Central Provident Fund

Singapore’s social safety net comprises the following four pillars:

1. Central Provident Fund: The Central Provident Fund (CPF) enables working Singaporeans to set aside funds for retirement
2. Home ownership: Public housing helps Singaporeans own long-term assets that can be monetised upon retirement;
3. Healthcare subsidies and the “3Ms”: The Medisave, MediShield and Medifund schemes provide a sustainable healthcare system for all Singaporeans.
4. 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.

Retirement

Working Singaporeans and their employers make monthly contributions to the CPF. These contributions go into three accounts:

• Ordinary Account - for housing, pay for insurance, investment and education.
• Special Account - for investment in retirement-related financial products.
• Medisave Account - for hospitalisation and approved medical insurance.

At the age 55, members may withdraw their CPF savings after setting aside the CPF Minimum Sum. The CPF Minimum Sum may then be used to purchase life annuity from a participating insurance company, placed with a participating bank, or left in the Retirement Account with the CPF Board.

From 62 years of age (current CPF drawdown age), members may make monthly withdrawals under the Minimum Sum Scheme which provides a monthly income to help meet basic needs in retirement for about 20 years or whenever the savings are exhausted. Members may choose to start these monthly payouts later as a way to make the savings last longer. If the member chooses to participate in the national annuity scheme - CPF LIFE, he will receive a monthly income for life from age 62. Members may opt into CPF LIFE up till age 80.

Members turning age 55 in 2013 or later with at least $40,000 in their Retirement Account will be automatically included in CPF LIFE. 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.

The CPF drawdown age is set to increase to 63 in 2012, 64 in 2015 and 65 in 2018.

Healthcare

Monthly contributions to the Medisave Account help build up savings for healthcare needs. Medisave may be used to cover for hospitalisation expenses for both members and their dependents . It may also be used for specific outpatient treatments, such as chemotherapy and radiotherapy.

For members who are meeting their CPF Minimum Sum requirements, a Medisave Required Amount is set aside when withdrawing CPF savings. For members who do not have the Medisave Required Amount, Special and Ordinary Account savings may be used in excess of the CPF Minimum Sum to set aside the Medisave Required Amount.

Medisave savings may be used to cover premiums for MediShield, which helps to meet the high medical costs of prolonged or serious illnesses for members and their dependents. 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.

Medifund helps the poor and needy to cover their medical bills, thus ensuring that all Singaporeans have access to medical care.

Home Ownership

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.

Family Protection

The Dependents' 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 dependents 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.

Asset Enhancement

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.