Higher salary ceiling, more contributions for older workers among CPF changes

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Budget 2015: Higher salary ceiling, more contributions for older workers among CPF changes

SINGAPORE: A higher salary ceiling and restoring parity in Central Provident Fund (CPF) contributions for workers aged above 50 to 55 with those of younger workers were among the changes highlighted by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam during his Budget speech on Monday (Feb 23).

Following the Government's acceptance of the recommendations proposed by the CPF Advisory Panel earlier this month, Mr Tharman shed more light on the changes to the CPF system.

For one, the CPF salary ceiling will be raised from the current S$5,000 to S$6,000 with effect from Jan 1, 2016. Middle-income Singaporeans will be able to accumulate more CPF savings during their working years, and the increase will benefit at least 544,000 CPF members, he said.

In line with the increase in salary ceiling, the Government will raise the contribution cap within the Supplementary Retirement Scheme, which offers tax incentives to encourage voluntary retirement savings to complement the CPF, he added.

INCREASED CONTRIBUTION FOR OLDER WORKERS

As for older workers, Mr Tharman said the CPF contribution rates will be restored for workers aged above 50 to 55 to the same level as those for younger workers. Specifically, the contribution rates for these workers will go up by two percentage points in 2016 - 1 per cent from the employer, and 1 per cent from the employee.

For workers aged above 55 to 60, employers' contribution rate will be upped by 1 percentage point, and raised 0.5 percentage points for workers aged above 60 to 65, he said, adding the changes will take effect from Jan 1, 2016.

The increase in employer contributions will go to the Special Account, while the increase in employee contribution will go to the Ordinary Account.

Additionally, Mr Tharman said to make the CPF system "more progressive", it would pay an additional 1 per cent extra interest on the first S$30,000 of CPF balances from the age of 55. This is on top of the existing 1 per cent extra interest provided on the first S$60,000 of balances, he said.

Around 60 per cent of today's CPF members aged 55 and older would earn 6 per cent on their CPF savings, and around 80 per cent will earn at least 5 per cent. This will take effect from Jan 1, 2016, the minister said.

- CNA/kk




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