Budget 2015: CPF salary ceiling to be raised

SINGAPORE — The Central Provident Fund (CPF) salary ceiling will be raised from S$5,000 to S$6,000 from Jan 1 next year, and the CPF contribution rates for older workers will also be increased.

Finance Minister Tharman Shanmugaratnam made these announcements in his Budget speech today, saying they are aimed at helping middle-income Singaporeans accumulate more CPF savings during their working years.

The raising of the CPF salary ceiling, proposed by the labour movement and the CPF Advisory Panel earlier, will benefit at least 544,000 CPF members, said Mr Tharman, who is also Deputy Prime Minister.

CPF contributions are currently based on salaries of up to S$5,000 a month for private sector employees and non-pensionable employees in the public sector.

“Based on the new ceiling, a 45-year-old worker who earns S$6,000 or more today will save an additional S$60,000 by the time he reaches 65,” said Mr Tharman.

The CPF salary ceiling was last revised in 2011 to S$5,000 a month, up from S$4,500 previously, to keep pace with income growth.

In his speech, Mr Tharman also announced a “final step” of restoring the contribution rates of workers aged 50 to 55 by 2 percentage points to 37 per cent, the same level as those for younger workers. The employer and the employee will contribute 1 percentage point of increase each.

Contribution rates for workers aged 55 to 60 will increase to 26 per cent, through a 1 percentage point increase in employer contributions. For workers aged 60 to 65, contribution rates will go up to 16.5 per cent, through a 0.5 percentage point increase in employer contribution.

Contributions by employees aged 55 to 65 remain unchanged.

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Additional employee contributions will go into the Ordinary account and can be used to help service housing mortgages. said Mr Tharman. Increased employer contributions will go to the Special Account.

To help older CPF members who have small balances in their accounts, an additional 1 per cent Extra Interest will be paid on the first S$30,000 of CPF balances from the age of 55, said Mr Tharman. This comes on top of the existing 1 per cent Extra Interest provided on the first S$60,000 of balances. With the change, about three in five CPF members aged 55 and older can earn 6 per cent interest.

Table: MOF

READ THE FULL BUDGET STATEMENT HERE

Other documents on Budget 2015 available on the Budget 2015 website.