More CPF savings with new rules
At least 544,000 CPF members expected to benefit from the changes
By Joanna Seow, The Straits Times, 2 Jan 2016
Several changes to the Central Provident Fund (CPF) scheme kicked in yesterday to help workers accumulate more savings for their retirement.
The CPF salary ceiling, the maximum amount of ordinary wages that employee and employer contributions are calculated on, was raised from $5,000 to $6,000.
"Middle-income Singaporeans will be able to accumulate more CPF savings during their working years," Deputy Prime Minister Tharman Shanmugaratnam said when he announced the latest change during the Budget in February last year.
At least 544,000 CPF members are expected to benefit.
The ceiling was last adjusted from $4,500 to $5,000 in September 2011 to keep pace with income growth.
As of December 2014, there were two million active CPF members, meaning that they had at least one contribution to their accounts in that month or in the preceding three.
The annual contribution cap within the Supplementary Retirement Scheme, in which people can voluntarily save money and receive tax benefits, has also been raised to $15,300 for Singaporean citizens and permanent residents and $35,700 for foreigners. The caps were previously $12,750 and $29,750 respectively.At least 544,000 CPF members expected to benefit from the changes
By Joanna Seow, The Straits Times, 2 Jan 2016
The CPF salary ceiling, the maximum amount of ordinary wages that employee and employer contributions are calculated on, was raised from $5,000 to $6,000.
"Middle-income Singaporeans will be able to accumulate more CPF savings during their working years," Deputy Prime Minister Tharman Shanmugaratnam said when he announced the latest change during the Budget in February last year.
At least 544,000 CPF members are expected to benefit.
The ceiling was last adjusted from $4,500 to $5,000 in September 2011 to keep pace with income growth.
As of December 2014, there were two million active CPF members, meaning that they had at least one contribution to their accounts in that month or in the preceding three.
Workers aged 50 to 65 also saw their CPF contribution rate rise yesterday. Their employers will contribute from 0.5 to 1 percentage point more of their wages into their Special Accounts. This brings the total employer contribution to between 9 and 17 per cent, depending on the employee's age group.
Workers aged 55 and above now also receive an extra 1 per cent interest on the first $30,000 of their CPF savings, on top of the existing 1 per cent extra interest on the first $60,000 of savings.
This means that the first $30,000 in their Special, Retirement or Medisave accounts can earn up to 6 per cent interest, based on the prevailing rates.
While the changes will be a boon for many workers, some such as training executive Fion Lau, 41, feel that they do not go far enough to provide retirement adequacy.
This means that the first $30,000 in their Special, Retirement or Medisave accounts can earn up to 6 per cent interest, based on the prevailing rates.
While the changes will be a boon for many workers, some such as training executive Fion Lau, 41, feel that they do not go far enough to provide retirement adequacy.
She said: "The revised changes in CPF rates are minuscule in enabling employees to accumulate retirement funds in the form of CPF savings, especially in the light of very hefty increases in property prices over the last few years."
What's new in the CPF scheme?
Enhancements that came into effect on Jan 1 will boost savings to offer more retirement income
By Lorna Tan, The Sunday Times, 3 Jan 2016
There were several recommendations made for the Central Provident Fund (CPF) scheme last year with more to follow this year. Some of the enhancements have just kicked in, aimed at boosting our savings so we can enjoy more retirement income in our golden years.
The enhancements that came into effect on Jan 1 include different payout options to better suit our needs and the flexibility of deferring payouts up to age 70 so as to receive more cash later.
The Sunday Times highlights the latest CPF changes.
MORE CPF SAVINGS FROM EMPLOYMENT
At least 544,000 CPF members stand to accumulate more savings while working due to the salary ceiling rising from $5,000 to $6,000 on Jan 1.
In addition, workers over age 50 will see their CPF rates increase by between 0.5 percentage point and two percentage points.
The CPF rate for members in the 50 to 55 age band has gone up two percentage points. That will be split equally between employees and employers, a move that restores the CPF rate fully to the level of younger workers at 37 per cent.
Enhancements that came into effect on Jan 1 will boost savings to offer more retirement income
By Lorna Tan, The Sunday Times, 3 Jan 2016
There were several recommendations made for the Central Provident Fund (CPF) scheme last year with more to follow this year. Some of the enhancements have just kicked in, aimed at boosting our savings so we can enjoy more retirement income in our golden years.
The enhancements that came into effect on Jan 1 include different payout options to better suit our needs and the flexibility of deferring payouts up to age 70 so as to receive more cash later.
The Sunday Times highlights the latest CPF changes.
MORE CPF SAVINGS FROM EMPLOYMENT
At least 544,000 CPF members stand to accumulate more savings while working due to the salary ceiling rising from $5,000 to $6,000 on Jan 1.
