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| Working Together For Our Economic Recovery: CPF Changes |
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The Government has announced key changes to the CPF scheme. The contribution rates will be cut to make our wage system more flexible and competitive. This will lower business costs and help save jobs.
While we cut CPF contribution rates, we still need to ensure that Singaporeans have enough savings when they retire. People are living longer and families are becoming smaller. Medical costs are also rising. Therefore, Singaporeans will have to depend more on their CPF for their old age and healthcare needs.
We understand that Singaporeans will be concerned about how these changes will affect them. Most of the changes will be made gradually so that Singaporeans have enough time to adjust their financial plans. The Government will help those whose housing payments are affected by the changes.
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CPF CONTRIBUTION RATES |
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Long-Term Target Contribution Rate Set At 30% To 36%
A lower long-term target CPF contribution rate of 30% to 36% will be set – with employee contribution at 20% and employer contribution at 10% to 16%. |
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Immediate Cut Of 3% In Employers’ Contribution Rate
From 1 October 2003, the employer’s CPF contribution rate will be cut by 3 percentage points. The new total contribution rate will be 33%. There is no change in the contribution rates for workers aged above 55 as the rates are already low. |
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Employer |
Employee |
Total |
Ordinary Account |
Special Account |
Medisave Account |
| For workers 35 years and below |
| Current |
16% |
20% |
36% |
26% |
4% |
6% |
| From 1 Oct 2003 |
13% |
20% |
33% |
22% |
5% |
6% |
| For workers aged above 35-45 years |
| Current |
16% |
20% |
36% |
23% |
6% |
7% |
| From 1 Oct 2003 |
13% |
20% |
33% |
20% |
6% |
7% |
| For workers aged above 45-50 years |
| Current |
16% |
20% |
36% |
22% |
6% |
8% |
| From 1 Oct 2003 |
13% |
20% |
33% |
18% |
7% |
8% |
| For workers aged above 50-55 years |
| Current |
16% |
20% |
36% |
22% |
6% |
8% |
| From 1 Oct 2003 |
13% |
20% |
33% |
18% |
7% |
8% | |
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Why? To maintain our cost competitiveness and save jobs. With tougher economic conditions and greater competition for investments, the 40% target CPF contribution rate is no longer realistic. The new long-term target rate offers more flexibility – to put in more into CPF in good years, and to cut the rate in bad times. |
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Long-Term Target Contribution Rate For Older Workers Aged Above 50 To 55 Set At 24% To 30%
A lower long-term target CPF contribution range of 24% to 30% will be set for older workers aged 50 to 55 – with employee contribution at 18% and employer contribution at 6% to 12%. |
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Further CPF Cuts For Older Workers Aged Above 50 To 55
From 1 January 2005, the CPF contribution rate for older workers aged 50 to 55 will be further reduced in two stages, from 33% to 30%, and then to 27% on 1 January 2006. |
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Employer |
Employee |
Total |
Ordinary Account |
Special Account |
Medisave Account |
| 1 Oct 2003 |
13% |
20% |
33% |
18% |
7% |
8% |
| 1 Jan 2005 |
11% |
19% |
30% |
15% |
7% |
8% |
| 1 Jan 2006 |
9% |
18% |
27% |
12% |
7% |
8% | |
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Why? To make older workers more employable. Older workers are at greater risk of losing their jobs. The last two recessions have shown that older workers who lose their jobs find it more difficult to get another, compared to younger workers. The lower CPF contribution rates will encourage employers to keep these workers and make it easier for them to find jobs. |
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CPF SALARY CEILING |
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Lower Salary Ceiling From $5,000 To $4,500
From 1 January 2006, the salary ceiling will be further lowered from $5,000 to $4,500. This is in addition to the original plan to reduce the salary ceiling from $6,000 to $5,500 on 1 January 2004 and, to $5,000 on 1 January 2005. |
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Why? To give high-income earners greater flexibility in managing their finances, including their retirement needs. The lowering of the salary ceiling also reduces the compulsory savings for this group of workers and lessens the burden on employers. |
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CPF AND MEDISAVE MINIMUM SUMS |
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Rise In CPF Minimum Sum
From 1 July 2004, the Minimum Sum will be raised gradually from $80,000 to $120,000 (in today’s dollars). The increase will be spread out over 10 years, from 2004 to 2013. Half the Minimum Sum can be in a pledged property, with the other half in cash. |
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Why? To ensure that Singaporeans still put aside enough for their retirement despite the CPF cut. Singaporeans are living longer, and can expect to live till about 80 years. So, the current Minimum Sum of $80,000, of which half can be in a property pledge, is not very much.
With only $40,000 in cash in the Minimum Sum, this gives you only $252 a month, from when you retire at 62 until you are 80 years old. As $252 is only a small fraction of the last drawn pay of most workers and not enough to meet basic needs in old age, the Minimum Sum needs to be increased.
If half the revised Minimum Sum is in a property pledge, the remaining $60,000 will provide a monthly payment of $378 (in today’s dollars) for about 18 years.
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Medisave Minimum Sum
From 1 July 2004, the current Medisave Minimum Sum of $25,000 will be adjusted every year, to take into account inflation of healthcare costs.
