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Singapore CPF

Singapore Central Provident Fund (CPF) Contribution is mandatory for its Citizens and Permanent Residents. Therefore, if you are planning on applying for either the status, you should really get to know what CPF is, how it works and what you can eventually do with your contribution.

1. Overview of CPF Contribution in Singapore

Let’s get familiar with some of the aspects of CPF:

1.1. What is CPF?

Definition

The term CPF stands for Central Provident Fund and it is one of the most common funds in Singapore. Having been established since July 1955, the CPF still remains its functions as a comprehensive social security system that enables working employees in Singapore to set aside funds for their retirements.

Other than the main purpose, which is retirement savings, this fund also financially supports people to address health-care, home ownership, or buying assets through beneficial schemes.

Who is responsible for contribution?

Please take note that not every employee has to contribute to CPF. In fact, as aforementioned, only Singaporeans and Permanent Residents are entitled to contribute to CPF monthly. Moreover, the employers of citizen or PR employees have to contribute to this fund as well.

How does the contribution work?

If you are an employee (citizen or PR) then every month, a part of your salary will be deducted by a regulated percentage (the rate will be discussed later in this blog) to put in your CPF accounts. Therefore, you should not be surprised if your take-home or actually-received salary is quite lower than the official salary stated in the contract.

It is the responsibility of the employer to automatically withdraw this proportion from your salary and contribute it for you, along with their contribution as well.

CPF Accounts

Your contribution to CPF in Singapore will be put in 4 types of accounts for different uses:

Types Usage
Ordinary Account (OA) For housing, education, insurance and investment
Special Account (SA) For old age and retirement-related investment
MediSave Account (MA) For hospitalisation and approved medical insurance
Retirement Account (RA) This account will be automatically created on the 55th birthday. And at that time, the savings in OA and SA will be transferred into this account.

1.2 All of The CPF Rates in Singapore That You Should Know

There are several types of rates regarding the Central Provident Fund in Singapore:

1.2.1. CPF Contribution Rates

In addition to employees, the employer must also contribute a proportion to the fund. Therefore, there are two kinds of contribution rates for both targets. The rates will gradually decrease according to age of employees. To be more specific:

Age of Employee CPF Contribution Rates (% of Wage)
Employer Employee Total Contribution

Up to 55 years old

17%

20%

37%

Above 55 to 60 years old

13%

13%

26%

Above 60 to 65 years old

9%

7.5%

16.5%

Above 65 years old

7.5%

5%

12.5%

Note that the above CPF contribution rate applies for non-pensionable employees with monthly wages ≥ $750.

Let’s have a look at an example for better understanding:

You are an employee with monthly salary of $1000. Then each month your employer will withdraw $200 from your salary (20% of $1000) and contribute it to CPF, along with his contribution of $170 (17% of $1000).

Then, the actual salary you will get is $800 and the total contribution of $370 will be put into CPF.

1.2.2. CPF Allocation Rates

The CPF contributed money then will be divided into the accounts by the following ratio depending on the age of non-pensionable employees those earning monthly wages of ≥ $750. To be specific:

Age of Employee Allocation Rates (% of CPF Contribution)
For Ordinary Account (OA) For Special Account (SA) For MediSave Account (MA)

Up to 35 years old

23%

6%

8%

Above 35 to 45 years old

21%

7%

9%

Above 45 to 50 years old

19%

8%

10%

Above 50 to 55 years old

15%

11.5%

10.5%

Above 55 to 60 years old

12%

3.5%

10.5%

Above 60 to 65 years old

3.5%

2.5%

10.5%

Above 65 years old

1%

1%

10.5%

It can be seen that the older you get, the less money will put into OA and SA, and more money will be put into MediSave Account since the need for health-care will be likely to rise considerably.

1.2.3. CPF Interest Rates

It is interesting that you can also earn interest when contributing to CPF accounts. The purpose is to encourage people to save for retirement and avoid unnecessary withdrawals. The current interest rates for 4 types of accounts are described in the table below:

Type of Account

Interest Rate (per annum)

Ordinary Account (OA)

2.5% (max up to 3.5%*)

Special Account (SA)

4% (max up to 5%*)

MediSave Account (MA)

4% (max up to 5%*)

Retirement Account (RA)

4% (max up to 5%*)

On the first $60,000 of combined CPF balances, with up to $20,000 from the OA;*You can also earn an extra interest of 1% in the following cases:

  • On the first $30,000 of combined balances, with up to $20,000 from the OA, when reaching the age of 55 or above.

This can make the interest rates increase up to 3.5% for OA and up to 5% for the rest.

1.3. Central Provident Fund Contribution Ceilings

Understanding CPF Contribution Ceilings is crucial since you will know the cap for your contribution. Let’s learn.

Surprisingly, there is a limit for the wage that is subject to Singapore CPF contribution. This is called Wage Ceiling, including two parts: Ordinary Wage Ceiling and Additional Wage Ceiling.

The Ordinary Wage (OW) Ceiling is the maximum amount of your monthly salary that is subject to CPF contribution in Singapore and it is capped at $6,000 currently. For example, if your salary is $7,000 per month, then the first $6,000 would attract CPF contributions, meanwhile the remaining $1,000 would not.

The Additional Wage (AW) Ceiling is the maximum amount of your additional wages (such as bonus or incentives) that is subject CPF contribution. The formula to calculate Additional Wage Ceiling is:

[AW Ceiling = $102,000 – Total Monthly Salary (OW) subject to CPF for The Year]

Let’s have an example to apply what you have just read: You earn $7,000 a month, and get an annual bonus of $35,000. Then, only the first $6,000 of your monthly income will be subject to CPF contributions. As for your annual bonus, [Additional Wage Ceiling = $102,000 – ($6,000 x 12) = $30,000]. Since your bonus amount is more than the AW Ceiling, only $30,000 will be subject to the CPF contributions; the remaining $5,000 will not.

