To help Singaporeans achieve adequate savings for retirement, Finance Minister Tharman Shanmugaratnam announced the following initiatives relating to CPF during his Budget speech in Parliament on 15 February 2008:

*Applicable to employers

LIFE Bonus

The CPF LIFE scheme will be introduced as a major new plank to assure Singaporeans of a stream of income for as long as they live. Singaporeans who turn age 55 in or after 2013 and who have at least $40,000 in their CPF Minimum Sum will be automatically included in the scheme. Older Singaporeans and those with less in their Minimum Sum can opt in.

The Government will provide a Bonus, called the LIFE Bonus (L-Bonus), to encourage Singaporeans to enroll in the LIFE scheme.

Liberalization of CPF Minimum Sum Topping-Up Scheme

The CPF Minimum Sum Topping-Up Scheme will be liberalized to encourage Singaporeans to voluntarily put aside more savings whenever they can. It will be made easier for Singaporeans to top up CPF accounts for themselves and their family members in order to meet the Minimum Sum, and offer more tax incentives for them to do so.

Details are shown in the table below:

Current Treatment	New Treatment
Individuals can claim tax relief for cash top-ups to their own Minimum Sum and top-ups to siblings, spouses1, parents and grandparents’ Minimum Sums, provided that the recipients are aged 55 and above.	Individuals can claim tax relief for cash top-ups by themselves or their employers to their own Minimum Sum and cash top-ups to siblings, spouses2, parents and grandparents’ Minimum Sums, regardless of the age of the recipients.
Total tax relief for self top-ups and family top-ups is capped at $7,000 per year of assessment.	Tax relief for cash top-ups by the member and his employer is capped at $7,000 per year of assessment. There will also be a separate tax relief for family cash top-ups, which is capped at another $7,000 per year of assessment.
Employers cannot make Minimum Sum cash top-ups for their employees.	Employers can make Minimum Sum cash top-ups for their employees and receive a tax deduction on the entire top-up3. Employees are taxable on the employer’s top-ups to their Minimum Sum. However, the employees may claim tax relief for the employer top-ups. Total tax relief for employer top-ups and self top-ups is capped at $7,000 per year of assessment. These changes will take effect from year of assessment 2009.

1	For top-ups to siblings/spouses, the recipient must have earned $2,000 or less in the preceding year for the tax relief to be claimed.
2	For top-ups to siblings/spouses, the recipient must have earned $2,000 or less in the preceding year for the tax relief to be claimed.
3	Any voluntary contributions to the CPF made by the individual or in the case where the individual is an employee, by his employer (whether on the employee’s behalf or not), that are not specifically made to the Minimum Sum are still not allowed as tax deduction for the employer or tax relief for the employee.

Please visit MOM's website for more details and FAQs on the Liberalisation of Minimum Sum Topping-Up Scheme announced by Minister of Manpower on 4 March 2008. The above changes will take effect from 1 November 2008.

Growth Dividends

Growth Dividends will be given to all adult Singaporeans, to be paid out in two instalments in April and October this year. Those who have already signed up for their GST credits will automatically receive their Growth Dividends.

Generally, a lower-income Singaporean living in a three-room HDB flat or smaller, will receive a Growth Dividend of $400. The majority of Singaporeans, who live in other HDB flats and do not have high incomes, will receive a Growth Dividend of $300.

Older Singaporeans, those aged 60 and above, will get more. Most older Singaporeans will receive one and a half times what other Singaporeans will receive.

Those with Annual Incomes more than $100,000 will receive a Growth Dividend of $100.

Those who have served and are currently serving national service will get an additional $100 of Growth Dividends, to recognise their contributions to our nation.

As before, Singaporeans will have the option to donate their Growth Dividends to charity, so that those who wish to can conveniently contribute to a cause of their choice.

Structure of Growth Dividends

		Annual Value of Home in 2007
		$5,000 or less (1-3R HDB flats)	More than $5,000 and up to $10,000 (4R, 5R HDB flats, exec flats and some less expensive private properties)	More than $10,000 (more expensive private properties)
Annual Assessable Income in 2007	$24,000 or less	$400 For those 60 years old and above: +$200	$300 For those 60 years old and above: +$150	$150 For those 60 years old and above: +$75
	More than $24,000 and up to $100,000	$300 For those 60 years old and above: +$150
	More than $100,000	$100
NSmen, ex-NS men and NSFs		+$100

Tax Relief for Voluntary Contributions to CPF Medisave Account

To encourage savings to meet medical needs, tax relief will be provided for voluntary contributions that CPF members specifically direct to the Medisave Account. This will also help more CPF members meet the Medisave Minimum Sum. The change will be implemented on 1 November 2008 and the tax relief changes will take effect from year of assessment 2009.

Details are shown in the table below:

Current Treatment	New Treatment
Individuals cannot claim tax relief for voluntary contributions specifically directed to the CPF member’s own Medisave Account.	Individuals will now be able to claim tax relief for voluntary contributions that they make specifically to their own Medisave Account4 up to a cap of ($26,393 less mandatory contributions5) per year of assessment.

4	Voluntary contributions to the Medisave Account are capped at the prevailing Medisave Contribution Ceiling (MCC).
5	Mandatory contributions are compulsory contributions by employers and employers required under the CPF Act. This includes CPF contributions on the Ordinary and Additional Wages for employees, and Medisave contributions by self-employed persons.

