You will be able to plan how you will pay your MediSave contribution and avoid the problems that come with arrears.
The MediSave notice is open on your screen, and the amount is larger than anything in your personal account. You could pay it from savings and hope the next few months are good. You could leave it for a week while you think. Or you could check whether a client pays before the due date and cover it then. Each of those is a plan made under pressure, and most of the trouble with MediSave arrears starts with one of them.
This lesson is about deciding how you will pay before the notice arrives, so the notice is a step in a routine and not a crisis.
The CPF Board lists the ways to pay your MediSave contribution on its website, and it includes an option to pay by instalments through GIRO. With an instalment plan, the contribution is spread over a number of monthly deductions instead of falling due in one lump. The number of instalments and the conditions are set out on the CPF Board website, so check them there for your own notice.
For most freelancers, an instalment plan from the tax and MediSave pot is the steadiest route. The money has been building in the pot since the income came in, and a fixed monthly deduction from it is as predictable as your base pay transfer. Paying in one lump from the pot also works if the pot holds enough, and some people prefer to clear the bill at once.
What does not work well is paying from whatever is left in your personal account that month. Your base pay is sized for your living costs, not for a bill of several thousand dollars. Raid it, and you end up borrowing from the holding account, a credit card or a friend, and a credit card balance at card interest rates is an expensive way to pay a healthcare contribution. Credit and debt: scores, cards, loans and BNPL covers why.
Unpaid MediSave contributions do not fade away. The CPF Board can take enforcement action to recover them, and the steps it can take are set out on its website.
For some people there is also a direct effect on how they earn. Drivers who hold a vocational licence, such as taxi and private-hire drivers, may find that unpaid MediSave contributions hold up the renewal of that licence. If your income depends on a licence, check the current rules with the CPF Board and the Land Transport Authority, and treat MediSave as a cost of keeping the licence, as fixed as insurance or car rental.
Arrears also make everything that follows harder. A bill you did not pay this year sits alongside next year's bill, and next year's bill is based on income you may have already spent too.
MediSave is easy to resent because it feels like a tax, yet the contribution goes into your own MediSave account, and the money stays yours, to be used under the CPF Board's rules.
MediSave can pay for approved medical costs, such as hospital bills and some outpatient treatments, within limits the CPF Board sets. It can also pay your MediShield Life premiums, and premiums for some other approved health insurance plans. For a self-employed person without group hospital cover from an employer, that is a real job. Module 6 comes back to this when you map what cover you still have and what you have lost.
So paying on time keeps money flowing into an account that pays your own hospital premiums and bills. That is a better way to think about it than a penalty for working for yourself.
Here is the part that catches people. Because the contribution is based on income assessed after the year ends, a strong year now means a larger MediSave bill later, arriving in a year that may be quieter.
Mei's figures, made up for the example, show this. Her net trade income last year was S$58,000, which at the made-up rate from lesson 2.2 gave a contribution of about S$5,220. Suppose this year goes much better and her net trade income reaches S$70,000. The bill for this year, at the same example rate, would be S$6,300, and it would arrive in the second half of next year. If next year is quiet, she would be paying the largest MediSave bill of her career during her leanest stretch.
The tax and MediSave pot exists to break that link. Money set aside from each payment this year pays this year's bills, whenever they land. A good year fills the pot faster, and the bill it produces is already covered.
A payment plan has three parts. First, how you will pay: in instalments by GIRO, or in one lump. Second, which account the money comes from, which should be your tax and MediSave pot. Third, when you will look for the notice, so you are not relying on spotting a letter or an email among everything else.
You do not know the exact date the notice will arrive, but you can set a check date. Look at when last year's notice came, or when your tax assessment usually arrives, and put a reminder in your calendar a few weeks after that. Module 8 adds it to your money calendar for the year.
With those three answers written down, the notice becomes a task you already know how to handle. The activity below asks for those three answers for this year's contribution.
Write down how you will pay this year's MediSave contribution, from which account, and the date you will check for the notice.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).