CPF Contribution rate

Understanding CPF Contribution Rates in Singapore

The Central Provident Fund (CPF) is a mandatory savings scheme for working Singaporeans and permanent residents. CPF contributions are calculated based on the employee’s age and income, with the contribution rates adjusted periodically to reflect changes in economic and social conditions.

In this article, we’ll take a closer look at the current CPF contribution rates in Singapore and what you need to know to understand your mandatory savings.

CPF Contribution Rates

CPF contribution rates are split between the employer and employee, with the employer making contributions on behalf of the employee, and the employee making contributions to their own CPF account.

For Employees Below 55 Years of Age:

Employer’s CPF Contribution:

  • Ordinary Wages (OW) – 17%
  • Additional Wages (AW) – 0%

Employee’s CPF Contribution:

  • Ordinary Wages (OW) – 20%
  • Additional Wages (AW) – Up to 37%

For Employees Above 55 Years of Age:

Employer’s CPF Contribution:

  • Ordinary Wages (OW) – 13%
  • Additional Wages (AW) – 0%

Employee’s CPF Contribution:

  • Ordinary Wages (OW) – 13%
  • Additional Wages (AW) – Up to 25%

OW refers to the employee’s monthly wage, while AW refers to any bonuses, incentives, or allowances that the employee receives.

It is worth noting that the CPF contribution rates are subject to a cap, which is adjusted annually to reflect changes in the average wage. The current CPF contribution ceiling is $6,000 for ordinary wages and $102,000 for additional wages.

How CPF Contribution Rates are Calculated

CPF contributions are calculated based on the employee’s age and income, with the contribution rates adjusted periodically to reflect changes in economic and social conditions.

For example, an employee below 55 years of age earning a monthly salary of $3,000 would have the following CPF contributions:

  • Employer’s CPF Contribution: 17% of $3,000 = $510
  • Employee’s CPF Contribution: 20% of $3,000 = $600

An employee above 55 years of age earning a monthly salary of $4,000 would have the following CPF contributions:

  • Employer’s CPF Contribution: 13% of $4,000 = $520
  • Employee’s CPF Contribution: 13% of $4,000 = $520

CPF Contribution Allocation

CPF contributions are allocated to three accounts: Ordinary Account (OA), Special Account (SA), and Medisave Account (MA).

The OA is used for housing-related expenses, including mortgage payments, home renovations, and property taxes. The SA is used for retirement savings, while the MA is used for healthcare expenses, including hospitalization, medical treatments, and health insurance premiums.

Employees below 55 years of age have a CPF allocation rate of 23% to the OA and 6% to the SA, while employees above 55 years of age have a CPF allocation rate of 21% to the OA and 9% to the SA.

Conclusion

CPF contribution rates are a critical component of the mandatory savings scheme in Singapore. By understanding the current CPF contribution rates, employees can make informed decisions about their finances and plan for their future. With CPF contributions providing retirement, healthcare, and housing benefits, it is important to ensure that your CPF contributions are being allocated correctly to meet your individual needs.