So here I am, in the middle of the night, not sleeping, but pushing through with my objective.
For tonight, I want to focus on a topic which is close to the hearts of many citizens here in Singapore.
And that is...
 |
CPF |
It's being talked about everyday, it's a hot topic during election (recall HHH's and Roy Ngerng's #ReturnOurCPF), and it will continue to bug us for the rest of our lives.
Therefore, I feel it's rather important for me to understand fully what is CPF in order to make informed decisions on future plans for my retirement (not that I'm near retirement age, but I do want to retire early. =p)
I will have to keep the materials light because I'm researching on them while I'm typing out this post.
Therefore, I titled this post as "Part 1", hoping that in future I can educate myself more than what I can read tonight.
Well, here goes~
Question 1: What is CPF?
It just dawned on me that I have no idea what does the word, Provident, means.
Thus, in the spirit of learning, I have looked up the definition:
Provident (adjective): making or indicative of timely preparation for the future. (From Google)
I guessed that a 'Provident Fund' would mean something like 'money saved for the future', which is generally describe what I think the CPF is. I tried to find a statement to describe what CPF is from the CPF website. But ironically, I couldn't, and so, I turned to Wikipedia.
"In Singapore, the Central Provdent Fund (CPF) is a compulsory comprehensive savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs." - Wikipedia
The word, 'compulsory' was highlighted because sometimes I do feel a bit unfair that I am not given a choice on whether I want to be a responsible adult to save up for my future, or be an irresponsible guy who just spends every single dollar of my salary.
I'm forced to be responsible.
Sounds like an arranged marriage?
Like I have no choice but to marry this girl because my parents say so, and feel that this girl will create a better future for me.
Question 2: What are the different accounts in CPF?
Before the age of 55, it seems that I would have 3 different accounts in my CPF.
- Ordinary Account (OA)
- Special Account (SA)
- Medisave Account
Each of these accounts has their own unique uses and clauses on how they are being managed.
I shall not go deep into them for now because it would take a long time to read and filter the information I think it's important to me (and also because I want to sleep...)
After reaching 55, I believe my OA and SA would become my Retirement Account (RA).
The retirement plan is also another long story.
So I will leave at this first.
Question 3: How much of my salary do I have to contribute to CPF?
Or, how much am I getting if I don't need to contribute to CPF?
I believe this arithmetic question has, from time to time, appeared randomly to working adults like me.
I do know that currently I have to give 20% of my salary, while my employer has to contribute an additional 17% of my salary on top of my contribution.
Thus, if my salary currently is $4,000:
Own Contribution (20%) - $800
Employer's Contribution (17%) - $680
=> Take Home Salary - $3,200
So, imagine if there is no CPF contribution.. my salary would be $4,680!
It's quite shiok to think of it this way. haha..
One surprising find from the CPF website is that the percentage of CPF contribution from myself and my employer changes as I hit 50 and beyond (see Table 1). This isn't really that impactful, as it would be another 20+ years before the contribution rates change for me.
Table 1: Contribution rates
| Employee's age(years) |
Contribution Rates from 1 Jan 2015
(for monthly wages ≥ $750)
| ||
By Employer
(% of wage)
|
By Employee
(% of wage)
|
Total
(% of wage)
| |
| 50 and below | 17 | 20 | 37 |
| Above 50 to 55 | 16 | 19 | 35 |
| Above 55 to 60 | 12 | 13 | 25 |
| Above 60 to 65 | 8.5 | 7.5 | 16 |
| Above 65 | 7.5 | 5 | 12.5 |
Source: Link
An even more amazing find is that there is something called the Ordinary Wage (OW) ceiling.
This 'ceiling effect' limits the amount of salary that will be effected for the 20% contribution.
At the moment, it's capped at $5,000 (will be change to $6,000 on 1 Jan 2016).
So if I am earning $8,000 now, my CPF contributions will be:
Own Contribution (20% of 1st $5,000) - $1,000
Employer's Contribution (17% of 1st $5,000) - $850
=> Take Home Salary - $7,000
I'm quite delighted at this realization, because it means next time when my salary is higher, I get to keep a larger chunk of money (>80%) as compared to now (80%).
The allocation rates into the 3 accounts in CPF also changes over time.
But the changes start from 35 years old, which is l0 years away for me.
Changes seemed small, but I think these are still considerable factors to ponder over when deciding to transfer funds between the accounts (where applicable) or to dump in more cash from my pocket into the CPF accounts.
Table 2:
Employee's age
(years)
|
Allocation Rates from 1 Jan 2015
(for monthly wages ≥ $750)
| ||
Ordinary Account
(% of wage)
|
Special Account
(% of wage)
|
Medisave Account
(% of wage)
| |
| 35 and below | 23 | 6 | 8 |
| Above 35 to 45 | 21 | 7 | 9 |
| Above 45 to 50 | 19 | 8 | 10 |
| Above 50 to 55 | 14 | 10.5 | 10.5 |
| Above 55 to 60 | 12 | 2.5 | 10.5 |
| Above 60 to 65 | 3.5 | 2 | 10.5 |
| Above 65 | 1 | 1 | 10.5 |
Source: Link
Alright!
These are still rather basic information about CPF.
There are a lot of other information to research on, such as the prevailing interest rates, the uses of the accounts, minimum sum, retirement, etc.
But since it's getting late, I shall stop writing and go to bed.
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