CPF in simple terms

Jes , 4 Comments

What is CPF?
A retirement fund that all Singaporeans and PR have to contribute every month so that you will not be a burden to society when you are old.
The dream is to still be healthy
What is in the CPF?
OA - Ordinary account - For education, housing, investment purpose
MA - Medishield account - For hospital bills
SA - Special account - For retirement

Can I withdraw when I immigrate or denounce my citizenship?
Yes you can withdraw even if you are below 55 years old but only if you are not relocating to West Malaysia. If you are going to stay in Johor, Penang, KL (West Malaysia) you can only withdraw at 55 years old.

How much do I have to contribute every month?
20% if you are 55 years old and below, 17% for employers. For others, check this table. Up to $5000 of your salary contributes to CPF.

What is the CPF annual limit?
The maximum amount you and your employer can contribute to CPF in a year, which is $31,450. This amounts to an annual salary ceiling of $85,000.

What are the changes starting Jan 2016?
Up to $6000 of your monthly salary will contribute to CPF.
CPF annual limit increases to $37,740 (17 months *$6000*37%)
Annual salary ceiling will increase to $102,000 (17 months *$6000)

When can you start receiving your CPF money?
At age 55, but only if you have more than the minimum sum of $161,000 in your account.

Can I still withdraw if I do not have $161,000?
Yes, you can withdraw up to $5000 only if you have a property .

What is the Retirement account?
Any sum less than $161,000 in your (OA + SA) will be transferred to this Retirement account (RA).

What is CPF Life?
This is a scheme you can choose at age 55 where you get money monthly starting from 65 years old until your last breath. You will need at least $40,000 in RA to qualify.
Option 1) If you have a property and only want to keep the minimum $80,500 in the RA, you can receive $660 to $720. This means you can withdraw any sum above $80,500 that you have in your RA.
Option 2) If you do not have a property, you will need at least $161,000 in RA to receive $1220 to $1320 every month. You can only withdraw any sum below $161,000.
Option 3) If you choose to keep the $161,000 in RA, you can receive $1220 to $1320 every month. You may also put more into the scheme to get higher payout.

Why does the minimum sum keeps increasing?
To keep up with inflation which results in higher cost of living.

What is inflation?
It means your money is getting smaller every year. In Singapore, it's around 2 to 3% inflation rate which means that $1 of biscuits this year will cost $1.02 to $1.03 next year. Thus if minimum sum does not increase accordingly, your retirement account will not be enough to take care of you for your retirement.

Why can't the government take care of me?
Money has to come from somewhere. The government can take care of you only if they increase taxes on your children and grandchildren.

If I am dying, can I use my hard earned money in my CPF to live out my life?
Of course you can! If you cannot work any more due to illness or have contracted any terminal diseases, you can withdraw all of them even after you opted into CPF Life.

What if I passed away without seeing the money?
You have the option to give them out to your beneficiaries in cash or to their CPF.

Why am I contributing more money yet have to wait even older before I can cash them out?
Singaporeans are living longer which means we can work for more years and also lead a longer retirement life.

Why don't the other countries  have such scheme?
Oh yes they do. Malaysia has EPF, Hong Kong has MPF. It's not unique. Most countries in Europe does not have a retirement scheme, so their income taxes are really very high (30 to 40%), which is one of the reasons contributing to the Europe debt crisis.

Why can't the government use the reserve funds for us?
Reserve funds are like emergency funds, we use it only when we need to. Being such a small country without natural resource and always threatened by neighbouring countries, having money safeguard our future against recession and rainy days. Just like your emergency funds.

How can CPF improve?
They should improve their website to more layman words and easier navigation. They should improve their communication with the masses on why they increase minimum sum and engage the public to answer people's questions, similar to what they are doing for the Pioneer Generation scheme.

CPF is not the perfect system but it is good enough because our government is clean and our money remains our money. All in all, you should not rely on just CPF for your retirement. You should be saving and investing right now!


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  1. How much do I have to contribute every month?
    17% if you are below 50 years old, 20% for employers.

    Do you mean 20% for employees. and 17% for employers?

    1. Hi there,

      Nice catch! I have amended my post but thank you for helping out :)

  2. Your articles are always helpful and relevant!

    1. Hi there,

      Thank you very much for your compliment and even though you are anonymous, it really helps motivate me to write more... :)