As Singapore continues its journey towards an ideal social security system, the Central Provident Fund (CPF) remains at the heart of this effort. With significant CPF contribution changes slated for September 2023, it’s important for both employees and employers to comprehend these alterations and their implications.
If you are a Singaporean citizen or permanent resident, you are probably familiar with the Central Provident Fund (CPF), a mandatory social security savings scheme that helps you save for retirement, healthcare and housing needs.
What are the CPF contribution changes?
The CPF contribution changes are part of the government’s efforts to enhance the retirement adequacy of Singaporeans, especially for older workers. They were announced in Budget 2023 and will be implemented in phases over the next few years.
There are two main types of changes:
- An increase in the CPF Ordinary Wage (OW) ceiling, which limits the amount of monthly salary that attracts CPF contributions for all employees.
- An increase in the CPF contribution rates for employees aged above 55 to 70, to boost their retirement savings.
Increase in CPF Ordinary Wage ceiling
The CPF OW ceiling will be raised from $6,000 to $8,000 by 2026, with the first increase to take place on 1 September 2023. The increase will take place in four steps to allow employers and employees to adjust to the changes.
The table below shows the CPF OW and annual salary ceilings from 2023 to 2026.
| Year | CPF OW ceiling | CPF annual salary ceiling |
| 2023 | $6,300 (+$300) | $102,000 |
| 2024 | $6,800 (+$500) | $102,000 |
| 2025 | $7,400 (+$600) | $102,000 |
| 2026 | $8,000 (+$600) | $102,000 |
There will be no change to the CPF annual salary ceiling of $102,000, which sets the maximum amount of CPF contributions payable for all salaries received in the year, inclusive of both Ordinary Wages and Additional Wages.
There will also be no changes to the Additional Wage ceiling and CPF Annual Limit, where they will remain at [$102,000 – Total Ordinary Wage subject to CPF for the year] and $37,740 respectively.
Increase in CPF contribution rates
The CPF contribution rates for employees aged above 55 to 70 will be increased to strengthen their retirement adequacy. The changes will apply to wages earned from 1 January 2024:
| Employee’s age (years) | Current | CPF Contribution Rates from 1 Jan 2024 | ||
| Total (% of wage) | Total (% of wage) | By employer (% of wage) | By employee (% of wage) | |
|---|---|---|---|---|
| 55 and below | 37 | 37 | 17 | 20 |
| Above 55 to 60 | 29.5 | 31 (+1.5) | 15 (+0.5) | 16 (+1) |
| Above 60 to 65 | 20.5 | 22 (+1.5) | 11.5 (+0.5) | 10.5 (+1) |
| Above 65 to 70 | 15.5 | 16.5 (+1) | 9 (+0.5) | 7.5 (+0.5) |
| Above 70 | 12.5 | 12.5 | 7.5 | 5 |
The increase in the CPF contribution rates will be fully allocated to the employees’ Special Account to provide a bigger boost to their retirement income.
For those earning monthly wages of more than $500 to $750, the employee contribution rates will continue to be phased in.
There are no changes to the graduated contribution rates for first and second year Singapore Permanent Residents (SPRs).
Why are the CPF contribution changes happening?
The CPF contribution changes are happening because of two main reasons:
- To keep pace with the rising income levels and cost of living of Singaporeans, especially for older workers who may have lower retirement savings and face higher healthcare expenses.
- To encourage longer working lives and support the re-employment of older workers, as Singapore faces an ageing population and a shrinking workforce.
The government hopes that by increasing the CPF contributions for older workers, they will be able to build up more savings for their retirement, enjoy higher monthly payouts from CPF LIFE, and have greater peace of mind in their golden years.
How will the CPF contribution changes affect you?
The CPF contribution changes will affect you differently depending on whether you are an employee or an employer.
If you are an employee
If you are an employee, the CPF contribution changes will mean that:
- You will receive more CPF contributions from your employer if your monthly salary exceeds the current CPF OW ceiling of $6,000. This means that a greater proportion of your salary will be allocated towards your CPF savings.
- You will also contribute more to your CPF if you are aged above 55 to 70. This means that you will have less take-home pay, but more savings for your retirement.
- You will enjoy higher monthly payouts from CPF LIFE when you retire, as your retirement account balance will be higher due to the increased contributions.
For example, if you are 57 years old and earning $8,000 per month, this is how the CPF contribution changes will affect you:
| Year | CPF OW ceiling | Employer’s contribution | Employee’s contribution | Total contribution | Retirement account balance at 65 |
| 2023 | $6,300 | $1,071 | $945 | $2,016 | $203,000 |
| 2024 | $6,800 | $1,156 | $1,088 | $2,244 | $224,000 |
| 2025 | $7,400 | $1,259 | $1,184 | $2,443 | $246,000 |
| 2026 | $8,000 | $1,360 | $1,280 | $2,640 | $269,000 |
As you can see, your total CPF contribution will increase from $2,016 in 2023 to $2,640 in 2026. This means that your take-home pay will decrease by $624 per month. However, your retirement account balance at 65 will also increase by $66,000. This means that your monthly payout from CPF LIFE will increase by about $300.
If you are an employer
If you are an employer, the CPF contribution changes will mean that:
- You will have to pay more CPF contributions for your employees if their monthly salary exceeds the current CPF OW ceiling of $6,000. This means that your labour cost will increase.
- You will also have to pay more CPF contributions for your employees who are aged above 55 to 70. This means that you will have to budget for the higher contributions and plan ahead for the cash flow implications.
- You may be eligible for wage offsets from the government to help you cope with the increased contributions. The government has announced that it will provide wage offsets of up to 50% of the increase in employer contributions for workers aged above 55 to 70 for five years from 2024 to 2028.
For example, if you have an employee who is 57 years old and earning $8,000 per month, this is how the CPF contribution changes will affect you:
| Year | CPF OW ceiling | Employer’s contribution | Wage offset | Net employer’s contribution |
| 2023 | $6,300 | $1,071 | – | $1,071 |
| 2024 | $6,800 | $1,156 | $43 | $1,113 |
| 2025 | $7,400 | $1,259 | $94 | $1,165 |
| 2026 | $8,000 | $1,360 | $150 | $1,210 |
As you can see, your employer’s contribution will increase from $1,071 in 2023 to $1,360 in 2026. This means that your labour cost will increase by $289 per month. However, you will also receive wage offsets from the government ranging from $43 to $150 per month. This means that your net employer’s contribution will increase by only $139 per month.
Streamline CPF calculation with HRMLabs
The changes to the CPF contribution rates and ceilings are part of the government’s efforts to help Singaporeans save more for their retirement and to ensure that the CPF system remains relevant and sustainable in the long term. These changes will affect both employees and employers in different ways, depending on their age and income level.
To make CPF calculations and compliance with the changing contribution rates easier, businesses should consider implementing a robust HR and payroll management system. One option is HRMLabs Payroll Software. With automated payroll processing features, HRMLabs can calculate CPF contributions accurately based on the latest rates. It also handles regulatory submissions like generating CPF files for easy compliance. This saves businesses time and reduces risks of errors from manual calculations.