In addition, workers over age 50 will see their CPF rates increase by between 0.5 percentage point and two percentage points.
The CPF rate for members in the 50 to 55 age band has gone up two percentage points. That will be split equally between employees and employers, a move that restores the CPF rate fully to the level of younger workers at 37 per cent.
A 50-year-old worker earning $6,000 or more will now reap a $370 increase in monthly contribution in his CPF account - $200 from his own pocket and an extra $170 from his employer.
That additional $370 will add up to about $30,000 more when the 50-year-old reaches 55, based on the higher CPF salary ceiling and the two-percentage-point hike in the contribution rate.
But he will have $200 less in disposable income every month, so that needs to be taken into account when budgeting.
The CPF rate for workers in the 55 to 60 age band has risen by one percentage point on the employer's side to 13 per cent while workers from 60 to 65 are getting a 0.5 percentage-point rise by the employer to 9 per cent.
The employee contribution is placed in the Ordinary Account, which can be used to service home loans, while the employer's contribution goes to the Special Account to boost retirement savings.
EARN MORE INTEREST ON YOUR CPF SAVINGS IN YOUR RETIREMENT ACCOUNT
Members over age 55 are getting an additional 1 per cent interest on the first $30,000 of their CPF savings, making 6 per cent interest a year.
This is on top of the 1 per cent extra interest on the first $60,000 in CPF combined balances, which everyone enjoys.
DIFFERENT RETIREMENT SUMS FOR DIFFERENT NEEDS
Basic Retirement Sum: $80,500, which allows estimated monthly payouts of $660 to $720 at 65.
EARN MORE INTEREST ON YOUR CPF SAVINGS IN YOUR RETIREMENT ACCOUNT
Members over age 55 are getting an additional 1 per cent interest on the first $30,000 of their CPF savings, making 6 per cent interest a year.
This is on top of the 1 per cent extra interest on the first $60,000 in CPF combined balances, which everyone enjoys.
DIFFERENT RETIREMENT SUMS FOR DIFFERENT NEEDS
Basic Retirement Sum: $80,500, which allows estimated monthly payouts of $660 to $720 at 65.
It applies to property owners. CPF members can halve their Full Retirement Sum to withdraw more savings.
Full Retirement Sum: $161,000, allowing estimated monthly payouts of $1,220 to $1,320 at 65.
This is for those who do not own a home or want higher payouts. The $161,000 sum will not be revised until January next year.
Enhanced Retirement Sum: $241,500, allowing estimated monthly payouts of $1,770 to $1,920 at 65. This will be suitable for CPF members who want to top up their CPF savings and get higher payouts.
Enhanced Retirement Sum: $241,500, allowing estimated monthly payouts of $1,770 to $1,920 at 65. This will be suitable for CPF members who want to top up their CPF savings and get higher payouts.
It is not a requirement for you to top up to any of the three Retirement Sums, as your retirement payouts solely depend on how much you can and wish to save.
Members with amounts falling between the three Retirement Sums listed here will have their payouts pro-rated accordingly.
Members with amounts falling between the three Retirement Sums listed here will have their payouts pro-rated accordingly.
For example, if your retirement sum is $60,000, the estimated monthly payout will be $528 to $570. If your retirement sum is $120,000, the monthly payouts will be about $940 to $1,018.
These payouts are estimates based on the CPF Life Standard Plan.
INCREASED BASIC RETIREMENT SUM FOR FUTURE COHORTS
The Basic Retirement Sum for CPF members turning 55 from 2017 to 2020 will be increased by 3 per cent yearly for each cohort, to account for inflation and rising standard of living.
The sum is made known ahead of time to allow for better retirement planning.
It is set at $80,500 for members aged 55 this year, rises to $83,000 for those turning 55 next year and $85,500 for the next cohort of 55-year-old members in 2018.
OPTION TO WITHDRAW UP TO 20% OF CPF SAVINGS AT 65
Previously, members who did not own property and did not meet their cohort's Retirement Sum could withdraw only $5,000 on turning 55.
INCREASED BASIC RETIREMENT SUM FOR FUTURE COHORTS
The Basic Retirement Sum for CPF members turning 55 from 2017 to 2020 will be increased by 3 per cent yearly for each cohort, to account for inflation and rising standard of living.
The sum is made known ahead of time to allow for better retirement planning.
It is set at $80,500 for members aged 55 this year, rises to $83,000 for those turning 55 next year and $85,500 for the next cohort of 55-year-old members in 2018.
OPTION TO WITHDRAW UP TO 20% OF CPF SAVINGS AT 65
Previously, members who did not own property and did not meet their cohort's Retirement Sum could withdraw only $5,000 on turning 55.
