Our CPF is a mandatory savings scheme for our retirement, housing, healthcare and other needs. In Singapore, we and employers take an active role in providing for our social security by contributing a percentage of our monthly salary to our CPF accounts, depending on our age and income level.
This way, we are forced to save a portion of our salary to pay for the important expenses in our lives, including to buy a home, pay for medical treatments and afford a basic retirement when the time comes.
The government plays its part by paying us a guaranteed risk-free interest rate of between 2.5% per annum and 6.0% per annum, depending on our age and account type. While not definite, the government also periodically makes top-ups to individuals’ accounts.
How Do CPF Contributions Work?
When we start working in Singapore, we have to contribute a percentage of our salary to our CPF accounts. We do not have to do anything as our employer will directly deduct this amount out of our salary each month. Our employers must also contribute a percentage of our salary to our CPF accounts. This sum is added to our CPF contributions and credited to our CPF accounts each month.
These contributions are a fixed percentage of our salary, and are dependent on our age group and subjected to salary caps and Annual Limit. What this also means is that we need to be gainfully employed in Singapore to start growing our CPF accounts.
How Much Do I Need To Contribute To My CPF Each Month?
Each month, we have to contribute up to 20% of our salary, and our employers have to contribute up to 17% of our salary to our CPF accounts up to a salary cap of $6,000. This percentage may vary depending on our age and our income.
|Employee Age (Years)||Contribution Rates (for monthly wages ≥ $750)|
|Employer (% of wage)||Employee (% of wage)||Total (% of wage)|
|55 and below||17||20||37|
|Above 55 to 60||13||13||26|
|Above 60 to 65||9||7.5||16.5|
As you can see, most employees will have close to 37% of their salary contributed to their CPF accounts.
When we turn 55, our employee contribution rates start to decline till we turn 65. There are several ways to look at this, 1) we may start to earn less as our skill set become outdated compared to younger employees or 2) we may want to work less after setting aside enough for our retirement or due to poorer health.
A lower employee contribution rate allows us to receive more of our salary in take-home pay, while the lower employer contribution rate makes older workers less expensive to hire and/or re-train.
If we earn less than $500, but more than $50, a month, we do not have to make employee CPF contributions. Only our employers have to pay their share of CPF contributions to our CPF accounts. This is especially relevant for contract, part-time and ad-hoc employees.
What Is The Interest I Earn On My CPF Contributions?
Our CPF contributions earn a guaranteed risk-free interest of 2.5% per annum on our Ordinary Account, 4.0% per annum on our Special Account and 4.0% per annum on our Medisave Account. We also earn an additional interest of 1.0% per annum on the first $60,000 of our CPF account balances.
While we may also have a Retirement Account after turning 55, our CPF contributions from our salary will never flow directly into this account. On the Retirement Account, we also earn an extra additional interest of 1.0% per annum on the first $30,000 of our balances.
|Account||Base Interest Return
How Much Goes Into My CPF Ordinary Account, Special Account and Medisave Account (Allocation Rates)?
CPF contributions from our monthly salary go into all three of our CPF accounts. How much goes into each account varies depending on our age as well.
|Employee Age (Years)||Allocation Rates (for monthly wages ≥ $750)|
|Ordinary Account (% Of Wage)||Special Account (% Of Wage)||Medisave Account (% Of Wage)|
|35 and below||23||6||8|
|Above 35 to 45||21||7||9|
|Above 45 to 50||19||8||10|
|Above 50 to 55||15||11.5||10.5|
|Above 55 to 60||12||3.5||10.5|
|Above 60 to 65||3.5||2.5||10.5|
If you look at our CPF accounts allocation rates, it makes sense for the life cycle of a person. When we are younger, we contribute more funds towards our Ordinary Account primarily to pay for our home. We also contribute towards our Special Account, primarily meant for our retirement, and our Medisave Account, primarily meant for our healthcare.
As we get older, a lower percentage goes towards our Ordinary Account, and more is channelled towards our Special Account and Medisave Account. This is because we should increasingly be paying down our property, and saving up more for our retirement and healthcare. Our Special Account and Medisave Account also earns a higher interest rate for these funds.
Once we are over 55, we may have already set aside our retirement sum in a newly created Retirement Account, and hence the greatest focus goes towards our healthcare needs via our Medisave Account.
What Is The Salary Cap (Wage Ceiling) For CPF Contributions?
There are two types of wages – Ordinary Wage and Additional Wage – that we need to take note of.
