News

Local Study Proposes Increase To CPF Contribution Rates By Older S’porean Workers

Boon Hun

2019-06-27 , 11:00 am

CPF is a word that Singaporeans are sensitive to.

It has gotten people sued.

People complaining.

Suffice to say, it’s not something that Singaporeans are really happy about.

But now, a local think tank is proposing something that’ll get Singaporeans up into even more of a tizzy.

Increase CPF Contribution Rates For Both Employers And Employees

On 26 June, a local study conducted by the Institute of Policy Studies (IPS) proposed that the CPF contribution rates for both employers and employees should be raised for older Singaporeans.

This, they explained, would help to keep older Singaporeans working as well as increase their retirement savings.

Now some of you who are reading this article, you’re probably thinking, wait, what?! Older Singaporeans are going to contribute more than 20% of their salary?!

You may want to watch a video we’ve done about CPF first before reading on (and remember to subscribe to our YouTube channel!):

Current Vs Proposed CPF Contributions

Here’s how the CPF contribution rate is like for Singaporeans right now.

From now till 55 years old, you get 20% of your salary locked away. But over the age of 55, a lesser percentage of your salary gets locked away as you age.

The maximum contribution by Singaporean workers will still cap at 20%.

Except, now, instead of having 20% of your salary going to your CPF until you’re 55 years old, it might be 65 years old.

Having More For Retirement

The smart people at the think tank has crunched out some number to support their proposal:

If the CPF contribution rates are increased for the folks from 55 to 64 years old, folks could save between $31,000 and $145,000 more than their lower-contribution-rate-counterparts.

And this means in their retirement age, they’ll get a higher payout in their CPF Life scheme.

Short Term Pain, Long Term Gain

You got to admit that CPF and increased rates are pretty painful words to hear.

But the researchers think otherwise.

For employees, this means lesser disposable income. For employers, this means higher wage costs.

But these are things that the think tank has taken into account, and they felt that the tradeoff would be worth it because, with higher payouts, these retirees can live a more comfortable life.

Plus, those who are still paying off their housing loans can simply pay with their CPF monies instead of forking out cash.

And given how Singapore is facing an ageing population, companies have no choice but to continue hiring older Singaporeans.

The last increase for CPF contribution was in 2016 where people in the 50 to 55 years old age group had their contributions increased by 2%.

What do you think of this move?

Do you agree with the movement? Or do you disagree? If so, why?

As for me, I’ve got only one thing to recommend:

Remember to make your CPF nomination or your hard earned money might go to people you don’t really want to give to. #JustSaying