Lifestyle

10 Facts About CPF All S’poreans Should Know ‘Coz It’s Not Just ‘Money That Can see But Cannot Touch’

2019-02-22 , 8:00 am

Last Updated on 2020-12-05 , 6:00 pm

If you’re a millennial who has just entered the workforce—congratulations!

You have just passed the first hurdle of life. Yes, there are many more other “obstacles” such as marriage, kids, BTO flats, and insurance before you can look forward to a peaceful retirement, and no, I am not talking about the sweet embrace of death.

So, you are probably easing into the whole work culture and before you feel like a deer in the headlights, take a deep breath.

Okay, all better?

Now, you probably have heard this word “CPF” buzzing around in the office, heck, you might have even heard of it when you were a student.

I am sure you know what it actually stands for—no it doesn’t stand for “crispy potato fries”, it is the abbreviation for Central Provident Fund.

What does this enigmatic word really mean?

Why are your older colleagues throwing it around like it’s some new millennial lingo?

Well, if you’re bamboozled by it, fret not!

We’ve done a video to educate you, because why not?

(Since you’re here, subscribe to our YouTube Channel for more informative videos lah)

Prefer to read? Well, here are 10 invaluable facts about CPF you should know, so you won’t feel like a lost sheep!

1) What is CPF

CPF is a compulsory savings plan for all Singaporeans and PRs. A portion of your salary, 20% to be exact, will be deducted to contribute to your CPF account.

On top of that, your company will contribute an additional 17% to boot.

So if you’re earning $2k, you will only receive $1,600 whereas the $400 will be allocated to your CPF account.

An addition of $340 will also be contributed by your company!

2) 3 accounts in your CPF

So why is there a need for CPF in the first place?

CPF can be used for many things, my friend, such as paying your medical bills and purchasing your BTO flat.

And that is why you have 3 different accounts (so your funds don’t get jumbled up)—Ordinary account, Special Account and Medisave Account.

The deducted amount will then be allocated to these accounts and depending on your age, the contribution will vary.

For example, if you’re 21 year’s old, you will contribute more to your Ordinary Account whereas a 63 year’s old man will contribute more to his Medisave Account.

The Medisave Account is for your medical expenses while the Ordinary Account is mainly used to pay for your HDB, education, insurance and more.

You will be wondering, “Then what do I retire with?”

That is what the Special Account is for!

3) There is a maximum contribution

This is slightly tricky so bear with me.

If you happen to earn 10k, only $6000 would attract contribution to your CPF account as the Ordinary Wages Ceiling is capped at $6000.

Still confused?

So if you are lucky enough to earn 10k, your 20% contribution will be only from $6000.

Instead of contributing $2000 (20% of 10k), you will only be contributing $1,200 (20% of 6k)!

4) It wasn’t always 20%

When CPF rolled out in 1955, in its infancy stage, the contribution was only 5% of your salary!

And your company will contribute another 5%!

5) Older workers contribute less

As you get older, your contribution will decrease significantly.

Once you reach the prime age of 55 to 60 years old, you and your company will contribute 13% each.

You will contribute 7.5% if you’re between 60 to 65 and the company will contribute 9%

If you’re hardworking and are still working above 65, your company will contribute 7.5% and you will contribute 5%

6) Self-employed people have to contribute Medisave

According to the CPF site, a self-employed person is someone who gets income from Singapore or from outside Singapore through any trade, business, profession or vocation excluding employment under a contract of services.

Those who are self-employed will also have to contribute to their Medisave accounts yearly.

The contribution is dependant on your net trade income which is your gross trade income minus your business expenses.

You can check the Medisave contribution rates over here.

7) Part-timers are entitled to CPF too

As long as your pay is more than $750 per month, the same rule applies.

You can only escape the clutches of CPF when you earn less than $500, and even then you will still get a contribution but it will be from the company.

However, if your pay is betwixt $500 to $750, then it is quite tricky lah.

8) Interns are not entitled to CPF

If you started out in the workforce as an intern, you would have noticed that you didn’t get any contribution.

Interns get an “allowance” instead of a monthly salary—you wouldn’t want further deduction from your measly allowance, trust me.

9) Bonuses, allowances and commission need CPF contributions too

Bonuses or allowances are subjected to a 20% contribution as well.

So if you have a mobile allowance of $20 per month, $4 of it will go to your CPF account.

I bet you didn’t know that, huh?

10) Other countries also have CPF

Love it or hate it, CPF is here to stay. And we are not the brainchild of this ingenious scheme as other countries have it too. One such example would be Malaysia, but over there it is called Employees Provident Fund (EPF).

Featured Image: macashop / Shutterstock.com