Central Provident Fund

Not to be confused with Central Provident Fund (South Africa).

Central Provident Fund Board

Logo of the CPF Board
Agency overview
Jurisdiction	Government of Singapore
Headquarters	238B Thomson Road, #08-00 Tower B Novena Square, Singapore 307685
Website	www.cpf.gov.sg

In Singapore, the Central Provident Fund (CPF; Chinese: 公积金, Pinyin: Gōngjījīn) is a compulsory comprehensive savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs. The CPF is an employment based savings scheme with employers and employees contributing a mandated amount to the Fund.

It is administered by the Central Provident Fund Board, a statutory board operating under the Ministry of Manpower which is responsible for investing contributions.

History of CPF

CPF Building, headquarters of the CPF Board, is located on Robinson Road.

British colonial authorities in Singapore created the Central Provident Fund in 1955 as a compulsory savings scheme to assist workers to provide for their retirement without needing to introduce a more extensive and costly old age pension. Money contributed to the Central Provident Fund earned a nominal rate of return. As Singapore's economy developed, the Central Provident Fund was expanded in 1968 to provide for housing expenses under the Public Housing Scheme. In 1984 the Central Provident Fund was again expanded to cover medical and care expenses. As the Central Provident Fund developed, dedicated accounts were created for the different expenses the Fund was designed to cover, to ensure a more targeted savings approach. In 1986 a higher risk investment option was added to give members the opportunity of a higher rate of return on their savings.

As Singapore continued to grow, the government progressively implemented a range of programs and supplements based around the Central Provident Fund. In 1987, the Minimum Retirement Sum Scheme annuity was introduced to better ensure a secure retirement for older workers. In 1990, MediShield health insurance, designed to be purchased with Central Provident Fund savings, was launched to provide more stable and affordable healthcare options to Singaporeans. Later expansions to the Fund included programs such as an additional rate of interest of 1% for the first $60,000 of retirement savings, the Workfare Income Supplement which supplements retirement savings for low-income older workers, and the Pioneer Generation Package which provides additional support for the medical expenses of older workers.

When the CPF was started in 1955, both employees and employers contributed 5% of an employee's pay to the scheme. The rate of contribution was progressively increased along with the growth of Singapore's economy, reaching 25% for both employers and employees in 1985. The principle of equal contribution was abandoned in 1986 due to a sharp recession, when the employer contribution was cut to 10% of an employee's pay in an effort to keep Singapore attractive to business. The employer contribution rate reverted to the same level as the employee rate until the 1997-1998 Asian Financial Crisis, when the rate for employers was again lowered to 10% for workers 55 years or younger. Since then, the employer contribution rate has been gradually increased, with ongoing economic problems blamed for postponing the reinstatement of the original principle of equal contribution. Employers currently contribute 3 fewer percentage points of salaries over S$750 for employees up to 55 years old.

Overview

Accounts and interest rates

Working Singaporeans and their employers make mandatory monthly contributions to the CPF and these contributions go into three accounts:

• Ordinary Account (OA) – for housing, pay for CPF insurance, investment and education.
• Special Account (SA) – for old age and investment in retirement-related financial products.
• Medisave Account (MA) – for hospitalisation and approved medical insurance.

Retirement Account (RA) - created when one turns 55 using the savings in OA and SA. It is set up to meet basic needs during old age. No contribution, whether mandatory or voluntary, will go into this account. One can only top up (which is not same as voluntary or mandatory contribution) to this account up to prevailing annual limit.

The CPF savings earn a minimum risk-free interest of 2.5% guaranteed by the Government. Until December 2014, Special, Medisave and Retirement Account savings earned a guaranteed minimum 4% interest. In addition, the first $60,000 in the combined CPF balances, with up to $20,000 from the Ordinary Account, earned an extra 1% interest.

Employer and employee CPF contribution rates

In September 2010, the employer's contribution to the CPF went up by 0.5% to be paid into the Medisave Account.

In March 2011, the employer's contribution went up another 0.5% to be paid into the Special Account, bringing the total employer CPF contribution to 15.5%, setting the overall employer and employee CPF contribution rate at 35.5%.

From 1 September 2011, the employers’ CPF contribution rate is increased by 0.5 percentage points. For employees who are above 35 years old and earning monthly wages of up to $1,500, the higher employer CPF contribution rate will continue to be phased in from 0% at the wage of $50 to the new full rate at the wage of $1,500. The increased contribution will be credited to the employees’ Special Account (including those above 55 years of age).

However, the additional 0.5 percentage points does not apply to graduated employer and employee rates for first or second year Singapore Permanent Residents (SPR) and their employers.[1]

From September 2012, CPF contribution rates for older workers aged 50 to 65 was increased to help them better prepare for retirement. For employees aged between 50 and 55, their contribution rates will go up by 2.5 percentage points – 2 percentage points from the employer and 0.5 percentage points from the employee – to bring their total CPF contributions up to 32.5% from 30%. For those between 55 and 60, their contribution rates will go up by 2 percentage points – 1.5 percentage points from the employer and 0.5 percentage points from the employee.For workers between 60 and 65, their employer contribution rate will increase by 0.5 percentage points, with no increase in their employee contribution rate.

