Adulting’s easy — said no one ever. Among the milestones that prove you’ve transitioned into adulthood is this one: getting your first full-time job, and having a portion of your salary put towards your Central Provident Fund, or CPF.
Except: what is CPF? Is it simply a retirement scheme? And what’s the difference between all those accounts? Here’s everything you need to know, and how to stretch your use of the mandatory system in Singapore.
What is CPF?
CPF — or Central Provident Fund (CPF), for short — is a compulsory savings and retirement scheme for working Singapore citizens and PRs. The social security plan additionally covers healthcare, home ownership, family protection and asset enhancement.
Why do we even need CPF?
Every country has its own social security system to cope with the needs and challenges faced by its citizens. While the jury’s still out on whether the ‘perfect’ savings and retirement scheme exists, these mandatory CPF contributions essentially prepare us for our retirement years…even if that means forcing us to set aside a sum each month.
Our CPF contributions are also put towards something called Special Singapore Government Securities (SSGS).
These government-backed, non-tradeable bonds are extremely safe, and resistant to financial market conditions.
(And nope, this isn’t a sponsored post!)
What are the CPF contribution rates if I’m employed or self-employed?
If you’re drawing a monthly salary of S$500 or more in Singapore and are not self-employed, your employer’s expected to make a monthly contribution of up to 17% of your paycheck. An additional 20% is then deducted from your salary to be put towards your CPF.
Here’s a breakdown of what that means for you:
|Up to 55 years old||17%||20%||37%|
|≥ 55 to 60||13%||13%||26%|
|≥ 60 to 65||< 9%||< 7.5%||< 16.5%|
|≥ 65 and up||7.5%||5%||12.5%|
What if I’m self-employed or a temp/contract worker?
If you’re a self-employed person (SEP), then the above CPF rates don’t apply to you. That’s because SEPs are allowed to contribute to their CPF on a voluntary basis — although Medisave contributions remain mandatory. Regardless, and if you fall in this camp, you’re still expected to file your taxes.
Temporary/ad hoc staff or contract workers are entitled to CPF contributions from employers, provided they are:
Singaporeans or PRs
Employed by someone, or by a company
Earning more than S$500 a month.
And if you’re earning less than S$500 a month, you won’t be expected to make an employee’s CPF contribution — but your employer will have to put 17% towards your CPF, anyway. Be sure to know your rights, and contact the WorkRight hotline at 1800-221-9922 if you have pressing questions.
How are CPF contributions allocated?
Your CPF contributions are split between four CPF accounts — the Ordinary Account (OA), Special Account (SA), MediSave Account (MA), and Retirement Account (RA). The latter, which is automatically opened on your behalf at the age of 55, combines the funds from your OA and SA.
CPF account types and allocation rates
Here’s a detailed look at the functions of each account, and their corresponding CPF allocation rates.
|CPF account type||Purpose of account|
|Ordinary Account (OA)||
|Special Account (SA)||
|MediSave Account (MA)||
|Retirement Account (RA)||
An important point to note is, your money isn’t equally allocated between each of your accounts. This overview shows how your salary contributions vary with age — and only applies to salaried employees drawing a monthly income of S$750 or more.
CPF allocation rates
|Your age||Ordinary Account
(% of wage)
(% of wage)
(% of wage)
|Up to 35 years old||23%||6%||8%|
|≥ 35 to 45||21%||7%||9%|
|≥ 45 to 50||19%||8%||10%|
|≥ 55 to 55||15%||11.5%||10.5%|
|≥ 55 to 60||12%||3.5%||10.5%|
|≥ 60 to 65||3.5%||2.5%||10.5%|
|≥ 65 and up||1%||1%||10.5%|
The CPF contribution cap
CPF imposes a contribution cap in what’s known as the CPF Wage Ceiling. This contribution cap means that no more than S$30,000 is put towards your CPF as a salaried employee. This cap can be further broken down into two parts: the Ordinary Wage Ceiling, and the Additional Wage Ceiling.
CPF Wage Ceiling
Ordinary Wage Ceiling
Capped at S$6,000 of your monthly salary
That means both you and your employer will only make CPF contributions for the first S$6,000 of your salary.
So if you’re drawing a salary of S$7,000 a month, the remaining S$1,000 will not be subject to CPF deductions.
