The Central Provident Fund (CPF), administered by the Central Provident Fund Board (CPFB) and functioning under the aegis of the Government of Singapore, is a comprehensive savings scheme that aims to help Singaporeans prepare and save up for their post-retirement life.
It is a mandatory contribution scheme to which both employees and employers are expected to make contributions. The amount contributed by the employer and the employee depends on the age of the employee. For instance, if an employee is 55 years and below, the employer will contribute 17% of the employee’s salary to the CPF, while the employee’s contribution will be 20%. As the employee’s age increases, the contribution of the employer also increases in comparison to the employee’s contribution.
It addresses critical issues such as retirement savings, healthcare, homeownership, and wealth generation and enhancement. It also helps provide for the education of the member or their immediate family.
The fund also provides payouts to CPF members and/or their dependent family members in the event of premature death or disability of the member, under the Dependent’s Protection Scheme, an opt-out term insurance.
The money contributed to the CPF goes into the following accounts:
- Ordinary Account (OA): Funds in this account can be used for housing, education, investment, and insurance.
- Special Account (SA): Funds will be used for creating retirement corpus and for investing in retirement-related vehicles.
- Medisave Account (MA): Funds from this account can be used for hospitalisation and medical costs and for investments into approved healthcare insurance plans.
As soon as you turn 55, a percentage of your CPF contributions will also be deposited in a fourth account called the Retirement Account (RA), to create a thicker financial cushion for your future.
However, CPFB has set a number of contribution and withdrawal limits that members and their employers must adhere to at all times. The following section sheds light on some of these.
Important CPF Limits
- Ordinary Wage Ceiling: Ordinary wages are wages that are paid by an employer to an employee solely and exclusively for the services he has rendered for the month. This wage is always paid before the CPF contribution due date. The monthly salary is an example of ordinary wage.
ordinary wage ceiling is the maximum ordinary wage amount that would attract CPF contributions. Currently, this limit stands at S$6,000 per month. If the ordinary wage of an employee exceeds S$6,000 in a month, the employee can’t claim contributions for the excess amount.
- Additional Wage Ceiling: Wages paid irregularly, in intervals of more than a month, or not solely or exclusively for the services rendered in a particular month, are defined as additional wages. Payment made for unused leaves in a calendar year, annual bonus, or other incentives that are paid periodically and in intervals exceeding 1 month, are some examples of additional wage.
The Board has also imposed a cap on the amount of additional wage that can mandatorily attract contributions from employers and employees. This is known as the additional wage ceiling. The current ceiling has been fixed at the amount of ordinary wage that attracts CPF contributions for the whole year subtracted from S$102,000.
[Additional Wage Ceiling = S$102,000 (equivalent to S$6,000 for 17 months) – Ordinary wages that have attracted CPF contributions]
This ceiling is applied on a per-employer-per-year basis. That means, an employee can claim CPF contributions for additional wages from two or more employers if they are simultaneously working for two or more employers.
An employer can, however, apply for a single additional wage ceiling if an employee is transferred from one organisation to a related organisation. This can happen if the employers in the two companies are the same or related, they have a formal agreement, or if the terms of employment under the two jobs remain the same.
Employers are recommended to be cautious when making contributions for additional wages because if an employer pays more than what is mandated, they would have to claim for a refund later on. If an employee doesn’t have sufficient balance in his/her CPF account, he/she may not be in a position to make the refund, which could lead to an unnecessary complication.
An employer can use the monthly ordinary wages for the last year or for the current year to estimate the additional wage ceiling for a particular employee. At the end of the financial year or upon an employee’s resignation, the additional wage ceiling will have to be recalculated based on the actual amount of ordinary wage that attracted CPF contributions.
If there is any shortfall, the employer will have to pay for that along with contributions for the last month of the financial year or the last month of the employee’s tenure with the company, whichever is applicable. If you have made excess contributions, download the relevant refund form from the CPF website, fill it up, and mail it to the board.
An employer may also apply for a refund if excess CPF contributions were made due to an error. The employer can fill out the relevant form and mail it back to the board within one year of making CPF contributions for an employee. The refund will be subject to availability of funds in the employee’s CPF account.
If you’re an employer, you can use the additional wage ceiling calculator available on the official CPF website.
