What is CPF and CPF rate in Singapore?

Blog, Singapore │ June 7, 2023

Understanding CPF The CPF, which stands for Central Provident Fund, serves a crucial role in Singapore’s social security system. It provides Singaporeans with adequate funds for retirement, medical expenses, and…

Understanding CPF

The CPF, which stands for Central Provident Fund, serves a crucial role in Singapore’s social security system. It provides Singaporeans with adequate funds for retirement, medical expenses, and home ownership. To achieve these objectives, CPF requires earning individuals to contribute a portion of their income each month to CPF accounts specifically designated for these purposes.

This compulsory saving scheme helps prevent individuals from spending all their money at once. It also helps avoid facing financial difficulties when it comes to paying for their retirement or medical bills. In addition, CPF helps to maintain a high home ownership rate in Singapore since the funds can only be utilized for purchasing a home, not for renting.

CPF contribution components

For employed individuals who are Singapore citizens or Singapore permanent residents (PRs), the CPF contribution is composed of the employee’s contribution and the employer’s contribution.

When you receive your salary each month, your employer has a legal obligation to inform the CPF board of your earnings and withhold the portion that must be allocated to your CPF accounts as an employee’s contribution.
The CPF contribution will be deposited into your account accordingly. Besides the employee’s contribution, there is also an employer’s contribution, which refers to the mandatory amount that your employer must contribute to your CPF accounts, in addition to your salary.
CPF Ordinary Wages (OW) is capped at S$6,000 per month and with effective from 01 Sept 2023, OW will be increased to S$6,300 per month.

Employers are required to:

Declare your employees’ wages to CPF Board
Pay your employee’s CPF contribution

These are applicable to your employees who are Singapore Citizens/Singapore PRs and earn more than S$50 per month.

Frequency of CPF contribution

CPF submission and payment will be done monthly. The due date for CPF contributions is the last day of each month. Don’t be late, or you’ll have to cough up late payment interest. Delayed payments will be charged additional 1.5% per month for each day after the due date.

CPF contribution rates for 2023

Effective 1 January 2023, the CPF contribution rates for ages above 55 up to 70 have increased. The following outlines the portion of an employee’s wage contributed by Singapore citizens or Permanent Residents (PRs) who have been living in Singapore for three years or more:

CPF CONTRIBUTION RATE FOR 2023

AGE OF EMPLOYEE	EMPLOYER CONTRIBUTION	EMPLOYEE CONTRIBUTION	TOTAL CPF CONTRIBUTION RATE

Up to 55 years old	17%	20%	37%
Above 55 to 60 years old	14.5%	15%	29.5%
Above 60 to 65 years old	11%	9.5%	20.5%
Above 65 to 70 years old	8.5%	7%	15.5%
Above 70 years old	7.5%	5%	12.5%

CPF contribution rates are categorized based on the citizenship status of individuals as well as their total wages. This applies to Singapore Citizens and first year, second year, and third year Permanent Residents.

However, if you’re self-employed, the aforementioned rules do not apply to you. Although Medisave contributions are mandatory, any CPF contributions you make are voluntary. Hence, you’ll be required to pay them after filing your taxes each year.

Illustration of CPF computation:

Assuming you’re a 30-year-old individual earning a monthly gross salary of $5,000, your employer will be contributing 20% of your wage towards your CPF account every month. This means that $1,000 will be deducted from your salary and deposited into your CPF accounts. This leaves you with a take-home pay of $4,000.

Furthermore, your employer is obliged to make a compulsory contribution to your CPF accounts. It is equivalent to 17% of your salary or $850. This is in addition to the $5,000 salary they pay you every month.

As a result, your CPF accounts will receive a total contribution of $1,850 every month.

For employer cost: S$5,000 + S$850

total gross salary + employer CPF contribution.

Assuming you are 40 years old Singapore PR more than 3 years receive a gross salary of S$8,000 in July 2023. Employee CPF contribution for the month of July 2023 is based on S$6,000 x 20% = S$1,200 and your employer will contribute S$1,020 (S$6,000 x 17%). Hence you will receive net salary of S$6,800 (S$8,000 – S$1,200). In July 2023, your CPF accounts will receive a total contribution of $2,220.

For employer cost: S$8,000 + S$1,020