Additional Wage (AW) Ceiling
The AW Ceiling determines the maximum annual CPF contributions deductible on your additional wages deductible on your additional wages — such as bonuses.
The formula for this is: (S$102,000) less (total ordinary wages for the year)
How to calculate the Additional Wage (AW) Ceiling?
To better set the context for the Additional Wage (AW) Ceiling, let’s assume you currently draw a monthly salary of S$7,000. Of this, the maximum sum of S$6,000 is subject to CPF.
To calculate your AW Ceiling, use the above formula:
(S$102,000) less (S$6,000 x 12 months) = S$30,000 (max. CPF contribution cap) You later learn you’ve gotten a two-month bonus of S$14,000.
At S$14,000, your bonus falls below the annual CPF contribution cap of S$30,000. Therefore, your bonus is subject to CPF contributions from both you and your employer.
Can I top up my CPF accounts outside of the mandatory contributions?
You absolutely could, but there is an annual limit of S$37,740 for CPF contributions — inclusive of what you and your employer would have contributed, of course. This annual limit essentially ensures no one games the system to stretch their returns too much. Which brings us to this:
It’s no secret CPF interest rates are notoriously competitive, and even more so than banks’ typically meagre annual interest rates.
|Ordinary Account (OA)||2.5%|
|Special Account (SA)||4%|
|MediSave Account (MA)||4%|
|Retirement Account (RA)||4%|
In addition to the listed interest rates per annum below, you’ll get an extra 1% interest on the first $60,000 of your combined CPF balances — of which up to S$20,000 can come from the OA.
To encourage older Singaporeans to leave some of their funds in CPF, those aged 55 and up also get an extra 1% interest per annum on the first S$20,000 of their combined CPF balances.
Should I transfer my money in OA to SA?
Granted, Special Account interest rates are far more enticing than the former. But keep this in mind: transferring your savings from OA to SA is irreversible.
That’s something worth thinking about if you’re planning to get a BTO or home, since the purpose of the Ordinary Account is to supplement the costs of your basic needs: housing, insurance, education, and investing.
The Retirement Sum Scheme, and CPF LIFE
We mentioned earlier your OA and SA merge on your 55th birthday to form your RA.
That’s where the Retirement Sum Scheme comes into play. Although this scheme was officially replaced in 2009 by the CPF LIFE Scheme, Singaporeans born before 1958 would technically still fall under the former scheme.
For purposes of clarity, we’ll focus on CPF LIFE, since all Singaporeans are automatically included in it.
CPF LIFE manages your RA payouts to ensure you’ve enough to tide you through your golden years, depending on which of the three tiers your retirement sum sits under. These figures are adjusted annually, owing to long-term inflation and projected costs of living.
It’s a little confusing at first — so here’s a look at what to expect.
|Year of your 55th birthday||Basic Retirement Sum
|Full Retirement Sum
|Enhanced Retirement Sum
So, how does it work?
From the time you turn 65, your payouts will vary depending on whether you’ve hit any of the above sums in each of the categories. If you don’t hit any of the above tiers, your monthly payouts will instead be prorated.
If you’ve managed to unlock your full retirement sum, however, you’ll be entitled to withdraw the excess.
|Year of your 55th birthday||Full Retirement Sum||Your Full Retirement Sum||Sum allowed for Withdrawal|
The same applies if you’ve amassed enough to hit the Enhanced Retirement Sum: you’re able to withdraw the excess, so long as the base Full Retirement Sum does not go beyond the minimum amount imposed. You’re also encouraged to supplement your monthly payouts with your own savings.
Where does my CPF money go after I die?
Ah, the all-important question. That’s where the CPF Nomination Scheme comes into play — because it’s your money, after all, and you can do (almost) what you like with it.
So while you can’t redistribute your CPF money through your will — not choose to donate it to charity organisations of your choice — you have the option of choosing who your CPF funds go to upon your passing.
For this, the CPF Nomination Scheme allows you to choose four nominees, as well as the share of savings you intend to allocate to each person. You’ll have to fill out a form, which can be accessed on the official CPF site.
Rather than rely on your CPF contributions, though, start planning early with Planner Bee’s retirement calculator to figure out how much you’ll need to live comfortably in your golden years.