Central Provident Fund
Key Information at a Glance
||2.5% (as of 1 Jul 2014)
||4% (as of 1 Jul 2014)
||4% (as of 1 Jul 2014)
||4% (as of 1 Jan 2014)
||$155,000 (from 1 Jul 2014)
|Medisave Minimum Sum:
||$43,500 (from 1 Jul 2014)
For other information, such as employer and employee contribution rates, visit the CPF website.
Singapore’s social safety net comprises the following four pillars:
- Central Provident Fund: The Central Provident Fund (CPF) enables working Singaporeans to set aside funds for retirement
- Home ownership: Public housing helps Singaporeans own long-term assets that can be monetised upon retirement;
- Healthcare subsidies and the “3Ms”: The Medisave, MediShield and Medifund schemes provide a sustainable healthcare system for all Singaporeans.
- Workfare: The Workfare Income Supplement scheme and the Workfare Training Support scheme encourages older, low-wage workers to continue working, while helping to meet their retirement and medical needs.
Functions of the CPF
The CPF was set up in 1955 as an old-age savings scheme for employees. The scheme has since evolved into a comprehensive social security savings system addressing not just retirement adequacy, but also healthcare, home-ownership, family protection and asset enhancement.
The principle of self-reliance is an essential tenet underpinning the CPF system, which continues to meet the three key needs of retirement expenditure, healthcare and home ownership. These constitute the basis of financial security in retirement. As Singapore moves towards an aging population, gradual enhancements to the system will be made to ensure that Singaporeans have ample provisions to last through their golden years.
The CPF Scheme performs four main functions: Retirement, Healthcare, Home Ownership, Family Protection and Asset Enhancement.
Working Singaporeans and their employers make monthly contributions to the CPF. These contributions go into three accounts:
- Ordinary Account - for housing, insurance, investment and education.
- Special Account - for investment in retirement-related financial products.
- Medisave Account - for hospitalisation and approved medical insurance.
At age 55, members may withdraw their CPF savings after setting aside the CPF Minimum Sum. The CPF Minimum Sum provides for basic needs in retirement. It can be used to purchase a life annuity from a participating insurance company, placed with a participating bank, or left in the Retirement Account with the CPF Board.
Members will receive monthly payouts from the CPF drawdown age. The drawdown age is currently 63, and is set to increase to 64 in 2015 and 65 in 2018 to keep pace with rising life expectancies.
Members turning age 55 in 2013 or later with at least $40,000 in their Retirement Account will be automatically included in CPF LIFE, The CPF LIFE is a national annuity scheme that allows members to receive a monthly income for life, starting from his drawdown age. Members from these cohorts who did not have $40,000 but who at their drawdown age have $60,000 in their Retirement Account will also be auto-included. Members with lower balances may opt into CPF LIFE up till age 80.
Monthly contributions to the Medisave Account help build up savings for healthcare needs. Medisave may be used to cover hospitalisation expenses for both members and their dependants. It may also be used for specific outpatient treatments, such as chemotherapy and radiotherapy.
Medisave savings can be used to pay for premiums for MediShield, or Medisave-approved Integrated Shield Plans. MediShield is a basic medical insurance scheme which helps its members with large hospitalisation costs at Class B2 or C wards. Members can also pay for ElderShield premiums with Medisave. ElderShield is a severe disability insurance scheme that provides insurance coverage to older CPF members who require long-term care.
At age 55, members will have to set aside the Medisave Required Amount, in addition to setting aside the CPF Minimum Sum, before withdrawing excess savings from their Ordinary and Special Accounts. For members who do not have the Medisave Required Amount, their Special and Ordinary Account savings in excess of the CPF Minimum Sum may be used to set aside the Medisave Required Amount. Members will also be able to withdraw savings from their Medisave Account, if they have excess savings above the Medisave Minimum Sum at or after age 55.
CPF is integrated with home ownership. Ordinary Account savings can be used to purchase a home under CPF housing schemes. A HDB flat may be purchased under the Public Housing Scheme, or a private property under the Residential Properties Scheme. CPF savings may be used for full or partial payment of the property, as well as to service the monthly housing payments.
The Dependants' Protection Scheme helps families to tide over the first few years in the event of an insured member's permanent incapacity or death.
The Home Protection Scheme prevents homes from being lost. This scheme is applicable to all CPF members who use their CPF savings to buy an HDB flat. Should the insured member become permanently incapacitated or die, the CPF Board will pay the outstanding housing loan based on the amount insured.
MediShield is a catastrophic medical insurance scheme to help one and their dependants to meet the high medical costs of prolonged or serious illnesses. Older CPF members can make use of ElderShield, an affordable severe disability insurance scheme that provides insurance coverage to those who require long-term care.
CPF members may invest their Ordinary Account balance under the CPF Investment Scheme - Ordinary Account (CPFIS-OA), and their Special Account balance under the CPF Investment Scheme - Special Account (CPFIS-SA). Assets that can be invested in include Insurance, Unit Trusts, Exchange Traded Funds (ETFs), Fixed Deposits, Bonds and Treasury Bills, Shares, Property Fund and Gold. Only monies in excess of $20,000 in the Ordinary Account and $40,000 in the Special Account can be invested.