Less than two months ago, a local study was conducted by the Institute of Policy Studies (IPS).
And it was found that older Singaporeans have to increase their CPF contributions.
Cue outrage.
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20% NOT ENOUGH? HOW MUCH MORE??!!
Chill.
Current 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%.
And here’s how the change is going to affect older Singaporeans.
- 55 to 60 years old:Â Total CPF contribution: 37%
- 61 to 65 years old: Total CPF contribution: 26%
- 66 to 70 years old:Â Total CPF contribution: 16.5%
- Above 70 years old:Â Unchanged
If you look carefully, you’ll realise that the bands are simply shifted down.
When Will It Happen?
To give Singaporeans time to adjust to the change, the government’s going to do it incrementally.
The first change will happen on 1 Jan 2021.
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Singaporeans born on or after 1951 will be affected.
While it wasn’t stated what subsequent increases will be like, it was promised that the increase will be kept within 1%, for both employers and employees.
Of course, they left themselves an out by saying they’ll monitor the situation and, if need be, adjust accordingly.
Having More For Retirement
Previously, the smart people at the think tank has crunched out some numbers 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.
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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.
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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%.
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