What Is CPF?
Firstly, a quick look up on CPF will lead you to the definition that The Central Provident Fund (CPF) is a comprehensive social security savings plan.
In short, CPF is implemented to ensure that Singaporeans save up for retirement, housing, and healthcare. Let’s face the fact, there are way more Singaporeans believing that they are disciplined enough to save up for retirement, than those who actually managed to do so.
CPF Contribution And Allocation Rate Below Age 55
The allocation of CPF is really not that difficult to understand despite the informative presentation on the CPF website. In fact, all your contributions and the allocation rate of your monthly can be simply summarised into the infographic below:
Introduction to CPF allocation:
- An employee will contribute 20% of their wage to their CPF account.
- Their employer will contribute an addition 17% of whatever their wage will be to their CPF account accordingly.
- The CPF account will then be allocated to 3 different accounts: Ordinary Account, Special Account and Medisave Account.
Few things to take note:
- Percentage allocated to each account changes as you age
- After age 55, the contribution rate for both employee and employer decreases.
What Happens At age 55?
At age 55, your Ordinary Account (OA) and the Special account (SA) will combine to form your Retirement Account (RA)
From there, there’s 3 scheme you can choose from depending on the Retirement Sum in your Retirement Account.
- Withdraw the difference after he chose to set aside for Full Retirement Sum or Basic Retirement Sum with property charge/pledge.
- Keep the savings in CPF to earn interest.
Do take note: For the first $30,000 of combined CPF balances, an extra 1% interest will be given. This is on top of the existing 1% extra interest on the first $60,000 of combined CPF balances. Combined CPF Balances is the sum of Ordinary, Special, Medisave and Retirement Account.
Basic Retirement Sum In Years To Come
Disclaimer: Do expect the sum to increase to account for long-term inflation and rising standard of living.