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CPF stands for Central Provident Fund. The CPF is the government backed insurance system which allows working Singaporean citizens and permanent residents to save for their retirement, as well as for other planned and emergency expenses including housing and healthcare.
Both individuals and their employers contribute to the CPF, and interest is earned on savings, making this an efficient way to save, invest, and prepare for the future.
This guide walks through all you need to know about the Central Provident Fund, including how it works and who’s eligible.
|📝 Table of contents:|
The CPF exists to help Singaporean citizens and permanent residents (PRs) to plan for their financial wellbeing throughout life, and especially for when they are beyond working age¹.
According to the CPF, half of all Singaporeans who are currently 65 years old are likely to live on until they’re 85 at least, and one in 3 will see their 90th birthdays. As we all live longer, our financial requirements increase, both for day to day expenses and any medical or care needs in older age - making the CPF more important than ever.
|Both individuals and their employers pay into the CPF on a monthly basis, with the funds split into several accounts which each have a different purpose.|
Here are the CPF account types - we’ll look at how much money goes into each in just a moment, as this can change depending on your age.
CPF account types
|CPF account||What is it for?|
|Ordinary Account (OA)||Housing, insurance and investment|
|Special Account (SA)||Older age and investment in financial products for retirement|
|MediSave Account (MA)||Healthcare, hospital expenses and approved medical insurance.|
|Retirement Account (RA)||Automatically created on your 55th birthday, at which point you may be able to make some withdrawals, or purchase an annuity when you reach payout age²|
If you die before you spend your CPF funds, they will be paid to your beneficiaries.
It’s best to make a nomination specifying who you want your savings to be paid to in the event of your death. This means the money will be distributed quickly and without excess fees. If you don’t do this, funds will be distributed according to legal entitlements, by the Public Trustee’s Office. There’s a fee for this service.³
If you’re working, your employer will contribute their portion of your CPF fund directly to your account. You’ll also pay your own share yourself.⁴ You can then log into your account to check your CPF funds and carry out any administrative tasks required. The amount paid - both by you and your employer - depends on your age.
If you’re a self employed person you are obliged to make MediSave contributions if you earn a net trade income of over SGD6,000 per year. The amount you’ll need to pay depends on your age and income. You can also choose to save in addition to this to make sure you have an adequate CPF for retirement and beyond.⁵
Here are the CPF contribution rates you need to know if you’re employed.
CPF Contribution rates
|Age of employee||Employer CPF contribution rate||Employee CPF contribution rate||Total CPF contribution rate|
|55 and under||17%||20%||37%|
|55 to 60 years||13%||13%||26%|
|60 to 65 years||9%||7.5%||16.5%|
It’s good to know that changes are being gradually phased in, which will mean alterations to both the age bandings and contribution percentages.⁶
These reforms, which were announced in 2019 will be fully completed by 2030 and will ultimately mean that workers aged up to 60 will benefit from the full CPF rates. Transitional arrangements are in place in the meantime.
CPF calculations look at both your normal monthly wage - known as ordinary wage(OW) - and any extra payments you might get such as annual bonus payments.
There’s a wage ceiling for ordinary wages, which is currently set at SGD6,000 a month. CPF payments are only made up to this maximum by the employer, and the employee can also apply to limit their contribution to this level.
There’s also a second limit known as the additional wage(AW) ceiling. At the moment that’s set at SGD102,000 annually.
That means that you may pay CPF funds on additional payments you receive, like your bonus or leave pay if it falls under the AW ceiling.⁷
Here’s how you might calculate if a payment is required on your annual bonus as an example.
Let’s say you have a monthly salary of SGD8,000. You’ll only pay CPF contributions on the first SGD6,000 a month due to the OW ceiling.
You then also receive an annual bonus at the end of the year, of SGD20,000. You’ve contributed to the CPF already up to the ceiling for ordinary wage - 12 x 6,000 = SGD72,000. This contribution is then deducted from the AW ceiling: 102,000 - 72,000 = SGD30,000.
As your bonus is below this amount, you’ll pay CPF contributions on all of it.
It’s good to know that the contribution rates for CPF are slightly different for people who have only just become PR. The CPF rates are capped to help new PR residents adjust to getting a lower take home pay once their CPF contributions begin.
These changes apply for the first 2 years from acquiring permanent residency, although you can request the option to increase contributions if you want. This can be done to mean that only the employer increases contributions, or both employer and employee start to pay up to the regular CPF contribution amount immediately.
Here’s what you need to know.⁸
|Types of Singapore PR||First-year||Second-year|
|Graduate employer and employee||Employer contribution:4% to maximum SGD240 Employee contribution:5% to maximum SGD300||Employer contribution:9% to maximum SGD540 Employee contribution:15% to maximum SGD900|
|Full employer and graduate employee||Employer contribution:17% to maximum SGD1,020 Employee contribution:5% to maximum SGD300||Employer contribution:17% to maximum SGD1,020 Employee contribution:15% to maximum SGD900|
|Full employer and full employee||Employer contribution:17% Employee contribution:20% Prevailing OW and AW ceilings apply||Employer contribution:17% Employee contribution:20% Prevailing OW and AW ceilings apply|
You can also use the CPF’s calculator for contribution rates for employees in their first and second year of PR status.
