Many working adult Singaporeans give a portion of their paychecks to their parents each month. And a number of parents actually don’t need the money at all. In some cases, the parents may still be working and may in fact be drawing larger paychecks than their offspring. In other cases, the parents may already be retired but have very substantial retirement savings or investments to draw upon. In such cases, the money given by adult Singaporeans to their parents is symbolic, a reflection of filial piety.
If you fall into the category of Singaporeans who give money to retired parents who do not have working income, but also do not require your contribution to get by, here’s one way to make your dollars work harder for you.
The CPF Board allows up to SGD7000 contributed each year into the retirement accounts of retired Singaporeans by their offspring to be eligible for tax relief. In other words, if you already give money to your retired parents, and they don’t need it, it’s far better to contribute it into their retirement accounts with the CPF than to give them cash. This way, you get to claim tax relief on the amount contributed. In the current low interest rate environment, your parents also get to enjoy the higher interest rates that the CPF provides (assuming they would have kept the cash in a lower-interest rate bearing bank account).
Full details are available at the IRAS, CPF and Singapore Budget websites.