But if you turned 55 in 2013 or later, you can withdraw up to 20 per cent of your Retirement Account savings at 65 - this amount includes the $5,000 sum - on top of monthly payments.
However, withdrawals from your Retirement Account will affect your monthly payouts, so work out your sums first.
Let's assume CPF member Andrew Tan withdrew $5,000 at 55 and has $60,000 left in his Retirement Account. In 10 years, this will grow with interest to $90,000.
He can either withdraw another $13,000 (20 per cent of $90,000 minus $5,000) at 65, which results in a lower $450 monthly payout for life, or leave the money in his Retirement Account and receive $530 for life.
CHOOSE CPF LIFE PLAN ONCE PAYOUTS START
Rules were relaxed on Jan 1 to allow members to choose CPF Life plans only when they start receiving payouts, that is, between the payout eligibility age and up to 70.
This gives us a better idea of our retirement needs and allows a more informed choice as to whether we should opt for the CPF Life Standard or Basic plan.
The payout eligibility age for those born in 1954 and after is 65 while for those born up to 1943, it is 60. If you were born between 1944 and 1949, your payout eligibility age is 62. For those born between 1950 and 1951 it is 63, and it is 64 for those born between 1952 and 1953.
HIGHER MONTHLY PAYOUTS IF MEMBERS START CPF LIFE PAYOUTS LATER
Based on the Labour Force Survey 2014, 40 per cent of residents between the ages 65 and 70 continue to work. So if your financial situation allows it, you can opt to defer your CPF Life payouts from your eligibility age up to 70 years old.
Doing so means you would enjoy 6 per cent to 7 per cent more in monthly payouts for each year deferred.
TOPPING UP YOUR SPOUSE'S ACCOUNT
Before the changes on Jan 1, savings above the Full Retirement Sum could be transferred to your spouse.
There is now a lower threshold so members can transfer CPF funds above the Basic Retirement Sum to top up their spouse's CPF account. Both will benefit from the extra interest that will be paid in the respective accounts and there is peace of mind as the spouse will have her/his own source of retirement payouts.
MEDISAVE FOR RETIREMENT
This year sees the introduction of the Basic Healthcare Sum (BHS) of $49,800, which is the permanent amount for those turning 65 this year.
CHOOSE CPF LIFE PLAN ONCE PAYOUTS START
Rules were relaxed on Jan 1 to allow members to choose CPF Life plans only when they start receiving payouts, that is, between the payout eligibility age and up to 70.
This gives us a better idea of our retirement needs and allows a more informed choice as to whether we should opt for the CPF Life Standard or Basic plan.
The payout eligibility age for those born in 1954 and after is 65 while for those born up to 1943, it is 60. If you were born between 1944 and 1949, your payout eligibility age is 62. For those born between 1950 and 1951 it is 63, and it is 64 for those born between 1952 and 1953.
HIGHER MONTHLY PAYOUTS IF MEMBERS START CPF LIFE PAYOUTS LATER
Based on the Labour Force Survey 2014, 40 per cent of residents between the ages 65 and 70 continue to work. So if your financial situation allows it, you can opt to defer your CPF Life payouts from your eligibility age up to 70 years old.
Doing so means you would enjoy 6 per cent to 7 per cent more in monthly payouts for each year deferred.
TOPPING UP YOUR SPOUSE'S ACCOUNT
There is now a lower threshold so members can transfer CPF funds above the Basic Retirement Sum to top up their spouse's CPF account. Both will benefit from the extra interest that will be paid in the respective accounts and there is peace of mind as the spouse will have her/his own source of retirement payouts.
MEDISAVE FOR RETIREMENT
This year sees the introduction of the Basic Healthcare Sum (BHS) of $49,800, which is the permanent amount for those turning 65 this year.
For those below 65, the BHS will be adjusted yearly. But there is no requirement to top up to meet the BHS when withdrawing CPF savings. Savings above the BHS will flow over to your other CPF accounts, according to your age.
Meanwhile, the Medisave Minimum Sum has been removed.
Meanwhile, the Medisave Minimum Sum has been removed.
Find CPF policies too rigid? With these new enhancements starting in 2016, you can enjoy greater flexibility with your...
Posted by CPF Board on Saturday, January 9, 2016
Related
Singapore Budget 2015 : CPF Enhancements
Committee of Supply Speeches 2015: CPF Highlights
CPF Advisory Panel Recommendations 2015
Do more with your CPF in 2016
Singapore Budget 2015 : CPF Enhancements
Committee of Supply Speeches 2015: CPF Highlights
CPF Advisory Panel Recommendations 2015
Do more with your CPF in 2016
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