Higher CPF Monthly Salary Ceiling Announced in Singapore
Singapore announces a higher CPF monthly salary ceiling in its Budget 2023. The current salary ceiling sits at S$6,000 and will be raised in stages to S$8,000 by 2026.
The first increase will commence 1 September this year to the sum of S$6,300. The next increase will happen in 2024 to the sum of S$6,800. In 2025, the amount will be raised to S$7,400. The final increase will happen in 2026 to the sum of S$8,000.
What Does This Mean for Income Earners?
The higher CPF monthly salary ceiling means those who earn above that ceiling can expect a smaller take-home pay, since this will now be allocated into the CPF fund. The benefit is that these employers will be receiving more CPF contributions from employers too. The bump in payments will result in a bigger nest egg come retirement.
Employees in Singapore up to 55-years contribute 20% of their monthly income to their CPF fund (employers contribute 17%). These savings go into an employee’s Ordinary Account, MediSave Account, and Special Account.
Past the age of 55, these contribution rates progressively drop. However, the Government has been raising these rates gradually in the last two years. The aim is to help seniors save more for their golden years. With the higher CPF monthly salary ceiling, middle-income earners in Singapore can achieve full retirement sums much faster.
With employers having to contribute more, this could increase business costs. However, this can be offset by greater productivity and use of technology.
Increase Contribution Percentage to Commence 1 January
From 1 January 2024, contribution rates for those between 55 to 60 will increase to 31%. Rates for those between 60 to 65 will increase to 22%. Those aged between 65 to 70 will see their rates increase to 16.5%. The increases will be allocated into the Special Account.
The Government hasn’t forgotten about employers though, A one-year CPF transition offset will be given to employers. The offset is the equivalent of the 2023 increase in contribution rates employers will have to pay for those between the age of 55 to 70. The offset will be automatic, no applications needed.
For seniors on the Retirement Sum Scheme, the minimum monthly payout will now be $350 from the current $250. This will take effect 1 June 2023 and will continue until the employee’s CPF savings are finished.
