During this year’s National Day Rally, Prime Minister Lee Hsien Loong announced that Central Provident Fund (CPF) contribution rates will be raised for older workers in Singapore so they can build on their retirement savings.
The whole process will take about 10 years or so, “but it will depend on economic conditions”, he said.
It was announced today that both employers and employees have to pay for the hikes from 1 January 2021.
The additional money will be credited into the Special Account, which accrues the highest possible interest among the CPF accounts.
For the first increase in CPF rates in 2021, employers and workers will each increase their contribution by either 0.5 percentage point or 1 percentage point for workers aged 55 to 70, based on the worker’s age.
For someone who was 55 in January this year and earns $3,000 monthly, both he and his employer must contribute 13 per cent, or $390 a month, to his CPF savings.
In January 2021, the contribution rates for each such party would go up to 14 per cent, or $420 a month. This works out to $360 more in contributions each per year for employer and employee.
Each further rise in CPF rates will not exceed 1 percentage point for either workers or employers.
Retirement Age Raised To 65 By 2030
The Government will raise the retirement age from 62 to 63 in 2022, and eventually to 65 by 2030.
Meanwhile, the re-employment age will be raised from 67 to 68 in 2022, and eventually to 70 by 2030.
The tripartite workgroup noted that the number of Singaporeans aged 65 and above is projected to almost double and reach 900,000 by 2030.
It also recommended that the Government provide wage offsets to accompany the higher age benchmarks, as the Special Employment Credit scheme expires at the end of next year.
It also called for one-off wage offsets to mitigate the higher CPF contribution rates.
Featured Image Credit: The Online Citizen
