Singapore’s retirement fund in 2023 is undergoing changes in contribution and payout limits, among others, following the release of the country’s 2023 budget. The fund, known as the Central Provident Fund or CPF, is a mandatory pension fund scheme for working Singaporean citizens and permanent residents. The CPF scheme was introduced in 1955 to provide a safety net for Singaporeans in retirement, healthcare, home ownership, and education.
Under the CPF scheme, employees and employers contribute a percentage of the employee’s monthly salary to the fund. The employee’s contribution is deducted from their salary, and the employer also contributes a matching amount. The contribution rate varies depending on the employee’s age and income level.
CPF monthly salary ceiling increased
The CPF monthly salary ceiling, which determines the maximum monthly wages eligible for CPF contributions, is reviewed periodically to help members increase their CPF savings. Currently set at S$6,000, it will progressively increase to S$8,000 from 2023 to 2026 in four gradual steps. This allows employers and employees time to adjust to the new regulations. It is important to note that the CPF annual salary ceiling of S$102,000 remains unchanged. Starting September 2023, the monthly base salary eligible for CPF contributions will increase by SG$300. Subsequently, in December 2024, the monthly salary ceiling will increase by SG$500, and in December 2025 and January 2026, it will increase by SG$600 each, eventually reaching S$8,000.
Contribution rates for seniors increased
CPF contribution rates for senior workers were raised in 2022 and 2023. Following the Singapore Budget for 2023, the government plans to increase contribution rates further starting on January 1, 2024. The increased CPF contribution will be channeled into the CPF Special Account, allowing senior workers to accumulate more retirement savings.
Payout increases for non-CPF LIFE members
From June 2023, the minimum monthly payout for non-CPF LIFE members, those enrolled in the Retirement Sum Scheme, will increase from $250 to $350. There will be no changes for members already receiving monthly payouts of $350 or more.
Changes for CPF LIFE payouts
Some members who have begun receiving their CPF LIFE payouts, such as senior workers, may have received additional contributions to their Ordinary and Special Account (OSA). If they have not set aside their cohort’s Full Retirement Sum (FRS), these contributions will not be available for lump-sum withdrawal and are meant to be disbursed as monthly payouts. To receive higher CPF LIFE payouts, these members must inform the CPF Board to convert their OSA savings to monthly payments. Starting in October 2023, the CPF Board will streamline the process for these members to receive greater monthly payouts. The CPF Board will automatically annuitize any non-withdrawable savings in their OSA, resulting in higher payouts. Members will be notified individually before the annuitization occurs. Members who have met their cohort’s Full Retirement Sum (FRS) will not automatically have their Ordinary and Special Account (OSA) savings converted to monthly payouts. This ensures that these savings can still be withdrawn as a lump sum or used to purchase annuities, providing members greater flexibility and control over their retirement funds.
Manual instruction requirements for CPF members
CPF members who start their payouts from age 65 must manually instruct the CPF Board. However, some members may neglect to do so, prompting a change in 2018. Members born in or after 1948 will automatically receive payouts when they turn 70 if they have not already started receiving payouts. CPF savings are intended to provide monthly retirement income to members who can choose to receive them manually or automatically at age 70.
Mandatory contributions for platform workers
Platform workers, such as delivery workers and private-hire drivers, face more significant earnings uncertainty than salaried employees. This makes it crucial for them to consider retirement planning. To address this, the government will require platform workers below the age of 30 to make CPF contributions starting in late 2024. The contribution rates for platform workers and companies will align. Workers who are older than 30 can also opt in. The CPF contributions will phase in over five years. Platform workers who earn $500 or less per month do not need to make CPF contributions. To soften the impact on the take-home pay of lower-income platform workers, the government will introduce the Platform Worker CPF Transition Support from 2024 to 2027 to offset part of the additional CPF contributions. Singaporean platform workers who earn S$2,500 or less per month, including wages from platform work and other sources, will be eligible for the scheme if they are required to make CPF contributions or opt-in to do so. Moreover, eligible workers will receive higher Workfare payments when CPF contributions for platform workers align fully with employees.
More background on Singapore’s Central Provident Fund
CPF contributions are divided into three accounts: the Ordinary Account (OA), the Special Account (SA), and the Medisave Account (MA). The OA is used for housing, education, and investment, while the SA is used mainly for retirement. The MA is used to pay for medical expenses.
CPF funds can be withdrawn for specific purposes such as buying a home, education, or medical expenses. However, there are restrictions on the withdrawal amount and when it can be withdrawn. CPF funds cannot be withdrawn fully until the account holder reaches the age of 55, and there are penalties for early withdrawal.
Galaxy, Asinta’s employee benefits consulting Partner in Singapore, provided this article about the changes to Singapore’s retirement fund in 2023. If you need support with your employee benefits in Singapore, contact us, and we will gladly put you in touch with Galaxy.