Retirement Planning

It is never too early to start planning for retirement. How you plan to live your golden years – travelling around the world, starting a new business or taking up a new sport, it is crucial that you map out a plan for a comfortable retirement now.

One of the more common ways is to put aside a certain percentage of your income into a monthly savings investment plan. The larger the percentage set aside, the greater the options available to you at retirement. For Singapore Permanent Residents, the Central Provident Fund provides one aspect of savings for retirement.

Central Provident Fund

The Central Provident Fund (CPF) is a compulsory social security savings plan to provide for Singapore Citizens and Permanent Residents in their old age. Both employees and employers contribute a percentage of the monthly income to this savings plan. Since its inception, CPF has developed to incorporate health care, home-ownership, family protection and asset management to meet the needs of families today.

The maximum amount of CPF payable is based on a monthly salary ceiling of $4,500 for ordinary wages. This will change to $5,000 from 1st of September 2011.

CPF is split into 3 different accounts, each serving a different purpose.

Ordinary Account

This account can be withdrawn to purchase a home, CPF-approved investments as well as payment towards a full-time undergraduate or diploma education at an approved institution. Both the students’ and parents’ CPF accounts may be used towards payment of tuition fees.

Special Account

Money set aside in this account is for old age and contingency purposes. It may also be used to purchase retirement-related financial products and CPF-approved investments.

Medisave Account

Funds in this account are kept aside to meet personal or immediate family’s hospitalisation expenses and approved medical insurance.

Once an employee commences employment, both the employee and employer will begin making CPF contributions. In the case of a Permanent Resident, contribution rates will only need to be paid once the Permanent Resident status is acquired. The contribution rates for Permanent Residents are graduated and only reach on par with Singaporeans in the 3rd year.

Withdrawal Age

Once you turn 55 years of age, a retirement account is created. At this age, a percentage of the CPF money can be withdrawn except the minimum sum (currently set at $99,600 and to be increased to $120,000 by 2013). The minimum sum will be kept untouched until age 62 (to be increased to 67 in 10 years) before monthly payouts are made for the next 20 years. This monthly payout can also be used to purchase a lifetime annuity for cash benefits to sustain you for as long as you live.

Rate of Contribution for Singapore Permanent Resident Employees

Rate of Contribution for Singapore Citizen Employees

The maximum amount of CPF payable is based on a monthly salary ceiling of $4,500 a month of ordinary wages. This will change to $5,000 from 1st of September 2011.