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Singapore Budget 2011: Initiatives Relating to CPF
 

Minister for Finance Tharman Shanmugaratnam announced the following initiatives relating to CPF during the FY2011 Budget Statement in Parliament on 18 February 2011:

  • Increase in Employer CPF Contribution by 0.5 Percentage Point
  • Increase in CPF Salary Ceiling to $5,000
  • Workfare Special Bonus
  • Tax Benefits for Voluntary Contributions by Companies to Self-Employed Persons’ Medisave Account
  • Special Employment Credit

    For more details of Singapore Budget 2011, visit http://app2.mof.gov.sg/budget_2011/default.aspx. For the press release issued by Ministry of Manpower, please click here.

     

    Increase in Employer CPF Contribution by 0.5 Percentage Point

    To help Singaporeans save more for their retirement, the Government will increase the employer CPF contribution rate to the Special Account by 0.5 percentage point. This will restore the total CPF contribution rate to 36%. The 0.5 percentage point increase will take effect from 1 September 2011. (Please see Annex A for details of the new CPF contribution rates by age group.)

    This restoration of the employer CPF contribution rate follows Prime Minister Lee Hsien Loong’s announcement at the May Day Rally in 2010, on the 1 percentage point increase in employers’ contribution, with 0.5 percentage point to the Medisave Account on 1 Sep 2010 and another 0.5 percentage point to the Special Account on 1 Mar 2011.

    All employees will benefit from the new CPF contribution rate change. Employees aged above 35 who are earning between $50 and $1,500 per month will also see pro-rated increases in their CPF contribution rate. (Please see Annex B for details of the new CPF contribution rates for low wage workers.)

    Increase in CPF Salary Ceiling to $5,000

    To keep pace with income growth in recent years, the CPF salary ceiling will be adjusted upwards from $4,500 to $5,0001. The change applies to all age groups and will take effect from 1 September 2011.

    All employees will benefit from the 0.5 percentage point increase in employer CPF contribution, while those earning more than $4,500 a month, estimated to be 390,000 members, will benefit from the increase in the CPF salary ceiling.

    1 The last change in the CPF salary ceiling was in 2006, when it was lowered from $5,000 to $4,500.

    Workfare Special Bonus (WSB)

    To ensure that low-wage workers benefit from economic growth, and particularly in view of the strong economic recovery in 2010, the Government will provide a one-off Workfare Special Bonus (WSB) over and above the regular Workfare Income Supplement (WIS) payment. The WSB will reward workers for work done in 2010, 2011 and 2012, and will be given out in four equal payments.

    Workfare Special Bonus Qualifying period during which work is done Payment Date
    2010 Jan-Dec 2010 May 2011
    Dec 2011
    2011 Jan-Dec 2011 Dec 2012
    2012 Jan-Dec 2012 Dec 2013

    The WSB will amount to an additional one year’s worth of WIS payments, spread over three years. As with WIS, older workers will receive higher WSB amounts compared to younger workers.

    Employees can receive up to $2,800 WSB. The payments will be made fully in cash. Self-Employed Persons (SEPs) can receive up to $1,868 WSB. The payments will be made half in cash and half into CPF-Medisave.

    The eligibility criteria for WSB are the same as that for WIS:

    • Singapore citizens;
    • 35 years old and above as at 31 Dec of the work year;
    • Worked at least three months in any six consecutive months in a work year to receive half of the payment or at least six months in a work year to receive the full payment;
    • Earn an average monthly income not more than $1,700 in the work year; and
    • Stay in a property with Annual Value of not more than $11,000 assessed as at 31 Dec in the year preceding the work year. The Annual Value threshold will be increased to $13,000 from work year 2011.

    More information on WSB is available at www.growandshare.gov.sg.

    Tax Benefits for Voluntary Contributions by Companies to Self-Employed Persons’ Medisave Account

    To increase Self-Employed Persons’ savings to meet their medical needs, tax benefits will be given for voluntary contributions made by eligible Companies to the Medisave Accounts of Self-Employed Persons who work with them. Both Self-Employed Persons and the Company will enjoy the tax benefits.

    Such voluntary contributions can help offset the Medisave liabilities of Self-Employed Persons, and help them meet the Medisave Minimum Sum.

    The changes will be implemented for voluntary contributions made from 1 January 2011 and the tax benefits will take effect from Year of Assessment 2012.

    Details are shown in the table below:

    Current Treatment New Treatment
    For Self-Employed Persons:

    Medisave contributions made by eligible Companies to the Self-Employed individuals’ CPF accounts may be considered taxable income.


    Medisave contributions made by eligible Companies to Self-Employed individuals’ Medisave account will now be tax-exempt up to a cap of $1,5001 for each calendar year.

    The limit will remain at $1,500 for Self-Employed Persons with more than one Company.
    For Companies:

    Companies who voluntarily contribute to Self-Employed individuals’ CPF accounts are not given tax deductions.


    Eligible Companies who voluntarily contribute to Self-Employed individuals’ Medisave account will be allowed tax deductions up to $1,500 per Self-Employed for each calendar year.

    For Self-Employed Persons with more than one Company, the $1,500 tax deduction will be apportioned between the Companies in the order in which their contributions were made.

    For members who are both Self-Employed and an Employee, the $1,500 tax deduction will be apportioned between the Company and Employer2 for eligible top-ups in the order in which their contributions were made.

    1 In addition, the Medisave contributions have to be within the CPF Annual Limit of the recipient and Medisave Contribution Ceiling prevailing at the point of contribution.
    2 Employers can contribute to their Employee’s Medisave account to obtain tax deductions of up to $1,500 through the Additional Medisave Contribution Scheme.

    Special Employment Credit (information added on 10 March 2011)

    As part of the 2011 Budget measures to support employers, a one-off Special Employment Credit (SEC) has been introduced. The SEC aims to raise the employability of older low-wage Singaporeans.  It will complement other measures to boost the employment rate for older workers, such as the Workfare Income Supplement (WIS) scheme, lower CPF rates for older workers, the ADVANTAGE! Fund to promote job re-design, and the re-employment legislation that will come into force on 1 Jan 2012.

    About 43,000 employers employing 125,000 older low-wage Singaporeans are expected to benefit from the SEC. This will cost the Government about $100 million over three years. Employers may qualify for the SEC for workers employed from January 2011 onwards. Payments will be made twice a year, with the first payment to be made in September 2011. For more details on the SEC, click here.

     

    Frequently Asked Questions

    Increase in CPF Contribution Rates and CPF Salary Ceiling
    Workfare Special Bonus
    Voluntary Medisave Contributions by Companies to Self-Employed Persons

    Public Enquiries

    Queries on Workfare Special Bonus can be addressed to CPF Board via:

    • Email at growandshare@cpf.gov.sg
    • Hotline number at 1800-2222-888 (or 65 62222 888 if you call from overseas) (Mondays-Fridays: 8am – 6pm)

    Questions on Special Employment Credit can be addressed to CPF Board via:

    • Email at sec@cpf.gov.sg
    • Hotline number at 1800-2222-888 (Mondays-Fridays: 8am – 6pm)


    For more information on other matters, please contact the CPF Call Centre at 1800-227-1188 (Mondays-Fridays: 8am – 6pm).

     

     Last Updated on: Monday, September 16, 2013 at 5:30 PM
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