Singapore: Introduction of Government Match for Provident Fund Catch-up Contributions

Submitted by mmarquez on

Social Security Administration (25.02.2021) Singapore Introduces Government Match for Provident Fund Catch-up Contributions In January, Singapore's Central Provident Fund (CPF) Board introduced the Matched Retirement Savings Scheme, a program that provides a dollar-for-dollar government match of up to S$600 (US$450.56) per year in catch-up contributions for qualifying CPF members from 2021 to 2025. To be eligible, a CPF member must be aged 55 to 70; have a Retirement Account (RA) balance of less than the Basic Retirement Sum (currently S$93,000 [US$69,836.69]); have average monthly income not exceeding S$4,000 (US$3,003.73); and meet certain asset limits. Anyone can make the catch-up contributions for eligible CPF members, including the members, their families, and their employers. (Catch-up contributions with no government match are allowed for all CPF members with account balances up to a certain limit that varies by age. The government provides tax incentives for up to S$7,000 [US$5,256.52] of catch-up contributions each year.) According to the government, around 440,000 CPF members, representing 53 percent of all members aged 55 to 70, are eligible for the program.

The CPF is a publicly managed provident fund program that is mandatory for most workers (including most public-sector workers) and voluntary for all other workers. Employers contribute 17 percent of monthly payroll greater than S$50 (US$37.55) for employees aged 55 or younger, 13 percent for employees aged 56 to 60, 9 percent for employees aged 61 to 65, or 13 percent for employees aged 66 or older. CPF members contribute 20 percent of monthly earnings of at least S$750 (US$563.20) if aged 55 or younger, 13 percent if aged 56 to 60, 7.5 percent if aged 61 to 65, or 5 percent if aged 66 or older. (CPF members earning at least S$500 [US$375.47] but less than S$750 a month pay a flat monthly amount based on their age and earnings.) CPF contributions are allocated into three different individual accounts: (1) an Ordinary Account (OA) that can be used to finance the purchase of a home, life and mortgage insurance, education, and investments in approved retirement-related financial products (for funds over S$20,000 [US$15,018.64]); (2) a Special Account (SA) that is principally for retirement, but funds over S$40,000 (US$30,037.29) can be invested in approved retirement-related financial products; and (3) a MediSave Account for certain hospitalization and medical expenses. Upon reaching age 55, a fourth account—the RA—is created from the combined account balances of the OA and SA accounts. Funds from the RA can be withdrawn for retirement as early as age 55 if the RA balance exceeds a certain minimum; otherwise, the standard payout age for CPF retirement benefits is 65.

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