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Both the overall amount of CPF contribution and how it is allocated between different account types will change over time. The amount of CPF contribution paid peaks and then comes down to help make sure older workers stay competitive in the workforce. The money that is contributed is also split differently over time.
At first, most money goes into the ordinary account to allow you to save for a home purchase. Over time the amount being paid into this account diminishes in the expectation that you’ll have already bought a property and will be moving on to think more about retirement savings. The amount put into your MediSave account also increases over time to make sure you have enough as your medical needs may become more costly as you get older.
Here are the current allocation rates by age group:⁸
|Employee age||Ordinary account (% of wage)||Special account(% of wage)||MediSave(% of wage)|
|Up to 35||23||6||8|
|35 - 45||21||7||9|
|45 - 50||19||8||10|
|50 - 55||15||11.5||10.5|
|55 - 60||12||3.5||10.5|
|60 - 65||3.5||2.5||10.5|
|65 and over||1||1||10.5|
Your retirement sum is basically the amount of money in your CPF fund which you can use to pay for your day to day needs in retirement. Depending on your age and the amount of savings you hold you may choose to join the retirement sum scheme or CPF LIFE. ⁹
The retirement sum scheme will pay out a fixed amount of money on a monthly basis until your CPF savings are depleted. For most Singaporeans and PRs, this has been replaced by the LIFE plan which pays a monthly annuity for life - meaning there’s no risk of running out of money when you may need it most.
CPF LIFE stands for Lifetime Income for the Elderly. It’s an annuity product which pays out a monthly amount for life, funded from your CPF. Singaporean citizens and PRs will generally be automatically enrolled in this system if they already have SDG60,000 or more in CPF savings at age 65¹⁰.
If you don’t meet these criteria you can still apply to join any time up to 1 month before your 80th birthday.¹¹
You’ll be able to choose different LIFE plans depending on whether you want a stable income or would rather see your monthly amount increase over time. You can also model the amount you may be eligible to receive based on the amount you have in your CPF fund, to help plan your contributions to match the lifestyle you want to have.
From the age of 55 you can withdraw up to SGD5,000 from your CPF funds as long as you have already reached the basic retirement savings - known as the Full Retirement Sum.
The Full Retirement Sum which applies to you will depend on your age and birth year. Depending on your age you may also be able to make lump sum withdrawals at and after age 65.²
If you have a private pension which pays out the same or higher than your LIFE plan would, you could be exempt from taking the LIFE plan option, and be entitled to withdraw your CPF funds instead.
Funds in your CFP accounts attract interest as follows:
|Account name||Interest rate|
|Ordinary account||Up to 3.5%|
|Special account||Up to 5%|
|MediSave account||Up to 5%|
|Retirement account||Up to 5%|
These rates include bonus interest which is earned on the first SGD60,000 held in your CPF fund, of which up to SGD20,000 can come from the ordinary account. There is also a potential bonus interest rate available on the first SGD30,000 of combined balances for people aged over 55, meaning the highest rates available from this age group are 6%.
As you can see, there’s a better interest rate on the special, MediSave and retirement accounts compared to the ordinary account. That’s because the ordinary account is the most flexible in terms of what you can do with the money, while the special and medical accounts are only accessible for retirement and healthcare purposes.
You can choose to put more money into your special account for example, to benefit from the higher interest rate. However, you need to know that you won’t then be able to withdraw these funds to buy a house or to pursue your education - it’s locked into tighter conditions and can’t be accessed until retirement.
Planning your financial future can be a headache. Helpfully there are a few tools out there which can make the maths somewhat easier to deal with. Here are some of the CPF board’s more handy calculator tools to plan your contributions and your potential retirement income:
Even if retirement feels like a long way off, understanding the CPF fund and your options makes good sense. From using your ordinary account for your first home, to being able to relax in the knowledge that you have funds for medical care should you ever need it, the CPF fund is a crucial part of life in Singapore. Use this guide as a starting point, and do your research online through the CPF’s website to make sure you have planned your financial future as well as possible.
- Central Provident Fund Board (CPFB) - CPF Overview
- CPFB - Withdrawals of CPF savings from 55
- CPFB - CPF Nomination Scheme
- CPFB - CPF Contribution and Allocation Rates
- CPFB - Self-Employed Scheme
- Channel News Asia - National Day Rally 2019: Retirement, re-employment ages to be raised to 65 and 70 by 2030
- CPFB - CPF contribution for employees
- CPFB - CPF Contribution and Allocation Rates
- CPFB - Retirement Sum Scheme
- CPFB - CPF LIFE
- CPFB - CPF Board
Sources checked on 28th April 2021
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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