Schemes and Services

The overall schemes and services of the CPF encompass the following:

Retirement savings and withdrawals

CPF Minimum Sum
The CPF Minimum Sum (MS) Scheme provides members with a monthly income to support a modest standard of living during retirement. For members who are unable to set aside the full MS in cash, their property bought with their CPF savings will be automatically pledged to make up up to half of their MS.

CPF members who turn 55 between 1 July 2014 and 30 June 2015 will need to set aside a Minimum Sum of $155,000 in their Retirement Account. The MS for 2013 was $148,000, and is continuously being reviewed.

The MS has been adjusted over the years to account for inflation, longer life expectancies and Singaporeans rising expectations of their quality of life post-retirement. The MS is targeted to reach $120,000 ($2003) in 2015.

Reaching 55
Upon reaching 55, members may withdraw a portion of their CPF savings based on their available CPF balances. Setting aside the MS upon reaching 55 ensures that members have some regular income from their Draw Down Age to live on during retirement.

At 55
From 2013, at age 55, the CPF savings may be withdrawn after setting aside the CPF minimum sum and Medisave minimum sum. Savings from the Special and Ordinary Account are transferred into a newly created Retirement Account to form the CPF minimum sum. Members with at least $40,000 in their Retirement Account at 55 or at least $60,000 at 65 years old will be asked to select a CPF LIFE annuity plan, which will give them an income for life, starting from their draw down age. Those who are not on CPF LIFE can choose to join it or continue to keep the monies in their Retirement Account.

From 65
Monthly payments shall commence from one's draw down age to help meet basic needs in retirement. For those on CPF LIFE, their monthly income for life will start paying out. For those who are not on CPF LIFE, the monthly income will start paying out from their Retirement Account till the CPF minimum sum is exhausted; this is typically around 20 years.

Refer to the table below for the applicable draw down age

Year of Birth	Applicable Draw Down Age (DDA)
1944 to 1949	62
1950 and 1951	63
1952 and 1953	64
1954 and after	65

If you reached 55 before 1 January 1999, your Draw Down Age is 60.

Withdrawal at age 55
For withdrawal of CPF savings, the following rules apply for those who reach 55 between 1 January 2014 and 30 June 2014:

Cash balances in Ordinary and Special Accounts, and any balance above Medisave Minimum Sum (currently $40,500) in Medisave Account (MA) at 55	Amount that can be withdrawn
$5,000 or less	All cash balances
More than $5,000 but less than or equal to $153,000	$5,000. The remainder will be set aside in the Retirement Account (RA)*.
More than $153,000	$5,000 and any further cash balances after setting aside the CPF Minimum Sum of $148,000 (from July 2013 to June 2014) and the current Medisave minimum sum of $40,500 (for 2013).

Note: If you have at least $40,000 in your Retirement Account at age 55, you will be automatically placed on CPF LIFE

(*)The Retirement Account is created when a member reaches 55.

(**)The CPF Minimum Sum applicable for members turning 55 between 1 July 2013 and 30 June 2014 is $148,000. The Board will announce the CPF Minimum Sum figure (adjusted for inflation) in May each year.

From 1 January 2013, members reaching 55 who have set aside the CPF Minimum Sum in their Retirement Account, and the Medisave Minimum Sum in their Medisave Account, may choose to withdraw in cash all the balances in their CPF Ordinary (OA) and Special Accounts (SA), and any balance above the Medisave Minimum Sum in their Medisave Account (MA).

From 2003 to 2013, Central Provident Fund members leaving Singapore withdrew SGD$426 million, or 0.3 per cent of the average total members' balances each year. This includes the amounts withdrawn by former citizens, former Permanent Residents (PRs) and foreigners who contributed to CPF before 2003.

CPF LIFE
The CPF Lifelong Income scheme for the Elderly (CPF LIFE) is a scheme that will provide with a monthly payout starting from your Draw Down Age (DDA), for as long as you live. It improves upon the Minimum Sum Scheme where payouts only last about 20 years. No minimum amount of RA savings will be needed to join CPF LIFE, however the monthly payout depends on the RA savings. Thus, members with lower RA balances will receive correspondingly lower monthly payouts.

For members who turn 55 before 2013, he can join CPF LIFE if he is a Singapore Citizen or Singapore Permanent Resident between the ages of 55 and 80 with savings in your Retirement Account (RA).

For members who turn 55 after 2013, he would be automatically included in CPF LIFE if he had at least $40,000 in his RA when he turns 55 or at least $60,000 upon reaching 65. Members can still choose to join the scheme if he is not automatically included. Members who have a life annuity from an insurance company that provides equivalent benefits to that of CPF LIFE may be exempted from joining the scheme.

