The Central Provident Fund (CPF) is a crucial social security savings scheme that the government of Singapore has set up. Both employers and employees finance this initiative to safeguard the financial stability of Singaporeans and PRs. The core purpose of CPF revolves around three fundamental retirement needs: a comfortable retirement, medical costs, and facilitating homeownership. To accomplish these objectives, individuals must set aside a specific percentage of their monthly earnings into designated CPF accounts. This CPF guide aims to familiarise you with the basics of CPF, explore the allocation in CPF accounts, the types of CPF accounts, the interest rates, and more.
CPF Contribution Rates for 2024
The CPF contributions for employees who are Singapore Citizens or PRs consist of the employee’s contribution and the employer’s contribution. These contributions are deducted automatically from the employee’s salary. Individuals can contribute up to 20% of their salary to their CPF accounts, while employers can supplement the contribution by up to 17% of the employee’s salary to their CPF account.
Employers are solely responsible for contributing to your CPF accounts until your monthly earnings surpass $500. Once your salary exceeds this threshold, a percentage ranging from 5% to 20% will be deducted for CPF contributions. It is mandatory for Singaporean citizens and PRs to contribute to their CPF accounts from their very first job, irrespective of its nature, be it permanent, contractual, or part-time.
To make it easier for you, check out the CPF contribution rates as laid out by CPFB!
CPF Contribution Salary Caps
There are two types of wages – Ordinary Wage (OW) and Additional Wage (AW). The OW refers to our monthly salary. Starting from 1 January 2024, the CPF monthly contributions will be subject to a monthly salary cap of $6,800. As per the announcement made in Budget 2023, the salary cap will increase gradually to $8,000 by 2026.
This elevation in the CPF salary cap guarantees the CPF system’s ongoing relevance in fulfilling our retirement requirements. The Additional Wage (AW) encompasses bonuses, leave pay, allowances, and any other salary components. It is necessary to make CPF contributions on these wages, ensuring they do not exceed the CPF Annual Limit.
CPF Annual Limit
The CPF Annual Limit signifies the maximum amount of money that goes into your CPF account within a year. Presently, this limit is $102,000, encompassing compulsory and voluntary contributions.
Types of CPF Accounts
Your CPF contributions will be in three essential accounts: the Ordinary Account (OA), MediSave Account (MA), and Special Account (SA). Once you reach 55 years old, a Retirement Account (RA) is established to cater to your future needs.
| CPF Account | Purpose of Account |
| Ordinary Account | For housing, insurance, education, and investment Housing: Acquisition of HDB public housing and private properties* *Private properties require the repayment of OA money into your CPF account, whereas this obligation does not extend to HDB properties. Insurance: Mostly used for paying the Dependents Protection Scheme (DPS) premiums. Education: Members can use OA money for their own, spouses’, children’s, or relatives’ subsidised tuition fees for approved courses. * *The amount used must be paid back by the student starting one year after graduation. Investment: Investment in various CPFB-approved financial products. |
| Special Account | For old age and investment in retirement-related financial products |
| MediSave Account | The insurance coverage offered by MediShield Life, a national health insurance scheme, encompasses hospitalisation expenses and approved medical insurance. This inclusive insurance plan ensures coverage for basic medical procedures, day surgery, hospitalisation fees, and selected outpatient expenses throughout one’s lifetime. |
| Retirement Account | For monthly retirement payouts (Age 55 and above) RA = SA + OA account savings You have three options for retirement sums: the Basic Retirement Sum, Full Retirement Sum, or Enhanced Retirement Sum (depending on the sum of your RA). |
CPF Interest Rates
Here are the CPF interest rates your savings could earn across your CPF accounts as of 1 January 2024:
| CPF Account | Interest (Per Annum) |
| Ordinary Account | Base interest: 2.5% Below 55: Additional 1% on the first $20,000 Above 55: Additional 2% on the first $20,000 |
| Special Account | Base interest: 4% Below 55: Additional 1% on the first $60,000 combined CPF balance Above 55: Additional 2% on the first $30,000 combined CPF balance, additional 1% on the next $30,000 |
| MediSave Account | Base interest: 4% Below 55: Additional 1% on the first $60,000 combined CPF balance Above 55: Additional 2% on the first $30,0000 combined CPF balance, additional 1% on the next $30,000 |
| Retirement Account | Base interest: 4% Below 55: Additional 1% on the first $60,000 combined CPF balance Above 55: Additional 2% on the first $30,000 combined CPF balance, additional 1% on the next $30,000 |
Conclusion
CPF can seem puzzling and complicated but there is no denying the significance of this scheme for every Singaporean and PR. CPF serves as a foundation to ensure a more comfortable retirement awaits us. We hope this CPF guide will help you understand the ins and outs of CPF better!
CPF Calculator
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