Last Updated on June 12, 2023 by Parentology
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Right from the moment your child enters the world, they are automatically enrolled in Singapore’s MediShield Life, Singapore’s mandatory basic health insurance plan. This coverage takes care of major hospital expenses and selected expensive outpatient treatments, while keeping the premiums affordable. However, if you desire more comprehensive healthcare for your child, you have the option to purchase a private Integrated Shield Plan (IP).
An IP acts as an extension to MediShield Life, providing additional benefits such as coverage for private hospital stays and access to a wider range of medical services and treatments. To ensure your child’s well-being, you can utilize your MediSave account to pay for their MediShield Life premiums, offering them vital healthcare protection. Additionally, this approach allows you to explore the possibilities of an IP, tailoring the coverage to suit your family’s specific needs.
By tapping into your MediSave account and considering these options, you can prioritize your child’s healthcare and provide them with a comprehensive safety net for their medical needs.
Supporting Your Child’s MediShield Life Premiums with MediSave Account
When a Singapore Citizen child is born, they are automatically provided with a MediSave Account (MA). As parents, you receive a MediSave Grant for Newborns amounting to $4,000. This grant is specifically designed to assist you in paying for your child’s MediShield Life premiums and other approved healthcare expenses.
For your newborn, the annual MediShield Life premium amounts to $145, before factoring in any government subsidy. It is worth noting that this annual premium remains the same for individuals aged between 1 and 20. It is only for individuals who turn 21 or older that the premiums increase.
Given these circumstances, the MediSave grant allocated to your child should be more than sufficient to cover their MediShield Life coverage until they reach the age of 21 or older. However, it’s important to be aware that MediShield Life premiums may rise in subsequent years. Additionally, you have the option to utilize your child’s MediSave grant for other crucial healthcare expenses.
Paying for Your Child’s MediShield Life Premiums
As new parents ourselves, the question arises: should we cover our child’s MediShield Life premiums from our own MediSave Account (MA) or let them pay for it themselves from their own MA? While the love for our children motivates us to do whatever we can for their well-being, there are several compelling financial reasons to consider paying for their MediShield Life premiums.
Further Reading – A Guide to Choosing the Right Child Insurance for Your Little One
Benefiting from Regular CPF Contributions and Safeguarding Your Child’s CPF MA
As you receive regular CPF contributions from your employment, your CPF balances have the potential to grow. However, the situation is different for your child’s CPF MediSave Account (MA), which remains static or may even decrease due to utilizing the funds for approved medical expenses.
By utilizing your own MA balances to cover approved expenses, such as your child’s MediShield Life premiums, you take a proactive step in safeguarding their future. This approach ensures that your child’s MA remains intact, allowing it to compound and grow over the long term. By preserving their MA, you contribute to their financial well-being and provide them with a stronger foundation for the future.
Leveraging the Extra 1% Interest on CPF Balances to Benefit Your Child
As young working adults, it’s possible that the combined CPF savings for both of you exceeds $60,000. However, your newborn will only have $4,000 in their CPF account. This difference becomes significant because the first $60,000 in CPF accounts earns an additional 1% interest annually.
By taking the responsibility of paying for your child’s MediShield Life premiums, you enable their CPF MediSave Account (MA) balances to fully capitalize on this extra 1% annual interest. Consequently, their MA balances can grow at a faster rate, compounding at 5% annually. In contrast, your own MA balances would only be growing at the standard 4% per annum.
Maximizing Tax Relief through CPF Top-ups for Your Child’s MediSave Account
When you make top-ups to your own MediSave Account (MA), you can benefit from a dollar-for-dollar tax relief of up to $8,000, provided that your MA balance is within the $66,000 Basic Healthcare Sum (BHS) in 2022.
However, it’s important to note that you do not receive any tax relief for CPF top-ups made into your child’s MediSave Account. Instead, your child becomes the recipient of the tax relief. Considering that your newborn is unlikely to have income or pay taxes at this stage, they cannot directly benefit from this tax relief.
Nevertheless, by utilizing your own MediSave funds to cover your child’s MediShield Life premiums or other healthcare expenses, you effectively gain a tax relief by “topping up” your child’s MediSave Account. This is achieved by making the corresponding top-up into your own MA. Furthermore, you have the flexibility to convert your MA balances into Special Account (SA) balances through the Retirement Sum Topping-Up (RSTU) Scheme, rather than simply topping up your MA.
While these individual amounts may seem small, they can accumulate significantly if consistently practiced over several decades and for multiple children. Therefore, if you find yourself in a situation where you need to pay for your child’s MediShield Life premiums in cash, whether by choice or because their MA balances have been fully utilized, it is advisable to contribute to your own MediSave Account first. This way, you can enjoy the potential dollar-for-dollar tax relief (if eligible) while still ensuring your child’s healthcare coverage.
Considering the Impact on Your MediSave Account Balances and Savings
While there may be valid financial reasons to cover your child’s MediShield Life premiums, it is essential to assess how this decision will affect your own MediSave Account (MA) balances or cash savings.
Firstly, it is important to recognize that once cash top-ups are made to the CPF system, they become irreversible. This implies that in situations where you are in need of immediate access to liquid savings or encounter financial difficulties, you will be unable to tap into these funds. While it is essential to maximize tax reliefs and other benefits, it is equally important to maintain a long-term perspective on the sustainability of your actions.
Using your own MediSave Account balances to pay for your child’s MediShield Life premiums also reduces your capacity to allocate funds towards your own healthcare. Furthermore, if an unforeseen healthcare emergency arises, necessitating additional MediSave Account balances to cover medical treatments, accessing your child’s MA balances may present challenges, particularly if they are still underage.
How to Apply for Paying Your Child’s MediShield Life Premiums
If you decide to adopt the approach of paying for your child’s MediShield Life premiums, you will need to complete an online application on the MediShield Life website. Within the application, you will find the option to make a “Change of Payer for MediShield Life Cover.” Simply log in using your SingPass to apply online.
By taking on the responsibility of paying for your child’s MediShield Life premiums now, it’s important to note that you are not obligated to continue doing so in the future. If you wish to discontinue payment, you can submit an application to stop using your MediSave Account balances and instead utilize your child’s MA balances for premium payments. This offers flexibility and the ability to adjust the payment arrangement according to your preferences and circumstances.
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