What Companies Should Know About Singapore’s CPF Rate Increases

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With a goal of strengthening retirement adequacy for Singapore’s elderly, the Government has been making gradual efforts towards raising the Central Provident Fund (CPF) contribution rates for workers aged 55 to 70, with the first increase in rates taking place on 1 January 2022. As announced in the Singapore Budget 2022 statement, the next increase will take effect from 1 January 2023, with a total increase of 3 - 4% in CPF contribution rates over these two years. There is no change to the CPF contribution rates for other age groups.

What is CPF?

If you’re already doing business in Singapore, you’ll be familiar with the Central Provident Fund, which was established in 1955 to help workers save for their retirement. CPF’s goal is to enable Singaporeans to have a secure retirement through lifelong income, healthcare financing, and home financing.

Working Singaporeans and their employers will make monthly contributions to their CPF, which go into 3 accounts: Ordinary Account (primarily for retirement and housing needs), Special Account (primarily for retirement needs) and MediSave Account (primarily for healthcare needs). 

When employees reach the age of 55, savings from the Special Account and Ordinary Account are transferred to the Retirement Account for the retirement sum. The Basic Retirement Sum will be made known ahead of time to help Singaporeans plan for early retirement; the first $5,000 of Ordinary and Special Account savings may be withdrawn at age 55 even without meeting the Basic Retirement Sum. Employees who turn 65 years old from 2023 onwards can withdraw up to 20% of their Retirement Account savings available on their 65th birthday in a lump sum, minus the $5,000 that can be withdrawn from 55. 

Over time, the payouts will need to be higher to account for long-term inflation and the increased cost of living, therefore the Basic Retirement Sum to be set aside has been adjusted over time.

CPF for Employers

Employers in Singapore are legally obligated to make CPF contributions to employees’ CPF accounts. CPF Is applicable for employees who are Singapore Citizens or Permanent Residents, engaged under a contract of service, and earning total wages of more than $50 per month.

While a one-year CPF Transition Offset will be automatically afforded to employers to help manage the increase in costs for the business as a result of these measures, it’s important for businesses to be aware and prepare for the upcoming increase.

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