CPF Withdrawals on Other Ground
The CPF savings can also be withdrawn on the following grounds:

• By Malaysians, aged at least 50 years old, who had CPF accounts and residing in West Malaysia
• One has given up his citizenship or PR and leaving Singapore and West Malaysia permanently
• Permanently unfit for work, such as physically or mentally incapacitated - may not be a full withdrawal of savings, subjected to terms and conditions
• Death

Healthcare

Monthly contributions to the Medisave account help build up savings for healthcare needs. Medisave may be used to cover for self or dependents hospitalisation expenses. It may also be used for certain outpatient treatments like chemotherapy and radiotherapy treatments.

Medisave savings may be used to cover the premiums for MediShield. These are catastrophic medical insurance schemes for one and one's dependents. They help to meet the high medical costs of prolonged or serious illnesses. For older CPF members, there is ElderShield, an affordable severe disability insurance scheme that provides insurance coverage to those who require long-term care.

To ensure that all Singaporeans have access to medical care, Medifund helps the poor and needy to cover their medical bills.

The Medisave Required Amount is set at $38,500 from 1 January 2013.

Since 1 January 2004, CPF members who turn 55 and are able to meet the CPF Minimum Sum are required to set aside the MRA in their Medisave Account when they make a CPF withdrawal. If such members have less than the MRA in their Medisave Accounts, their Ordinary and/or Special Account balances in excess of the Minimum Sum will be used to top up the MRA

If you wish to withdraw your Medisave at 55, you need to set aside the Medisave Minimum Sum (MMS) before you are allowed to withdraw the excess. The MMS from 1 July 2012 is $38,500 and it would be increased to $40,500 from 1 July 2013.

The MMS is adjusted every July for inflation in healthcare costs so that its value in future years will be the same as that in 2003. This is because the value of money will fall as prices in general go up over time. It is therefore important that the MMS preserves its value to help members meet their healthcare needs in old age.

The revisions to MMS and MCC are to ensure that Singaporeans have sufficient savings to meet their healthcare expenses, and have been adjusted for inflation.

Home ownership

The Ordinary Account savings can be used to purchase a home under the CPF housing schemes. A Housing and Development Board (HDB) flat may be purchased under the Public Housing Scheme, or a private property under the Residential Properties Scheme. CPF savings may be used for full or partial payment of the property, and to service the monthly housing payments. Home buyers who are taking a bank loan to finance their property purchase have to pay the first 5% of the downpayment in cash. If a flat is purchased under the Public Housing Scheme, insurance under the Home Protection Scheme will be needed.

Limitations on the usage of Ordinary Account savings

Purchases (HDB/ Private Property) in which the usage of the Ordinary Account savings is limited	Limitations
New HDB flat bought Directly from HDB	The flat is financed by HDB concessionary loan. One can use the full CPF Ordinary Account savings and future CPF contributions in the Ordinary Account for the downpayment as well as the balance of the purchase price and/or pay off the HDB loan.
Resale HDB flat bought in the open market	The limitations are the same as above, but when the total amount of CPF used for the particular property has reached 100% of the Valuation Limit (VL), one has to have Ordinary and Special Account savings of at least 50% of the prevailing CPF Minimum Sum when using further Ordinary Account savings for the property. The VL is the lower of the purchase price or the value of the property at the time of purchase.
HDB flat or Private Property financed by bank loan	The limitations are the same as both of the above, except when the total amount of CPF used has reached the CPF Withdrawal Limit, further use of CPF is not allowed for the property.

Family protection

The Dependents' Protection Scheme helps families to tide over the first few years in the event of an insured member's permanent incapacity or death.

The Home Protection Scheme prevents homes from being lost. This scheme is applicable to all CPF members who use their CPF savings to buy an HDB flat. Should the insured member become permanently incapacitated or die, the CPF Board will pay the outstanding housing loan based on the amount insured.

MediShield is a catastrophic medical insurance scheme to help one and their dependents to meet the high medical costs of prolonged or serious illnesses. For older CPF members, there is ElderShield, an affordable severe disability insurance scheme that provides insurance coverage to those who require long-term care.

Asset enhancement

CPF members may invest their Ordinary Account balance under the CPF Investment Scheme – Ordinary Account (CPFIS-OA) and their Special Account balance under the CPF Investment Scheme – Special Account (CPFIS-SA), subject to caps. Assets that may be invested includes Insurance, unit trusts, Exchange Traded Funds (ETFs), Fixed Deposits, Bonds and Treasury Bills, Shares, Property Fund and Gold. From 1 July 2010, only monies in excess of $20,000 in the Ordinary Account and $40,000 in the Special Account can be invested.

See also

• Central Provident Fund (South Africa)
• Social security
• Employees Provident Fund, Malaysia's Provident Fund
• Economy of Singapore
• Provident fund (disambiguation)

Similar systems elsewhere

• National Insurance (UK)
• Social Security in France
• South African Social Security Agency
• Social Security (United States)
• Social Security (Sweden)
• Social Security (Australia)
• National Social Security System (Sistem Jaminan Sosial Nasional)(Indonesia)
• Canada Pension Plan

External links

• Central Provident Fund
• Singapore’s Central Provident Fund Scheme An Overview and A Comparison with the U.S. Social Security System