Understanding how the Central Provident Fund (CPF) works is a rite of passage for every salaried employee. We know how painful it can be to see a chunk of your salary get taken away from you each month but trust us, you’ll be glad for it once you need it.
If you’re getting your first job soon and want to understand this better, don’t fret. We’ve got you covered with this quick guide on what you must know about your CPF contribution rates this year.
CPF Contribution Rates
Quick recap: all income earners must make mandatory contributions to their CPF accounts every month. These accounts include the Ordinary Account, Special Account, and Medisave Account, each of which has specific purposes as briefly described below:
|Ordinary Account (OA)||Special Account (SA)||Medisave Account (MA)|
|For housing, insurance, investment, and retirement||For old age and investment in retirement-related financial products||For hospitalisation expenses and approved medical insurance|
If you’re a salaried employee, then your employer is also entitled to contribute a certain percentage towards your CPF accounts.
As of January 2022, these are the latest contribution and allocation rates for Singaporeans and permanent residents:
|Age Group||Special Account||MediSave Account||Retirement Account (For those turning 55 y.o.)||Total % of Monthly Wage (Covered by Employee)||Total % of Monthly Wage (Covered by Employer)||Total Monthly Rate|
|35 and below||23%||6%||8%||20%||17%||37%|
|Above 35 to 45||21%||7%||9%||20%||17%||37%|
|Above 45 to 50||19%||8%||10%||20%||17%||37%|
|Above 50 to 55||15%||11.50%||10.50%||20%||17%||37%|
|Above 55 to 60||12%||5.50%||10.50%||14%||14%||28%|
|Above 60 to 65||3.50%||4.50%||10.50%||10%||8.50%||18.50%|
|Above 65 to 70||1%||2.50%||10.50%||8%||6%||14%|
Generally, the total percentage of monthly contributions decreases as you age. You may find your Medisave allocations to increase as you grow older, but that will be counterbalanced by lower monthly contributions in your other accounts.
The reasoning behind evolving allocation percentages is quite simple: age groups have different needs.
For example, a young and healthy 30-year old would likely need a house more than they would need to spend for medical bills. As you grow a little bit older, the chance of falling ill also increases, hence you need higher allocations to your MA.
By the time you reach the retirement age of 62 years old, it’s expected that you’d have saved quite a bit for your retirement. This is why the allocation for your OA significantly drops.
Note that money earned in your CPF accounts would earn interest too. It’s computed monthly, and it will be credited to your account by the 1st of January of the following year.
|Ordinary Account||Special Account||Medisave Account||Retirement Account (For those turning 55 y.o.)|
In the next few years, take note that CPF contribution rates for workers between the ages of 55 and 70 will gradually increase, as noted below. The final rates are targeted to be implemented by 2030.
- Above 55 to 60: From 28% today to 37% by 2030
- Above 60 to 65: From 18.5% today to 26% by 2030
- Above 65 to 70: From 14% today to 16.5% by 2030
Still confused after all this? Here’s a classic illustration.
Imagine a 25-year old full-time professional taking home a monthly salary of $4,000. Now, take away 20% from their monthly salary for CPF contributions, which will amount to $800.
On top of that amount, their employer has to credit an additional monthly contribution of $680 (17% of your total monthly wage) to their CPF accounts. Take note that this amount is separate from their monthly salary.
This brings a total of $1,480 in CPF monthly savings, which will be split to their accounts accordingly as broken down below:
- Ordinary Account – $920 (23% of the total monthly salary; 4,000 x 0.23)
- Special Account – $240 (6% of the total monthly salary; 4,000 x 0.06)
- Medisave Account – $320 (8% of the total monthly salary; 4,000 x 0.08)
To know how much your contributions should be as you age, follow the same steps using other age group contribution allocation rates. Take note that these rates will change over time, so it’s best to keep yourself updated via CPF’s website for more information.
Your CPF contributions are also subject to a cap, which puts a limit on how much you can contribute each month. There are two types of contribution caps available, as illustrated below:
Ordinary Wage Ceiling
This simply means that only the first $6,000 of your monthly salary will be subject to CPF deductions.
For example, let’s say you earn $7,000 monthly. Your CPF contributions will be computed based on $6,000 only, excluding the remaining $1,000 from contributions.
Additional Wage Ceiling
This ceiling cap puts a limit on your additional wages such as bonuses. It’s computed using the following formula: $102,000 minus total Ordinary Wage subject to CPF for the year.
For example, say that you earn $7,000 monthly, getting a performance bonus of $10,000. To know what the limit to your CPF contributions will be for this bonus, use the formula above: $102,000 – $72,000 (12 x 6,000) = $30,000.
Seeing that your bonus is below $30,000, it means that your entire bonus will be subject to CPF contributions.
Self-Employed CPF Contribution Rates
On the other hand, self-employed individuals are only mandated to make Medisave contributions. Only those with an annual Net Trade Income (NTI) of more than $6,000 need to contribute to Medisave, as noted in the table below:
|Below 35 Y.O.||35 to Below 45 Y.O.||45 to Below 50 Y.O.||50 Y.O. and Above|
|Above $6,000 to $12,000||4%||4%||5%||5.25%|
|Above $12,000 to $18,000||4% to 8%||4.5% to 9%||5% to 10%||5.25% to 10.5%|
|Above $18,000||8% (Maximum $5,760)||9% (Maximum $6,480)||10% (Maximum $7,200)||10.5% (Maximum $7,560)|