Top-ups to CPF Medisave Account

Ministry of Health (MOH) will be enhancing MediShield to provide better coverage for patients with large hospital bills, with some adjustment to MediShield premiums in tandem. To help older Singaporeans pay for their medical bills and their increased MediShield premiums, the Government will top up the Medisave accounts of all those aged 51 and above by up to $450. The top-ups will be made in the second half of 2008.

Structure of Medisave Top-ups

Age in 2008	Medisave Top-up Amount
51 to 60	$150
61 to 70	$250
71 to 75	$350
76 and above	$450

Liberalization of Supplementary Retirement Scheme (SRS)

The Supplementary Retirement Scheme (SRS) provides a tax incentive for Singaporeans as well as foreigners to save for retirement outside of the CPF scheme. It will be liberalized to allow employers to directly contribute to the SRS on behalf of their employees. In addition, the age limit on contributions to the SRS will be removed since more Singaporeans are now working beyond the retirement age. The changes listed below will take effect from 1 October 2008.

Details are shown in the table below:

Current Treatment	New Treatment
Employers cannot directly contribute to their employees’ SRS accounts.	Employers can contribute to their employees’ SRS accounts, subject to the current contribution limits of $11,475 per year for Singapore Citizens and Permanent Residents, and $26,775 for foreigners for each employee. Employers will be able to claim full tax deduction for the contributions they make to their employees’ SRS accounts. SRS members will be taxable on the contributions that their employers make to their SRS accounts. But, they can enjoy a tax relief up to the applicable contribution limit per year of assessment for the SRS contributions which they or their employers make.
SRS members can contribute up to the prevailing statutory retirement age. They can withdraw their SRS monies over 10 years from the prevailing statutory retirement age.	SRS members can contribute beyond the prevailing statutory retirement age, up to the point of their first penalty-free withdrawal. They can withdraw their SRS monies over 10 years from the point of their first penalty-free withdrawal.
Individuals without any earned employment income in the previous year cannot contribute to SRS in the current year.	Individuals without any earned employment income in the previous year can contribute to the SRS in the current year. These changes will take effect from year of assessment 2009.

Tax Deduction for Costs of Medical Benefits Incurred by Employers for their Employees

The criteria for employers to enjoy tax deductions for the costs of medical benefits incurred for their employees will be relaxed to encourage them to provide portable medical benefits through Medisave and MediShield. Beyond regular Medisave contributions, employers will also be allowed tax deductions up to the higher cap if they make ad-hoc contributions to their employees’ Medisave accounts, or if they purchase MediShield or Medisave-approved private integrated plans for their employees.

Details are shown in the table below:

Current Treatment

New Treatment

Currently, the tax deduction limit for costs of medical benefits incurred by employers for their employees is generally 1% of total wage bill. However, companies which have implemented the Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS) can qualify for tax deduction for the costs they incur on medical benefits at 2% of total wage bill. This is to encourage more employers to adopt the PMBS or TMIS, which provide portable medical insurance coverage for employees that employees can continue to enjoy, if they wish to, even when they switch jobs or retire6.

With effect from year of assessment 2008, employers who provide their employees with inpatient medical insurance benefits in the form of portable medical shield plans can qualify for tax deduction at 2% of the total wage bill for medical expenses they incur for their employees. Employers can provide such portable medical shield plans, either by paying the insurance premiums on behalf of their employees to the insurance companies directly or by reimbursing the premiums into employees’ Medisave accounts. To qualify, the employer must provide the portable medical shield plans for at least 20% of existing local employees employed as at the first day of the basis period for the year of assessment, and every local employee who commences his employment during the basis period for that year of assessment. The medical insurance expenses qualifying for the additional 1% of tax deduction will exclude premiums for “riders”7 that cover deductibles and co-payments. In addition, with effect from year of assessment 2008, if employers make ad-hoc contribution to employees’ Medisave account (subject to a cap of $1,500 per employee per year), the 1% tax deduction limit will be lifted for these ad-hoc contributions (but subject to the cap of 2% of total wage bill for total medical benefits expenses). Tax deduction for all other medical benefits will remain capped at 1% of total remuneration if employers are not on PMBS or TMIS or do not provide portable Shield plans for their employees (as above). The above changes are introduced in recognition that employers’ provision of portable medical shield plans or ad-hoc contributions to the Medisave accounts of employees achieves the same objective as the PMBS and TMIS, namely, to provide portability of medical benefits. MOM will release more details by March 2008.

6	For more information on the PMBS and TMIS, please refer to Ministry of Manpower’s circular at: http://www.mom.gov.sg/publish/etc/medialib/mom_library/Workplace_Standards/ files2.Par.34919.File.tmp/Information%20booklet%20on%20PMBS%20&%20TMIS%20(Mar%202007).pdf
7	A policy rider is a provision or modification to an existing insurance policy that provides additional coverage to an insurance policy.

Skills Development Levy (SDL)

Currently, employers contribute a Skills Development Levy (SDL) on workers earning $2,000 and below. In line with the Government’s move to provide Continuing Education and Training (CET) to workers across all levels, employers will contribute SDL on all workers they employ, up to the first $4,500 of gross remuneration from 1st October 2008. The levy rate will in turn be reduced from 1% to 0.25%, subject to a minimum of $2. This will help to reduce the overall burden on smaller companies and employers of lower-wage workers.