Last Updated on 20, January 2015
With effect from 1 January 2015, the CPF contribution rates will increase. The following table is meant for employees who are Singapore Citizens, Singapore Permanent Residents in their 3rd year onwards and with wages above $750. The table does not apply for the Ordinary Wage in excess of $5000.
| Employee's age | Employer's contribution | Employee's contribution |
|---|---|---|
| 50 and below | 17% (+1%) | 20% |
| Above 50-55 | 16% (+2%) | 19% (+0.5%) |
| Above 55-60 | 12% (+1.5%) | 13% |
| Above 60-65 | 8.5%(+1.5%) | 7.50% |
| Above 65 | 7.5% (+1%) | 5% |
As it can be seen above, the employee enjoys a real wage increase because the Employer's contribution has increased from between 1% to 2% percentage points.
The bad news are for those who are Self-Employed. Self-Employed are required to increase their Medisave contribution by 1 percentage points for those with net trade income above $18,000. This results in reduction in take home pay with no real increase in income. As Medisave is relatively much less liquid compared to take home cash, it means the Self-Employed is worst off.
Source: Singapore Budget 2014: Initiatives Relating to CPF
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The figures in your table shocked me.
For age 50 and below, the employer contributes 20%. 15 years later ie at age 65 and above, this rate of contribution drops to 5%.
What are the implications on such a huge reduction in employer’s contribution?
Actually the employer’s contribution drops from 17% to 7.5% after 65. This is the automated and official way of cutting salary as one ages.
Pardon me, I was looking at the wrong header but the right values ie 20% to 5%.
This translates to higher take-home pay = higher income tax chargeable ?
U can always max out your voluntary CPF contribution. Still not enuf, you can then top up your parents’ CPF.
PAP decide on lowering compulsory CPF contribution rates as you get older becoz they know that the average Sinkie’s pay gets less as he/she ages. This may not seem apparent to those working in civil service or senior levels in MNCs or those with highly marketable skills e.g. doctors, lawyers. But as a whole and if you check out even the official govt statistics, it is true. Hence lower CPF contribution rates is meant to compensate for the lower take-home pay. This is so that govt can save on having to pay higher handouts and angbaos.