If you are an employer or an employee in Singapore, you may be wondering how much CPF contributions you need to pay or receive in 2023, especially if you or your employee is aged 55 and above. In this blog post, we will explain the changes to the CPF contribution rates for this age group and how they affect your retirement savings.
What are CPF contributions?
CPF contributions are mandatory payments made by employers and employees to the Central Provident Fund (CPF), which is a social security savings scheme that helps Singaporeans and permanent residents (PRs) save for their retirement, healthcare, housing and education needs. CPF contributions are based on a percentage of the employee’s monthly wages, which are divided into two components: Ordinary Wages (OW) and Additional Wages (AW).
Ordinary Wages are wages paid or payable for each calendar month, such as basic salary, allowances, overtime pay and commissions. Additional Wages are wages paid or payable that are not OW, such as bonuses, annual wage supplements and back pay.
There are different CPF contribution rates for different age groups and wage bands. The contribution rates also vary depending on the employee’s citizenship status. Singaporeans and PRs (from the third year of PR status) have the same contribution rates, while PRs in the first and second year of PR status have lower contribution rates. However, PRs in the first two years of PR status can jointly apply with their employers to contribute CPF at higher rates.
What are the changes to the CPF contribution rates for age 55 and above?
The CPF contribution rates for employees aged above 55 to 70 have been increased to strengthen their retirement adequacy. The changes in CPF contribution rates for Singaporeans and PRs (from third year and onwards) took effect from 1 January 2023. There is no change to the CPF contribution rates for other age groups.
The following table summarises the current and revised contribution rates for employees aged above 55 across the different wage bands.
| Employee’s age (years) | Contribution rates from 1 January 2023 (monthly wages > $750) | Revised contribution rates from 1 January 2024 (monthly wages > $750) |
|---|---|---|
| By employer (% of wage) | By employee (% of wage) | |
| 55 and below | 17 | 20 |
| Above 55 to 60 | 14.5 | 15 |
| Above 60 to 65 | 11 | 9.5 |
| Above 65 to 70 | 8.5 | 7 |
| Above 70 | 7.5 | 5 |
As you can see from the table, the CPF contribution rates for employees aged above 55 to 60 will increase by 2 percentage points from 29.5% to 31.5% of their wages, while those aged above 60 to 65 will see an increase of 3.5 percentage points from 20.5% to 24% of their wages.
The increase in CPF contribution rates will be shared equally between employers and employees, except for those earning up to $1,000 per month, who will not see any increase in their employee contribution rates.
The CPF contribution rates for employees aged above 65 to 70 and above 70 will remain unchanged at 15.5% and 12.5% respectively.
How do the changes affect your retirement savings?
The increase in CPF contribution rates for employees aged above 55 will help them build up more savings in their CPF accounts, which can be used to fund their retirement needs.
The CPF accounts consist of three sub-accounts: Ordinary Account (OA), Special Account (SA) and Medisave Account (MA). The OA can be used for housing, investment, education and insurance purposes, while the SA is mainly for retirement savings under the CPF LIFE scheme, which provides monthly payouts for life from age 65. The MA can be used for healthcare expenses such as hospitalisation, outpatient treatment and MediShield Life premiums.
The allocation of CPF contributions to the three sub-accounts depends on the employee’s age group. The following table shows the allocation rates for employees aged above 55 across the different wage bands.
| Employee’s age (years) | Allocation rates from 1 January 2023 (monthly wages > $750) | Revised allocation rates from 1 January 2024 (monthly wages > $750) |
|---|---|---|
| To OA (% of wage) | To SA (% of wage) | |
| 55 and below | 12 | 6 |
| Above 55 to 60 | 3.5 | 6.5 |
| Above 60 to 65 | 1 | 3.5 |
| Above 65 to 70 | 0.5 | 1.5 |
| Above 70 | 0.5 | 0.5 |
As you can see from the table, the allocation rates to the SA and MA will increase for employees aged above 55 to 65, while the allocation rate to the OA will decrease or remain unchanged.
This means that more of their CPF contributions will go towards their retirement and healthcare savings, which can help them enjoy higher monthly payouts from CPF LIFE and better coverage from MediShield Life.
For example, an employee aged above 55 to 60 earning $4,000 per month will see an increase of $80 in his or her total CPF contributions from $1,180 to $1,260 per month. Of this amount, $18 will go to the OA, $260 will go to the SA and $525 will go to the MA.
Assuming that the employee does not withdraw any money from his or her CPF accounts until age 65, he or she can expect to have about $14,000 more in the SA and $9,000 more in the MA by then, compared to the previous contribution rates.
This can translate to an increase of about $100 in monthly payouts from CPF LIFE and an additional buffer of about $9,000 for healthcare expenses.
Conclusion
The changes to the CPF contribution rates for employees aged above 55 are part of the government’s efforts to enhance the retirement adequacy and financial security of older workers in Singapore.
By increasing the CPF contribution rates and allocating more to the SA and MA, older workers can accumulate more savings in their CPF accounts, which can provide them with higher monthly payouts and better healthcare coverage in their golden years.
If you are an employer or an employee aged above 55, you should take note of these changes and plan ahead for your retirement needs. You can use the CPF Contribution Calculator to estimate how much CPF contributions you need to pay or receive based on your age, wage and citizenship status.
You can also use the CPF Retirement Calculator to estimate how much monthly payouts you can get from CPF LIFE based on your CPF balances and desired retirement age.
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