CPF enhancements for a better retirement

Updated: 15 Dec 2016
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Adequate preparation for retirement is a growing concern amongst Singaporeans especially now that we can expect to live longer and healthier lives, and the CPF is one of our safety nets to ensure we do not outlive our savings. The recent changes to the CPF system will provide Singaporeans with more options and flexibility in growing their retirement savings.

A safety net for Singaporeans

The Central Provident Fund (CPF) was conceived as a way for Singapore Citizens and Permanent Residents to systematically save for their retirement. In addition, savings in the CPF can also be used for a variety of purposes leading up to retirement.

CPF savings are commonly used for housing to make the down payment for a home and then for subsequent monthly home instalments. This has helped Singaporeans achieve one of the highest rates of home ownership in the world. So by the time Singaporeans retire, many would be assured of a roof over their heads.

An important component of your CPF is Medisave. As you grow older, the likelihood of needing more frequent and more expensive medical care increases. Medisave will help pay for your medical fees and can also be used to fund selected medical insurance plans to mitigate large medical expenses.

Raising the Salary Ceiling for CPF contribution

The salary ceiling for CPF contributions refers to the upper limit of a person's salary that is used to compute his or her CPF contribution. In January this year, the salary ceiling was raised from $5,000 to $6,000 so the maximum amount a person will contribute to CPF each month is now $1,200 (20% of $6,000). For those earning more than $5,000 to $6,000 a month, it may mean a small reduction in take home pay. However, it also represents a bigger contribution from employers to your retirement fund which means you will reach the sum you need to retire faster.

Employers to contribute more

The percentage of CPF contributions made by employers & employees changes as a worker gets older. An employer starts off by making a 17% contribution up to the cap of $6,000 and this percentage gradually tapers off to 7.5% by the time the employee reaches the age of 65.

From 2016, the percentage that employers contribute to their workers between the ages of 50 to 65 has increased. The increase in employer contribution will go to your Special Account to help you save more for your retirement income needs.

Age of employee Employer contribution rate Employee contribution rate
50 and below 17% (no change) 20% (no change)
Above 50 to 55 17% (up from 16%) 20% (up from 19%)
Above 55 to 60 13% (up from 12%) 13% (no change)
Above 60 to 65 9% (up from 8.5%) 7.5% (no change)
Above 65 7.5% (no change) 5% (no change)

Interest rates for CPF accounts raised

Currently, your CPF Ordinary Account earns you a risk-free interest rate of up to 3.5% p.a, whereas your other account savings earn you risk-free interest of up to 5% p.a. From 2016 onwards, an additional 1% of interest will be paid to the first $30,000 of combined balances of CPF members aged 55 and above, with up to $20,000 from the Ordinary Account. Thus, CPF members aged 55 and above will get up to 6% on the first $30,000 of combined CPF balances.

Make the most of the benefits

If you leave your savings with a bank, you will be earning very low interest which may prove inadequate upon retirement. Making a top-up to your CPF or transferring funds from your Ordinary Account to your Special Account will bring you some tangible benefits:

  • Tax relief on the sum you use to top up your CPF account using cash (see below).
  • Interest paid by CPF is much higher than interest earned from a bank in a savings account or fixed deposit & is completely risk-free.

One way of maximising your benefits is to make a cash top-up into your Special Account if you are below age 55 or Retirement Account if you are aged 55 and above. When you turn 55, the funds in your Ordinary and Special Accounts are automatically transferred to a newly created Retirement Account. From this amount of money, a monthly payout will be made to you for your living expenses when you retire at 65. By making a cash top-up to your Special Account or Retirement Account, you may receive tax relief of up to $7,000 per year. On top of that, if you make a cash top-up to your loved ones' Special or Retirement Account, you may receive additional tax relief of up to $7,000 per year. If you have spare cash in a bank account, find out more about the Retirement Sum Top-up Scheme and the terms and conditions that apply on the CPF website which will contain important details you'll need.

If you are below 55 years old, another way to make your CPF funds work harder for you is to transfer savings from your Ordinary Account into your Special Account where the interest rate is higher. This is especially true for people with no intention of using their Ordinary Account to pay for a house or to fund tertiary studies, as the transfer is irreversible.

Furthermore, if you have set aside the Basic Retirement Sum in your Special Account or Retirement Account, you will be able to transfer CPF savings above the Basic Retirement Sum to your spouse's CPF account from 2016 onwards. Consequently, your spouse will have his/ her own source of retirement income and you will be able to benefit from the extra interest that is paid in the respective accounts. Previously, you could only set aside the Full Retirement Sum before making a transfer of CPF savings to your spouse. The Full Retirement Sum is two times the amount of the Basic Retirement Sum.


There are various schemes that exist under the CPF to help you retire better. To learn what they are and how they can help you, you have several options ranging from kiosks to on-the-go information on your mobile phone.

1 The Basic Retirement Sum is the retirement sum to set aside at age 55 to receive a monthly CPF LIFE payout of about $660 - $720 from payout eligibility age. This sum is set at $80,500 for members who turn 55 in 2016. This assumes that the member owns a property and does not need to pay rent.