Our Ordinary Wage is our monthly salary, and CPF contributions on it subjected to a salary cap of $6,000. Put simply, if we earn $6,000 and below, we simply make contributions as highlighted above. However, if we earn more, only the first $6,000 applies to both our employee and employer CPF contributions.
|Monthly Salary (Age 35 and below)||Ordinary Account Contributions||Special Account Contributions||Medisave Account Contributions||Total Contributions|
We can use the CPF Contribution Calculator if we want to crunch the numbers for ourselves.
Our Additional Wage accounts for bonuses, performance/ variable bonuses, leave pay and other related salary that we may not receive on a monthly basis. Both employees and employers have to make CPF contributions on these wages up to the CPF Annual Limit.
What Is The CPF Annual Limit?
The CPF Annual Limit is $37,740 on our CPF contributions per year. This means our we have to make CPF contributions on our Additional Wages, up to this cap, if we are able to do so.
If we earn more than $6,000 a month, we are not automatically excluded from CPF contributions on our Additional Wage.
In the scenario we earn $7,000 a month, and receive six months in bonuses at the end of the year. Our $7,000 a month salary would account for up to $26,640 in CPF contributions a year, because we only make CPF contributions on the first $6,000. This means we can still make more CPF contributions up to the Annual Limit.
Our year-end bonus is $42,000, which should account for $15,540 in CPF contributions if we have to make CPF contributions on the full amount. However, this would put us over the Annual Limit. In this case, we only need to contribute up to the Annual Limit (which applies to the first $30,000 of our bonus), and we do not need to make CPF contributions on the rest of the funds. Again, if we’re still unsure we can use the CPF Contribution Calculator to crunch the numbers for ourselves.
Can I Contribute More To CPF?
We can always make more contributions to your CPF accounts via the Voluntary Contributions (VC) scheme, up to the CPF Annual Limit of $37,740, and the Retirement Sum Topping Up (RSTU) scheme, up to the Full Retirement Sum for those below 55 and the Enhanced Retirement Sum for those 55 and above.
When Does My Employer Have To Make My CPF Contributions?
Employers have a grade period of 14 days after the end of the month to pay our CPF contributions. If the 14th day falls on a weekend or Public Holiday, they have up to the next working day to pay our CPF Contributions.
If employers do not pay the CPF contributions on time, they may have to pay interest on late payment and a fine, which will go towards making up for any loss in employee’s interest returns. For employers who pay late, they may face:
- Late payment interest, charged at 18% per annum (1.5% per month), or a minimum of $5 per month.
- Fines of between $1,000 and $5,000 per offence and/or up to 6 months jail
- Fines of between $2,000 and $10,000 per offences and up to 12 months jail for repeat offenders
- Fines of up to $10,000, imprisonment of up to 7 years or both if employee’s share of CPF contributions are deducted by fail to pay to CPF Board
How Do I Check On My CPF Contributions?
Step 1: Login to your CPF Account, via the CPF website.
Step 2: You should see the latest CPF contribution and the date you received the funds.
Step 3: To check on additional details and past contributions, go to My Statement (Section B) and click to see your Contribution History.
Even though the responsibility of making CPF contributions is on our employer, we should still regularly check if we have received the right amount. If we spot any errors, you should check in with our employer, and if we need to escalate the issue, we can email the Ministry of Manpower.
Since our employer has up to 14 days to make payment, we should only check after that.
What Can I Use My CPF Contributions For?
Balances in our CPF accounts can be used in diverse ways to simplify and improve our lives:
# 1 We can use our CPF contributions to pay for our home downpayment and monthly mortgages
# 2 Treat it as forced savings for our retirement and healthcare needs. In addition, we can also use part of our Ordinary Account and Special Account balances to invest in the stock market and other financial products.
# 3 Pay for our or loved ones’ education in Singapore, at approved institutions. One important thing we have to note is that we need to pay these funds back, with accrued interest.
# 4 Pay for our or our loved ones’ insurance in Singapore. We can use our CPF balances to pay for our Home Protection Scheme (HPS) and Dependents’ Protection Scheme (DPS), which provides our loved ones with greater financial security. In addition, we can also pay for our and our loved ones MediShield Life premiums and ElderShield and future CareShield Life premiums.
# 5 Once we turn 55, our Ordinary Account and Special Account balances will be transferred into our Retirement Account. These funds will be used to give us a lifelong monthly income via CPF LIFE, after we retire.
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