Central Provident Fund (CPF), the Comprehensive Social Security Savings Scheme
Assurance in old ages includes three key considerations that are healthcare, retirement and housing. The Central Provident Fund or also known as CPF, is the key pillar of the Singapore’s comprehensive social system that enables working Singapore Citizens and Permanent Residents to set aside funds for retirement. It also addresses healthcare, home ownership, family protection and asset enhancement.
If you are a working Singaporean, you and your employer have to make a monthly contributions to CPF. The CPF is a mandatory social security savings scheme funded by contributions from employers and employees. In addition, the government also helps to supplement the CPF savings of lower wage workers through schemes such as workfare and top-ups to Medisave for senior citizens.
The monthly contributions to CPF will be allocated into three accounts:
- Ordinary Account – Primarily for retirement and housing needs
- Special Account – Primarily for retirement needs
- Medisave Account – Primarily for healthcare needs
In order to calculate for your retirement sum when you have reached 55 years old, the saving in your Special Account and Ordinary Account will be transferred to your Retirement Account. To help you plan early for retirement, the Basic Retirement Sum will be made known to you ahead of time. Even if you do not meet your Basic Retirement Sum at age 55, you can still withdraw the first $5,000 of your Ordinary and Special Account savings. On the other hand, for those who is turning 55 years old, the payouts need to be higher to account for long term inflation and rising standard of living. Correspondingly, the Basic Retirement Sum to be set aside has to increase.
Just like all the savings in other platform, CPF also offers interest rate for their members. What are the rates for the CPF? You may earn a guaranteed interest rate of 2.5% per year in your Ordinary Account, while savings in the Special Account and Medisave Account earn guaranteed interest rates of 4% per year. You will be able to earn an additional 1% interest per year when your savings reached the first $60,000 of your combined CPF balances, of which up to $20,000 comes from your Ordinary Account.
There are slight differences for the calculation of the monthly contributions, for both employee and employer, depending on each individual difference. As the calculation for the monthly contributions to CPF is somewhat time consuming, hence for you to get an accurate calculation, you should consider to engage a service provider. As both the employee and employer has to make a mandatory monthly contributions to CPF monthly on time, engaging a service provider for your company payroll service would be definitely helpful you to save cost and time. You will be able to have more time and to better focus on your business expansion. When you turn to 3E Accounting, you can ensure to enjoy the premium, comprehensive and cost-effective services. Contact 3E Accounting to find out more!