The Central Provident Fund (CPF) is the name for Singapore’s social security scheme. It covers health care, retirement and home ownership.
The contribution rate varies depending on the age, the wage band and the status of the employee (i.e. Singaporean citizen or Permanent Resident). The maximum amount of CPF contribution payable is based on a monthly salary ceiling of $6,000. Voluntary contributions can be paid in addition to the mandatory contributions.
The employee’s share of CPF contribution is deducted from their salary by the employer during the monthly payroll processing. The employer is then required to pay the employer’s and employee’s share of CPF contributions monthly for all employees (Singapore citizens and Singapore PRs) at the rates set out in the CPF Act. The contributions payable should be based on the employee’s actual wages earned for the month.
CPF contributions are not allowed for:
- Foreigners working in Singapore under an EP, S Pass or a Work Permit; and
- Directors’ fees
How is the Central Provident Fund contribution calculated?
For the purpose of CPF, wages are classified into 2 categories.
Ordinary Wages
Ordinary Wages (OW) refers to the basic salary earned in the month. The CPF contribution on OW is capped at $6,000 a month.
Additional Wages
Additional Wages (AW) refers to bonuses and other variable components earned. The CPF contribution on AW is capped based on the following computation:
AW subject to CPF = Total Wages – OW subject to CPF
Total wages are capped at $6,000 x 17 months = $102,000 a year
For example, an employee earning $8,000 a month with an annual bonus of $50,000 will contribute CPF based on the following capping:
OW: CPF will be contributed based on the cap of $6,000 on a monthly basis.
AW: AW subject to CPF =$102,000* – OW subject to CPF for the year
= $102,000 – ($6,000 x 12 months)
= $ 30,000
AW CPF will be contributed based on the cap of $30,000.
*Equivalent to 17 months x $6,000
EMPLOYMENT ACT TO COVER ALL EMPLOYEES
Core provisions of the Employment Act were updated effective 1st April 2019 to cover all employees. Prior to this, Managers and Executives earning up to $4,500 were excluded from these core provisions. With this change, all employees are now entitled to paid annual leave, paid public holidays and sick leave.
OVERTIME RATES FOR NON-WORKMEN
Non-workmen earning up to $2,600 are entitled to overtime pay and are covered under Part IV provisions of the Employment Act. This section of the Act provides for hours of work, rest day and overtime payments to eligible employees.
Managers and executives continue to be excluded from Part IV provisions.
CPF Treatment of employee benefits
Effective 1st January 2020, the CPF treatment for the reimbursement of employee benefits have been revised as follows:
- Reimbursements for medical and dental benefits (incurred for both local and overseas) for employees, employee’s spouse and children are not be CPF contributable.
- Reimbursements for holiday benefits for employees, employee’s spouse and children are CPF contributable.
These changes will align the CPF treatment for benefits provided to employees and their dependents.
Employee | Employee’s spouse & child | ||
Medical treatment reimbursement | Not CPF Payable | Not CPF Payable | |
Dental treatment reimbursement | Not CPF Payable | Not CPF Payable* | |
Holiday benefits reimbursement | CPF Payable* | CPF Payable | |
Other benefits reimbursement | CPF Payable | CPF Payable |
*Indicates change effective 1st January 2020
Employee benefits paid as cash allowances continue to be CPF contributable.
Increase in CPF Contribution Rates from 1 January 2022
As recommended by the Tripartite Workgroup on Older Workers, CPF contributions rates for employees aged 55 to 70 will be increased to strengthen their retirement adequacy.
A summary of the revised contribution rates from 1 January 2022:
How you can use your CPF
Find out how CPF can help you meet your retirement, housing and healthcare needs.
Monthly payouts
The savings set aside in your Retirement Account provide for monthly payouts, through CPF LIFE or the Retirement Sum Scheme, for your expenses in retirement.
You can apply to receive monthly payouts from the CPF payout eligibility age. The payout eligibility age is currently 65.
You can set aside the:
- Basic Retirement Sum, if you own a property with a remaining lease that can last you till 95, or
- Full Retirement Sum.
The remaining cash balances in your Ordinary and Special Accounts can be withdrawn, or you can continue to keep your savings in CPF to earn interest. You can also top-up your Retirement Account up to the Enhanced Retirement Sum to enjoy higher monthly payouts.
Payouts may be adjusted to account for long term changes in interest rates or life expectancy. For more information, visit the CPF website.
CPF LIFE
CPF LIFE is a national longevity insurance annuity scheme that allows you to receive a monthly payout for life, starting from your payout eligibility age.
