Rules and regulations surrounding the Central Provident Fund (CPF) are regularly reviewed by the Singapore government and announced in the annual Budget presentation. The Budget is presented at the end of March every year, but the changes regarding CPF announced in it are implemented from the beginning of the following year. For example, the changes made to CPF from January 1, 2016 are based on the proposals that were made in the Budget announce in 2015.
Here’s a detailed list of the changes that were brought about in the CPF system through Budget 2015:
- The CPF Salary Ceiling or the Ordinary Wage Ceiling, was raised from S$5,000 to S$6,000, for private sector non-pensionable employees (for Singapore citizens and Singapore Permanent Residents with more than 3 years of permanent residency). This was done in order to factor in the growing income levels. The government estimated that around 544,000 workers, with a salary of $5,000 or more, would profit from this initiative.
- According to the above change, Additional Wage Ceiling also went up to S$102,000 (Ordinary Wage Ceiling multiplied by 17) from S$85,000 in 2015.
- Annual contribution ceiling for Supplementary Retirement Scheme is up from S$12,750 to S$15,300 for Singapore citizens and permanent residents, and from S$29,750 to S$35,700 for foreigners.
- CPF contribution rates for employees in the age group of 50 years to 65 years for private sector non-pensionable employees (Singapore citizens and Singapore Permanent Residents with more than 3 years of permanent residency) was increased by between 0.5% and 2%.
- Those aged between 60 to 65 years received 0.5% extra contribution from employers.
- Those in the age group 55 years to 60 years received 1% more contribution from employers.
- Employees who are 50 to 55 years old got 1% more from employer and was mandated to add 1% more to their own contribution, thereby getting a 2% hike in contribution rates.
Employee's age (years) Increase in contribution rates (% of wages) Contribution by employer Contribution by employee Total contribution Above 50 to 55 +1 +1 +2 Above 55 to 60 +1 - +1 Above 60 to 65 +0.5 - +0.5
- The higher contribution rates applicable will be allocated to the CPF accounts differently. The contribution hike by employer will be allocated to the member’s Special Account, while the contribution hike by employee will be allocate to their Ordinary Account.
- The CPF Annual Limit has been raised from S$31,450 to S$37,740.
- Maximum compulsory Medisave contributions for self-employed persons also went up from 2016.
Age as on January 1, 2016 Below 35 years 35 to less than 45 years 45 to less than 50 years 50 years and more 12 months x S$6,000 x 8% = S$5,760 12 months x S$6,000 x 9% = S$6,480 12 months x S$6,000 x 10% = S$7,200 12 months x S$6,000 x 10.5% = S$7,560
- Self-employed persons will also get tax relief of 37% of their annual net trade income, up to the new CPF Annual Limit of S$37,740 on their CPF contributions. This move is aimed at encouraging self-employed people into contributing to CPF accounts.
- The Singapore government will give an additional 1% Extra Interest on the first S$30,000 of CPF combined balances for employees from the age of 55, in addition to the existing 1% Extra Interest provided on the first S$60,000. This means that CPF members aged 55 and above will earn up to 6% interest per year on the first S$30,000 of their retirement balances. The cap on Ordinary Account balance in both these calculations is S$20,000.
Several changes were also brought into schemes relate to the CPF. Let’s take a look at them:
- Temporary Employment Credit (TEC) will be extended up to 2017 to support employers amid increase in CPF salary ceiling and employer CPF contribution rates for older workers.
- For 2016, employers will receive an offset of 1% of wages for Singaporean and Permanent Resident workers up to the CPF salary ceiling of $6,000, while for 2017, employers will receive an offset of 0.5% of wages for the same category of employees.
Most of the changes in the CPF system for 2016 was done with the objective of boosting savings for older employee and to improve the employability of older employees. The government makes constant efforts to ensure that its citizens are able to afford retirement with their savings. For any queries on the changes and updates, you can contact the CPF organisation through email, phone or personal appointment.