2. What Can You Use The Singapore CPF Contribution For?

According to the above-mentioned definition, the funds can be used for your retirement or other personal purposes.

2.1. Retirement

Let’s have an insight into how the Central Provident Fund in Singapore affects your old-age retirement.

2.1.1. The Available Retirement Schemes

When you hit the age of 55, the Retirement Account (RA) will be created and the savings from OA and SA will be transferred to RA up to an amount called Full Retirement Sum, which will be discussed later. The total saving in your RA, which is known as Retirement Sum, will decide what retirement payout schemes applied to you when reaching 65 years old. There are two main kinds of payout programs:

  • The original CPF Retirement Sum Scheme requires you to have a minimum amount in your CPF accounts to ensure you receive monthly payouts that can support a basic standard of living. You will get payouts until your Retirement Account balance is depleted.
  • The CPF Lifelong Income For The Elderly Scheme (CPF LIFE) which was introduced in 2009 will give you monthly payouts for the rest of your life, as long as you are able to accumulate enough the required amount.

Generally, CPF LIFE is much more beneficial than the other. And luckily, you will automatically enroll in the scheme to enjoy payout for life, if:

  • You are a Singapore Citizen or Permanent Resident born in 1958 or after; and
  • You have at least $60,000 in your Retirement Account six months before you reach your payout eligibility age (65 years old).

If you are not qualified for CPF LIFE, you can apply to join anytime between your payout eligibility age and before you turn 80 years old or remain on the Retirement Sum Scheme

2.1.2. Retirement Payouts

Under CPF LIFE, the amount you get when retiring depends on which of the CPF Retirement Sums you satisfy, among Basic Retirement Sum, Full Retirement Sum and Enhanced Retirement Sum.

Please note that different Retirement Sum has different required amount and the regulated amount for each kind of Retirement Sum will increase every year to account for changes in interest rates and life expectancy. For example, the Full Retirement Sum was $176,000 in 2019 but increased to $181,000 in 2020 and it is expected to go up in 2021.

The table below provides you with the standard monthly payout you will receive in retirement based on the Retirement Sum set aside at age 55:

Retirement Sum Retirement sum amount at age 55 (regulated for 2020) Standard monthly payout (starting age 65)

Basic Retirement Sum

$90,500

$750 – $810

Full Retirement Sum

$181,000

$1,390 – $1,490

Enhanced Retirement Sum

$271,500

$2,030 – $2,180

If you don’t even manage to meet the Basic Retirement Sum? Then you will receive your monthly retirement payouts will then be pro-rated based on how much you have or remain on CPF Retirement Sum Scheme.

2.1.3. The amount you can withdraw from CPF savings from 55

Normally, under CPF LIFE, you will be required to leave at least the Full Retirement Sum (currently $181,000) in your Retirement Account. You can withdraw the rest. As a result, for the rest of your life, you will receive around $1,400 every month.

Only if you’re a property owner and agree to pledge your property to CPF can you withdraw and leave at least Basic Retirement Sum (currently $90,500).

The table below summarizes the amount you can withdraw at any time after you reach 55:

Balance of your OA and SA savings Withdrawal amount
$5,000 or less All your OA and SA savings
Between $5,000 and Full Retirement Sum $5,000

Plus

Retirement Account Savings above Basic Retirement Sum should you own property with leasing terms that can afford your living up to 95 years old.

More than Full Retirement Sum $5,000 or your OA and SA savings above Full Retirement Sum, whichever is higher

Plus

Retirement Account Savings above Basic Retirement Sum should you own property with leasing terms that can afford your living up to 95 years old.

2.2. Other Purposes

In addition to retirement savings, CPF contribution can be also used for housing, health-care and investment through many beneficial schemes.

2.2.1. Housing

Public Housing Scheme: You can use your CPF Ordinary Account (OA) savings to buy a new or resale HDB flat.

Private Properties Scheme: You can use the CPF Ordinary Account (OA) savings to buy or build private residential properties in Singapore for their own occupation or investment.

Home Protection Scheme: This is mortgage-reducing insurance that protects you and your family against losing your HDB flat in the event of death, terminal illness or total permanent disability.

2.2.2. Health-care

MediShield Life: This is a health insurance plan which can help you pay large hospital bills and some specific costly outpatient treatments such as cancer.

Private Medical Insurance Scheme: This allows you to spend your MA savings on Integrated Shield Plans for yourself and your dependants. An Integrated Shield Plan (IP) is a medical insurance plan which offers additional benefits on top of that provided by MediShield Life.

ElderShield: This is a disability insurance scheme that offers financial protection to those who are not able to do simple daily activities and need long-term care, especially in their old age.

2.2.3. Investment

CPF Investment Schemes: This scheme allows you to invest your OA and SA savings in a wide range of investments to enhance your retirement nest egg.

For more schemes and their details, click here.

3. Conclusion

Although you have to pay a proportion of salary to contribute to CPF, the benefits of the fund are eventually worth it, especially for your old age. You should plan ahead to meet the required Full Retirement Sum to enroll in CPF LIFE since it will provide you payouts for the rest of your life as soon as you reach 65 years old.

You can see that Singapore offers a great range of advantages for the people, so start your career journey to Singapore now. If you need any advice such as on Work Pass, feel free to talk to our experts!

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