Central Provident Fund

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


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. 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 care expenses. In 1986 an investment option was added to give members the opportunity to manage their own risk and returns.

In 1987, the Minimum Retirement Sum Scheme annuity was introduced. In 1990, MediShield health insurance funded by Central Provident Fund savings, was launched to provide universal healthcare to all Singaporeans. Later programs includes interest rate top up 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 to 25% for both employers and employees in 1985. The employer contribution was cut to 10% during a recession in 1986. The employer contribution rate was reverted to match the employee rate until the 1997–1998 Asian Financial Crisis, and thereafter lowered to 10% for workers 55 years or younger. Since then, the employer contribution rate has been gradually increased. Employers currently contribute 3 fewer percentage points of salaries over S$750 for employees up to 55 years old.

Accounts and interest rates
Employees and employers are required to make monthly contributions to the following CPF 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.

The OA and SA is combined to form the Retirement Account (RA) when one turns 55. The RA is used to meet basic needs during old age.

The CPF savings earn a minimum interest of 2.5% for OA and 4% for other accounts. In addition, the first $60,000 in the combined CPF balances, with up to $20,000 from the Ordinary Account, will earn an extra 1% interest.

CPF contribution rates
As of 2018, the employer's CPF contribution is 17% for those up to age of 55 and decreases to 7.5% for those 65 and above. The employee's CPF contribution is 20% up to age 55 and decreases to 5% for those 65 and above.

CPF Minimum Sum
The CPF Minimum Sum (MS) Scheme requires all members to set aside a minimum sum of CPF savings in the RA for retirement needs upon reaching 55 years old. CPF savings from the OA and SA would be transferred to the RA for this purpose. Members whose savings are in excess of the MS and Medisave minimum sum would be allowed to withdraw them in cash. For members with insufficient savings in the RA, their property bought with their CPF savings will be automatically pledged to make up up to half of their MS. Members would receive a monthly stipend from their RA at the start of their draw down age until it is depleted.

The MS has been continuously increased over the years to account for inflation and longer life expectancies. 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 and $40,500 in their Medisave Account. Over the years, the draw down age has been progressively delayed from 60 to 65.

CPF Life
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.

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.

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.

Medisave
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.

Since 1 January 2004, CPF members who turn 55 and are able to meet the CPF Minimum Sum are required to set aside the Medisave Minimum Sum (MMS) in their MA when they make a CPF withdrawal. The MMS is set at $40,500 from 1 July 2013. OA and/or SA balances in excess of the Minimum Sum will be used to top up the MMS if it is insufficient.

Medishield
MediShield is a catastrophic medical insurance scheme to help one and their dependents to meet the high medical costs of prolonged or serious illnesses. Medisave savings may be used to cover the premiums for MediShield.

Medifund
Medifund helps the poor and needy to cover their medical bills.

Eldershield
ElderShield is a severe disability insurance scheme that provides insurance coverage to the elderly who require long-term care.

Dependents' Protection Scheme
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.

Housing Schemes
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, mortgage insurance under the Home Protection Scheme will be necessary.

Investment Scheme
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.

CPF Withdrawal
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.

Conditions for withdrawal
CPF savings can be withdrawn on the following grounds:
 * Malaysians who are at least 50 years old and residing in West Malaysia.
 * Anyone who has renounced his citizenship or PR and leaving Singapore and West Malaysia permanently.
 * Upon death.
 * Conditional partial withdrawal for those who are certified permanently unfit for work, such as physically or mentally incapacitated.

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)
 * Canada Pension Plan