Singapore is facing an increasingly ageing population with low birth rates and longer life expectancy. Furthermore, with a decreasing family size, which currently stands at around 3.15 persons per household, more older workers wish to work longer to save more for their retirement
Following the recommendations from the Tripartite Workgroup on Older Workers, the government announced in 2019 that it would raise the Retirement Age from 62 to 65 and the Re-employment Age from 67 to 70 by 2030. Along with these extensions, the CPF contribution rate to the Special Account for older workers was also slated to increase for workers aged 55 to 70 years, by 2030. When fully implemented, workers aged 60 and below, will enjoy the full CPF rates which only workers aged up to 55 years enjoy today.
Businesses Need To Make 0.5% More In CPF Contributions For Older Workers From 2024
The CPF Transition Offset was first announced in Budget 2020 as part of the Senior Worker Support Package to ease the costs incurred by businesses having to raise their CPF contribution rates for their older workers.
The first round of increase to the CPF contribution rates for older workers was implemented at the start of 2022, and in Budget 2022, the government announced that there will be another round of similar increase in 2023.
Following Budget 2023, the CPF contribution rates for older workers will be increased for the third round from 1 January 2024. Employers would be required to pay an additional 0.5% to workers aged 55 to 70, starting in 2024.
This translates to:
For workers aged 55 to 60: The total CPF contribution will increase by 1.5% from the current 29.5% to 31% starting on January 1, 2024. The employee’s share of the contribution increases by 1%, while the employer’s share of the contribution increases by 0.5%.
For workers aged 60 to 65: The total CPF contribution will increase by 1.5% from the current 20.5% to 22% starting on January 1, 2024. The employee’s share of the contribution increases by 1%, while the employer’s share of the contribution increases by 0.5%.
For workers aged 65 to 70: The total CPF contribution will increase by 1.0% from the current 15.5% to 16.5% starting on January 1, 2024. The employee’s share of the contribution increases by 0.5%, and the employer’s share of the contribution also increases by 0.5%.
The table below summarizes the changes in the total CPF contribution rates by both Employer and Employee.
|Current and Target CPF Contribution Rates (Employer + Employee) by Age Band|
|Age Band||2016-2021||From 1 Jan 2022||From 1 Jan 2023||From 1 Jan 2024||By ~2030|
|>55 – 60||26.0%||28.5%||29.5%||31.0%||37.0%|
|>60 – 65||16.5%||18.5%||20.5%||22%||26.0%|
|>65 – 70||12.5%||14.0%||15.5%||16.%||16.5%|
Businesses Will Receive Half Of The Higher CPF Contribution From CPF Offset Transition
Through the CPF transition offset, businesses get payouts equivalent to half of the increased contribution rates. The scheme serves to alleviate some of the rise in business costs from the increase in CPF rates in 2024.
For a worker aged 58 years old earning $4,500, the employer needs to pay a total CPF contribution of 15% or $675. This is a rise of $22.50 per month. The offset that the employer will receive will be equivalent to $11.25 per month or $135 for the whole of 2024.
For a worker aged 62 years old earning $2,800, the employer needs to pay a total CPF contribution of $322 or 11.5%. This is a rise of $14 per month. The offset the employer will receive will be equivalent to $7 per month or $84 for the whole of 2024.
Employers Will Receive Half Yearly Payouts For The Higher CPF Contributions In 2024
Businesses can expect to receive their 2024 CPF Transition Offsets around the same timeline as they would be receiving them for this year.
The CPF offset payouts will be automatically determined based on the wages of eligible older workers in 2023 and 2024, and businesses will receive their payouts at a half-yearly interval.
Employers will receive the offset payout in September of that year for the wages paid from January to June of the qualifying year.
Employers will receive the payout in March of the following year for the wages paid between July and December of the qualifying year.
This article was first published on 28 February 2022 and has been updated to reflect the latest changes.
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