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CPF Contribution to be Increased
As announced in Budget 2014, the CPF contribution will be increased by 1% for everyone. The increased contribution will go to Medisave.
While companies will be receiving some kind of temporary top-up to help cope with this increase, self-employed personnel will have to fund this increase by themselves.
There will also be in additional increase for seniors.
I am not at all surprised with these changes. With the introduction of Medishield life, the premiums are going to increase quite significantly. The 1% increase will help to fund the higher premiums.
Business owners are not going to be happy about the increased wage cost. However, one way to look at this is that in the future, companies might choose not to offer hospitalization benefits as part of an employee’s benefit. The savings can be channelled to pay for this Medisave component.
This will also solve the current duplication wastage of the company’s benefit with Medishield (or their private integrated shield plans).
The full details of the changes are below:
Changes to CPF contribution rates from January 2015
Employer contribution rates to the Medisave Account (MA) will be increased for all workers to help them save more for healthcare needs. Workers aged above 50 to 65 will see an additional increase in the employer contribution rates to the Special Account (SA) to help them save more for retirement.
Employee contribution rates to the Ordinary Account (OA) will increase for workers aged above 50 to 55.
The table below shows these increases in CPF contribution rates for Singapore Citizens (SCs), and for Singapore Permanent Residents (SPRs) from their 3rd year of obtaining SPR status.
Increases in CPF contribution rates for SCs and SPRs from January 2015
| Employee’s age (years) | Percentage point increase in CPF contribution rates (for wages ≥ $750) | Allocation of increase | ||||
| Contribution by employer | Contribution by employee | Total | OA | SA | MA | |
| 50 and below | +1% | – | +1% | – | – | +1% |
| Above 50 – 55 | +2% | +0.5% | +2.5% | +0.5% | +1% | +1% |
| Above 55 – 60 | +1.5% | – | +1.5% | – | +0.5% | +1% |
| Above 60 – 65 | +1.5% | – | +1.5% | – | +0.5% | +1% |
| Above 65 | +1% | – | +1% | – | – | +1% |
Medisave contribution rates for Self-Employed Persons (SEPs) with annual net trade income of $18,000 and above will be raised by 1%.
The rates in the table below are applicable to SEPs for annual net trade income from 2015.
Contribution rates applicable to SEPs from 2015
| Annual net trade income (from 2015) | Age as at 1 January of work year | |||
| Below 35 years | 35 to below 45 years | 45 to below 50 years | 50 years and above | |
| Above $6,000 to $12,000 | 4% | 4.5% | 5% | 5.25% |
| Above $12,000 to $18,000 | Phased in*from 4% to 8% | Phased in*from 4.5% to 9% | Phased in*from 5% to 10% | Phased in*from 5.25% to 10.5% |
| Above $18,000 | 8% (Maximum $4,800) | 9% (Maximum $5,400) | 10% (Maximum $6,000) | 10.5% (Maximum $6,300) |
*Please refer to the CPF website for the phased-in rates.
Special Employment Credit and Temporary Employment Credit
To help employers better cope with the contribution rate increases in 2015, the Special Employment Credit (SEC) will be enhanced. Employers will in addition receive a new Temporary Employment Credit (TEC).
SEC enhancement in 2015
Employers hiring Singaporean workers aged above 50 earning up to $4,000 a month in 2015 will receive an additional offset of up to 0.5% of wages, making it a total offset of up to 8.5%. The current offset is up to 8%.
TEC payment in 2015
In 2015, employers will receive a one-year offset of 0.5% of wages for Singaporean and SPR workers, up to the CPF salary ceiling of $5,000 per month, based on employees’ incomes paid in 2015. This will help employers cope with the increased Medisave contribution rates.