Central Provident Fund  

How CPF works and what it is used for

The Central Provident Fund helps Singapore families plan for retirement.

 

 

To enable Singaporeans and Permanent Residents (PRs) to set aside sufficient funds for their retirement, the Central Provident Fund (CPF) - a social security savings plan for citizens and PRs  was set up. Unique to Singapore, the plan covers areas such as housing, healthcare, family protection and asset enhancement.
  • Singaporeans, PRs and their employers make monthly contributions to three accounts in their CPF:
  • Ordinary – Savings used to pay for property, insurance, investments and education
  • Special – For old age, contingencies and investments in retirement-related financial products
  • Medisave – For hospitalisation and approved medical insurance expenses
 
CPF accounts are funded by both employee and employer contributions. The accounts typically earn interest ranging from a minimum of 2.5% per annum for the Ordinary Account to at least 4% per annum for the Special and Medisave Accounts. The rates are reviewed quarterly and are determined by domestic interest rates.
The CPF also manages and administers other financial packages and one-off bonuses announced by the government. Thus far, citizens have benefitted from schemes such as the New Singapore Shares, Economic Restructuring Shares, Goods and Services Tax (GST) Offset Package and the Progress Package.
In fact, Singapore is the only country in the world that gives dividends to all its citizens as a result of its economic growth.

Eligibility and contribution rates

 

Who qualifies?

 
Only Singapore citizens and PRs have to contribute to the CPF. If you are working in Singapore on an employment pass, you will not need to contribute to the CPF. 

Contribution rates
 
The CPF contribution rate is adjusted according to the state of Singapore's economy and reviews are made on an annual basis.

Currently, citizens and PRs contribute 3.75% to 20% of their monthly income to the CPF. The amount that will be liable for CPF contributions is pegged to the first S$4,500 of their monthly salaries.

Employers contribute between 2.625% and 14.5% of the employee’s income to the CPF. The amount that will be liable for CPF contributions is also pegged to the first S$4,500 of the employee’s monthly income.

Together, the total contributions – or savings – add up to a substantial amount. Contribution rates depend on a host of factors such as monthly income, age group, sector of employment, and length of stay in Singapore for PRs.


Benefits of CPF

As a comprehensive social security fund, the CPF helps both the young and old in various areas, ranging from education and housing to healthcare and more.
 
Here are a few areas that CPF covers:
 
 
CPF contribution rates depend on a host of factors such as monthly income, age group, sector of employment, and length of stay in Singapore for PRs.
 

Comparative Benefits of CPF

Singaporean citizens and PRs are provided with significant savings each month with a comparatively higher employer contribution of up to 14.5% of the employee’s salary. This provides a solid foundation when it comes time to purchasing your own home or ensuring that you have a solid retirement fund available to you.

 

A cap is placed on your contribution to your CPF so as to ensure that as your salary grows, you are not taxed too heavily. This way you are able to make a sizeable contribution feeling the pinch.

 

As such, CPF takes care of your needs while employed and even after you’ve retired.