What You Need To Know About the CPF Changes in 2016.
On the 1st January this year, changes which were made to the CPF regime during 2015’s budget came into effect.
The Central Provident Fund (CPF) is a compulsory retirement plan for employed citizens and permanent residents to fund their housing, healthcare and retirement needs. The contribution rates, salary ceilings and interest rates are reviewed periodically to ensure their adequacy in line with the inflation and economic conditions. The changes were announced in advance so as to provide ample time for employers and employees to prepare for their implementation.
The total CPF contribution rate of workers aged 50-65 years has increased overall by O.5% – 2.0% for the various age categories. Prior to the change, only workers aged 50 years and below had their total contribution rate as 37% (with 20% of it coming from the employee and 17% from the employer). From the 1st January 2016, this rate will be extended to include employees aged up to 55 years also. The contribution rate of workers aged 65 and above remains unchanged. The employee contribution will be stored in the ordinary account and their employer’s contribution will go into the special account.
The wage ceiling has now been increased to S$6,000 from the previous limit of S$5,000. Consequently, the CPF deduction for workers whose monthly salary is more than S$5,000, will now be higher and their resulting take home salary will be less. With the higher salary ceiling, employers will also have to make a higher contribution. The ceiling was last revised in 2011 when it was increased from S$4,500 to S$5,000. The current revision is aimed at building the retirement savings of Singaporeans and Singapore Permanent Residents (PRs), in keeping with the growing cost of living and living standards.
In line with the revision in the salary ceiling, the annual contribution cap for the Supplementary Retirement Scheme (SRS) has also been increased. SRS is a scheme whereby workers who are otherwise not liable for CPF contribution, (such as self-employed Singaporeans/PRs and foreigners working in Singapore under an employment pass), can make voluntary contributions to earn tax benefits. The new contribution caps are S$15,300 for Singaporeans and PRs (up from S$12,750) and S$35,750 for foreigners (up from S$29,750).
The interest rate on CPF savings for those aged 55 and above has been increased. The first S$30,000 of their CPF savings will now earn an extra 1%, totaling 6% . The next S$30,000 will earn an interest of 5%. For workers aged below 55 years, the interest on the first S$60,000 remains at 5%. For all workers the interest rate on CPF savings once they hit above S$60,000 remains unchanged at 4%. Workers aged above 55 years will also be able to top up the account of their spouses in order to help them earn higher interest on their CPF savings.
The following table summarises the changes:
|
Before Change |
After Change |
|||||||||
|
Contribution Rates |
Age in yrs | Contribution Rate | Age in yrs | Contribution Rate | ||||||
| Employee | Employer | Employee | Employer | |||||||
| 50 – 55 | 19% | 16% | 50 – 55 | 20% | 17% | |||||
| >55 – 60 | 13% | 12% | >55 – 60 | Unchanged | 13% | |||||
| >60 – 65 | 7.5% | 8.5% | >60 – 65 | Unchanged | 9% | |||||
| >65 | 5% | 7.5% | >65 | Unchanged | Unchanged | |||||
| Wage Ceiling | S$5,000 | S$6,000 | ||||||||
| Supplementary Retirement Scheme | Singaporeans & SPRs | Foreigners | Singaporeans & SPRs | Foreigners | ||||||
| $12,750 | $29,750 | $15,300 | $35,700 | |||||||
| Interest Rate | Aged 55 yrs and above | Aged 55 yrs and above | ||||||||
| First $60,000 | 5% | First $30,000 | 6% | |||||||
| Next $30,000 | 5% | |||||||||
| Above $60,000 | 4% | Above $60,000 | 4% | |||||||