractive CPF interest rates but are withdrawable on demand. Capping the VC also affirms the fundamental objective of CPF to provide for basic retirement needs.

Besides CPF, employers can also make direct contributions to their employees' Supplementary Retirement Scheme (SRS) accounts from Oct 1.

SRS contributions are subject to an annual cap of $11,475 for Singapore citizens and permanent residents, or $26,775 for foreigners. Employers can similarly claim full tax deduction on these contributions.

These initiatives were announced with other changes to encourage voluntary retirement savings earlier this year.

More details can be found on the CPF Board's website at www.cpf.gov.sg/MSTPL and the Ministry of Finance's website at www.mof.gov.sg/taxation/srs.html.

We thank Miss Lim for her feedback.

Lim Boon Chye
Director (Collections & Recovery Division)
Central Provident Fund Board

This article was first published in The Straits Times on 8 July 2008.