You can choose to start your CPF LIFE payouts later, up to age 70. For each year deferred, your monthly CPF LIFE payouts permanently increase by about 7%. This will give you up to 35% increase in payouts if you choose to start your payouts at 70.
You will be automatically included in CPF LIFE if you:
- Are a Singapore Citizen or Permanent Resident,
- Are born in 1958 or after, and
- Have at least $60,000 in your retirement savings before you reach 65.
If you are not automatically included in CPF LIFE, you will remain on the Retirement Sum Scheme and will still receive monthly payments from your payout eligibility age until your Retirement savings are fully paid out. You may also choose to opt in to CPF LIFE at any time between 65 and one month before you turn 80.
Using MediSave to pay for healthcare
You can use MediSave to pay for:
- Hospitalisation and some long-term care expenses for you and your dependants.
- Certain outpatient treatments like chemotherapy and radiotherapy.
- Premiums for MediShield / MediShield Life, MediSave-approved integrated shield plans, ElderShield or CareShield Life.
Owning a home
You can use your Ordinary Account savings to buy a home under CPF housing schemes.
You can use it to:
- Buy an HDB flat.
- Buy or build private residential properties.
- Service housing payments such as:
- Downpayment
- Housing loan
- Stamp and legal fees
- Loans for the construction of your house and purchase of vacant land for private properties
- Home Protection Scheme premiums for HDB flats
A CPF charge is created when you use your savings in your Ordinary Account to finance the purchase of your property and pay for your housing loan. To discharge the CPF charge, you need to refund the amount used for the property and the accrued interest to your CPF account.
You can withdraw your CPF savings for immediate needs if:
- You have a property lease that lasts you up to age 95, and
- The CPF savings you have used for the property, including accrued interest, is enough to make up your Full Retirement Sum.
When you sell your property, the CPF savings you used to pay for it, including accrued interest, will be refunded to your CPF account. This will restore your retirement sum and payouts.
Protecting your family
You can protect yourself and your dependants through several CPF schemes.
The Dependants’ Protection Scheme is a term insurance that mitigates the impact of a loss of income to a family, in the event of an insured member’s permanent incapacity or death. It provides the dependants with a sum of money to tide over the initial difficult period.
The Home Protection Scheme is a mortgage-reducing insurance that protects you and your loved ones against losing your HDB flat, in the event of death, terminal illness or total permanent disability. It insures members up to age 65, or until the housing loan is paid up, whichever is earlier.
Growing your assets
You can invest your CPF funds that are above:
- $20,000 in the Ordinary Account.
- $40,000 in the Special Account.
You can invest them under the CPF Investment Scheme – Ordinary Account (CPFIS-OA) and the CPF Investment Scheme – Special Account (CPFIS-SA), respectively.
These schemes allow you to invest in products such as insurance, unit trusts, exchange traded funds (ETFs), fixed deposits, bonds and treasury bills, shares, property funds and gold.
CPF Retirement Sums
When you reach 55 years old, savings from your Special Account and Ordinary Account will be transferred to your Retirement Account to form your retirement sum.
To help you plan early for retirement, the Basic Retirement Sum will be made known to you ahead of time. You can withdraw the first $5,000 of your Ordinary and Special Account savings even if you do not meet your Basic Retirement Sum at age 55.
Members who turn 65 years old from 2023 onwards can withdraw up to 20% of their Retirement Account savings available as at their 65th birthday, in a lump sum (less the $5,000 that they can unconditionally withdraw from 55 years old).
For each successive cohort of members turning 55, the payouts need to be higher to account for long-term inflation and rising standard of living. Correspondingly, the Basic Retirement Sum to be set aside has been adjusted over time.
CPF Retirement Sums
When you reach 55 years old, savings from your Special Account and Ordinary Account will be transferred to your Retirement Account to form your retirement sum.
To help you plan early for retirement, the Basic Retirement Sum will be made known to you ahead of time. You can withdraw the first $5,000 of your Ordinary and Special Account savings even if you do not meet your Basic Retirement Sum at age 55.
Members who turn 65 years old from 2023 onwards can withdraw up to 20% of their Retirement Account savings available as at their 65th birthday, in a lump sum (less the $5,000 that they can unconditionally withdraw from 55 years old).
For each successive cohort of members turning 55, the payouts need to be higher to account for long-term inflation and rising standard of living. Correspondingly, the Basic Retirement Sum to be set aside has been adjusted over time.