- CPF Annual Limit: The board has also set a cap on the total amount of mandatory and voluntary contributions that can be made for a particular year for/by an employee. It encompasses contributions to all the three CPF accounts, namely OA, SA, and MA.
The current limit stands at S$37,740 per year. The voluntary contributions for a year will be subject to the annual limit and the total mandatory contributions that have to be made. Voluntary contributions in excess of the CPF annual limit will be refunded without any interest.
Voluntary contributions to the Medisave Account will depend upon the CPF Annual Limit or the Basic Healthcare Sum (BHS), whichever is lower. The BHS is usually reviewed and adjusted on a yearly basis to keep pace with the increasing rate of CPF withdrawals, for members below the age of 65.
This means that if the BHS limit has been touched, no more voluntary contribution can be made to the MA. Any excess amount will be refunded without interest.
- Valuation Limit and Withdrawal Limit Under the Public Housing Scheme (PHS): Under the Public Housing Scheme, you can use monies in your CPF OA to purchase a new or resale HDB property, pay interest on the home loan taken, or pay the stamp duty and associated legal fees of the transaction.
You can’t your OA funds to purchase an HDB flat in either of the cases:
- The lease remaining on the flat is less than 30 years.
- The lease remaining on the flat is less than 60 years but greater than 30 years, and the sum of the remaining lease period and your age is less than 80.
The amount of OA savings you can use for the purchase, would depend on the type of flat you’re buying – new or resale, and the type of loan you have got – bank loan or concessionary HDB loan. Also, either or both the following limits would apply:
- Valuation Limit: This is the actual purchase price of the flat or the value of the flat at the time you purchased it, whichever is lower.
- Withdrawal Limit: This is the amount of savings you can use from your CPF accounts. Currently, this limit stands at at 120% of the valuation limit.
Both the limits apply for bank loans, whether you have taken it for a new/resale HDB flat or a DBSS (Design, Build and Sell Scheme) flat. You may be allowed to use monies in excess of these limits for the purchase of your flat, depending on your age and the current Basic Retirement Sum (BRS).
If you’re below 55, you’ll have to set aside monies in your OA and SA for BRS and if you’re 55 or older, you’ll have to ensure that you have already met the BRS criterion in OA, SA, and RA.
For new flats bought with an HBD concessionary loan, none of the limits described above, apply. For a resale flat bought with an HDB loan, however, only the valuation limit would apply.
- Stock and Gold Limits: The CPF Investment Scheme (CPFIS) gives you the option to invest a certain percentage of your savings in your OA and SA in a wide range of stable investment vehicles.
You’ll be allowed to invest the entire savings in your OA after you have set aside S$20,000 in it. You may also invest your savings in your SA after setting aside S$40,000. From your investible OA balance i.e. the total permissible limit minus the amount that you have already withdrawn, you may invest up to 35% in stocks and up to 10% in gold. These limits are known as the stock and gold limits.
- Medisave Withdrawal Limit: Savings in your Medisave account can also be used for hospitalisation and certain outpatient treatments. Medisave funds can only be used if the member or a dependent has been admitted for at least 8 hours or has been admitted for a day surgery.
However, as with most withdrawals, limits apply depending on the nature/type of treatment. For patients admitted in a hospital, a maximum of S$450 can be used every day for hospital charges. This includes a cap of S$50 for fees related to a doctor’s attendance.
The daily limit for hospital charges in relation to day surgeries has been set at S$300, including a doctor’s attendance fee of S$30.
Depending on the surgical procedure, you may be able to utilise up to S$7,550. Under the Medisave Maternity Package, you’ll be able to use S$450 for hospital charges and another S$450 for surgery, in relation to a delivery. Only savings from the CPF Accounts of a member and/or their spouse can be used.
For assisted conception procedures, you’ll be able to utilise S$6,000 in the first cycle, S$5,000 in the second cycle, and S$4,000 in the subsequent cycles. A lifetime cap of S$15,000 also applies. For an autologous bone marrow transplant completed at a medical institute with Ministry-of-Health-approved clinical protocols, a limit of S$2,800 applies per year per patient.
Refer to the CPF website or the Ministry of Health website to learn more about the other Medisave withdrawal limits.
You may also use the various calculators and estimators available for members on the CPF website to have a clear idea about CPF contributions, withdrawals, and retirement savings.