Employers, employees to pay for CPF contribution rate hikes
Rate hike from 2021 will boost retirement savings for older workers, with additional money going to Special Account for highest interest
The move to bolster retirement savings of Singaporeans will see both employers and employees pay for the hikes in the Central Provident Fund (CPF) contribution rates for older workers from Jan 1, 2021.
The additional money will go into the Special Account, which accrues the highest possible interest among the CPF accounts.
These are among 22 recommendations made public yesterday by the Tripartite Workgroup on Older Workers, all of which have been accepted by the Government.
The group released its report a day after Prime Minister Lee Hsien Loong said at the National Day Rally on Sunday that CPF contribution rates for older workers will be raised over the next decade or so, so that the full rate of 37 per cent is extended to those aged up to 60 before it tapers off.
The rate for workers between 55 and 60 currently stands at 26 per cent.
The retirement age and re-employment age ceiling will also be raised to 65 and 70 respectively, by 2030. They will first go up from 62 to 63, and from 67 to 68, respectively in 2022.
PM Lee added that a support package to help businesses adjust to these changes will be announced in next year's Budget.
The workgroup recommended that the Government provide wage offsets to accompany the higher age benchmarks. It also called for one-off wage offsets to mitigate the higher CPF contribution rates.
Manpower Minister Josephine Teo said that the timeline for the changes took into account the changing economic conditions and the need to provide businesses with some certainty.
The number of Singaporeans aged 65 and over is projected to almost double from today and reach 900,000 by 2030, noted the workgroup.
It said that subsequent increases in the retirement and re-employment ages should be in one-year increments.
For the first increase in CPF rates in 2021, employers and workers will each increase their contribution by 0.5 percentage point to 1 percentage point for workers aged 55 to 70.
For someone who was 55 in January this year and earns $3,000, both he and his employer contribute 13 per cent or $390 a month to his CPF savings.
In January 2021, the contribution rates for each such party would go up to 14 per cent or $420 a month. That works out to $360 more in contributions each per year for employer and employee.
Each further rise in CPF rates will not exceed 1 percentage point for either workers or employers.
Singapore National Employers Federation president Robert Yap welcomed the proposals but noted that they come with cost pressures on businesses.