From 1 January 2004, if you meet the CPF Minimum Sum, you must have at least $2,500 in your Medisave Account before you can withdraw the rest of your CPF at age 55. If you have less than $2,500 in your Medisave Account, you will have to top it up to $2,500 using your Ordinary and Special Account savings before you can withdraw. This $2,500 will increase by $2,500 every year until it reaches $25,000 (in today’s dollars) on 1 January 2013. |
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Why? Singaporeans will spend more on healthcare as life expectancy increases. The Medisave Minimum Sum will ensure that you set aside enough savings when you turn 55 to meet your future healthcare expenses. |
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WITHDRAWAL RULE AT AGE 55 |
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Phasing Out 50% Withdrawal Rule At Age 55
Starting 1 January 2009, the 50% withdrawal rule will be phased out gradually. The percentage for withdrawal will drop to 40%, and thereafter be further reduced every year by 10 percentage points until the withdrawal rule is phased out. Therefore, from 1 January 2013, you must meet the CPF and Medisave Minimum Sums first before you can withdraw your remaining Ordinary Account and Special Account balances at age 55.
However, you can continue to withdraw the first $5,000 from your Ordinary Account and Special Account balances.
Those who reach 55 in the next five years will not be affected. They can still continue to withdraw half their CPF balances at age 55.
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| Year |
% of CPF withdrawals |
| 2003 - 2008 |
50% |
| 1 Jan 2009 |
40% |
| 1 Jan 2010 |
30% |
| 1 Jan 2011 |
20% |
| 1 Jan 2012 |
10% |
| 1 Jan 2013 onwards |
Only the Ordinary and Special Accounts balances after meeting the CPF and Medisave Minimum Sums requirements can be withdrawn | |
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Why?
With Singaporeans living longer, and families becoming smaller, they will have to rely more on their CPF for their retirement. With the lower CPF contribution rate, it is even more important for Singaporeans to keep the Minimum Sum for old age. Phasing out the 50% withdrawal rule will help Singaporeans set aside their Minimum Sums for their retirement. |
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Help Measures For Housing Payments |
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Understandably, you will be concerned that the CPF changes could mean less savings in your CPF Ordinary Account to pay your monthly housing payments. To help you service your housing payments if you are affected by the CPF changes, the following help measures are available: |
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Use Of Special Account Savings
From November 2003, you will be allowed to use your Special Account savings to meet the shortfalls in your monthly housing payments, to the extent that these payments are affected by the changes.
If you are currently using your CPF to service your monthly housing payments, you do not need to apply to use your Special Account savings. For your convenience, your Special Account savings will be deducted automatically to meet the shortfall when your Ordinary Account savings is used up. You will be informed when the first deduction from your Special Account savings is made. More details are available at our website www.cpf.gov.sg. |
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HDB Financial Assistance Measures
HDB has several measures to help HDB mortgagors who are in financial difficulty to service their monthly housing payments. These include rescheduling your loan, reducing or deferring payments, and paying arrears by instalments. Please check www.hdb.gov.sg for details, call HDB’s toll-free Branch Office Service Line at 1 800-866 3030, or approach your relevant HDB Branch Office for advice.
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Government Bridging Loan
The Government Bridging Loan is a short-term loan offered by the Government at a concessionary interest rate to help Singaporeans and permanent residents affected by the CPF changes meet the shortfall in their monthly housing payments, to the extent that these payments are affected by the changes. This scheme applies to properties bought before 1 October 2003 using CPF. To qualify for the assistance, the applicant’s savings in the Ordinary Account and Special Account must be fully used up first. |
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Cut ’n Keep CPF Changes |
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| Date |
Change |
| 1 Oct 2003 |
CPF contribution rate cut to 33% (Employees: 20%; Employers: 13%) |
| 1 Jan 2004 |
Salary ceiling lowered, from $6,000 to $5,500
If you meet the CPF Minimum Sum, you must have at least $2,500 in the Medisave Account before you can withdraw the rest of your CPF at age 55. This amount will increase by $2,500 every year until it reaches $25,000 (in today’s dollars) on 1 Jan 2013
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| 1 Jul 2004 |
CPF Minimum Sum to go up by $4,000 every year till it reaches $120,000 (in today’s dollars) in 2013
Medisave Minimum Sum of $25,000 will be adjusted every year, to take into account inflation of healthcare costs |
| 1 Jan 2005 |
Salary ceiling lowered, from $5,500 to $5,000 |
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CPF contribution rate for older workers aged above 50 to 55 cut to 30% (Employees: 19%; Employers: 11%) |
| 1 Jan 2006 |
Salary ceiling lowered, from $5,000 to $4,500 |
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CPF contribution rate for older workers aged above 50 to 55 cut to 27% (Employees: 18%; Employers: 9%) |
| 1 Jan 2009 |
Gradual phasing out of 50% withdrawal rule. The percentage for withdrawal will be reduced to 40%, and will go down by 10 percentage points every year until it is phased out by 1 Jan 2013 |
| 1 Jan 2013 |
Withdrawal rule phased out; withdrawal possible only after setting aside CPF and Medisave Minimum Sums. However, first $5,000 can be withdrawn
Medisave Minimum Sum to be topped up before CPF withdrawal at age 55 reaches $25,000 (in today’s dollars)
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| 1 Jul 2013 |
CPF Minimum Sum reaches $120,000 (in today’s dollars) | |
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