A Guide to Understanding the CPF

For Singaporean citizens, the Central Provident Fund (CPF) is something that is both omnipresent and still somewhat confounding. However, because your CPF is vital to a number of important stages in your life, it is crucial to have a complete understanding of what it is, what you can do with it and the changes that have happened in recent years. Below, we will discuss the major aspects of your CPF and break down confusing topics.

Table of Contents

What is the Central Provident Fund?

The Central Provident Fund (CPF) is Singapore's social security savings scheme that is funded by you and your employer. It will help you pay for your housing, medical and most importantly, your retirement needs. The contributions you and your employer make go into three accounts: the Ordinary Account, Special Account and MediSave Account. Your CPF contributions are automatically withdrawn from your salary and your employer's contribution supplements your contribution.

Singaporean Citizens and Permanent Residents start contributing money to their CPF as soon as they get their first job, whether it is contractual, permanent, part-time or casual. The contributions are mandatory, unless you are working abroad, and go into effect if you earn more than S$50 per month. However, until you start earning more than S$500 per month, only your employer will contribute to the CPF. Once you earn more than S$500, you will contribute between 5-20% of your salary to your CPF. New Permanent Residents will contribute to the CPF at graduated rates for the first two years to adjust to the lower take-home pay.

CPF Contribution Rates by Contributor as a % of Monthly Wages

Employee AgeEmployer ContributionEmployee ContributionTotal
55 and younger17.0%20.0%37.0%
Above 707.5%5.0%12.5%

Beyond your Ordinary Wage, which is the wage you earn per month, other types of compensation are also used towards your CPF contributions. These are called Additional Wages and include commissions, overtime pay, cash incentives, allowances and bonuses. Both types of wages have CPF contribution ceilings. The Ordinary Wage ceiling is currently capped at S$6,000. This means that only the first S$6,000 of your wages will be subject to the CPF contribution. The Additional Wage contribution is capped at S$102,000 minus the total Ordinary Wage that was subjected to the CPF.

There are limits to how much you can contribute and withdraw from your CPF accounts. Currently, the annual CPF limit is S$37,740, meaning this is the most you can put towards your CPF per year from both mandatory and voluntary contributions. For those who want to continue saving towards retirement, you can consider putting money either into a high-yield savings account or consider Best Online Brokerages in Singapore. However, before investing, you should always make sure you do your due diligence.

Example of CPF Contribution
Ordinary WagesS$6,500/month
Additional WagesS$50,000/year
OW Subject to CPF ContributionsS$6,000*12=S$72,000
AW Subject to CPF ContributionsS$102,000-S$72,000=S$30,000
S$30,000 of your S$50,000 AW will be subject to CPF Contributions

The money in your CPF account is invested in Special Singapore Government Securities. The securities are guaranteed by the government and ensure that your savings are safe from financial market fluctuations. You will earn interest on the funds in all of your accounts. For a breakdown of interest rates, please see the table below.

CPF Interest Rates as of March 2022

AccountInterest Rate (p.a.)
Ordinary AccountUp to 3.5%
Special AccountUp to 5.0%
MediSave AccountUp to 5.0%
Retirement AccountUp to 5.0%

What Can You Use Your Ordinary Account For?

The Ordinary Account can be used for housing, education and investments. When you are 35 years old or younger, most of your CPF contributions (around 23% of your wages) will go to the Ordinary Account. As you get older, the contribution amount to your OA lessens and instead prioritises your Special and MediSave Accounts. As with all CPF accounts, your OA also earns interest, although at a lower rate than your SA and MA. While we have summed up the main features of the Ordinary Account below, you can find more in-depth information in our comprehensive guide to your Ordinary Account.

Account Allocations of Wage Rates (% of total CPF contribution) (monthly wage > S$750)

Employee's AgeOASAMA
35 and below62.17%16.21%21.62%
Above 708%8%84% Source: CPF.gov.sg

Ordinary Account: Housing Expenses

You can use the money in your Ordinary account to help pay for new or resale HDB flats and private flats. This includes using OA funds to help pay for the cost of the house, the down payment or mortgage payments, as well as miscellaneous fees such as stamp duty, legal costs and survey fees. You can also use your OA funds to pay for private housing, although that comes with its own set of rules. If you use your OA to pay for your housing, you will have to insure yourself under the Home Protection Scheme. This scheme protects you and your family from losing your home if you die, become seriously ill or become disabled. You can insure up to 100% of your home loan.

Ordinary Account: Education Expenses

You can also use your Ordinary Account to pay for your, your spouse's or your child's education. It is also possible to use your funds to pay for your sibling's or relative's subsidised tuition fees, although this is approved on a case-by-case basis. You can withdraw up to 40% of your accumulated OA savings (the sum of your current OA balance and the OA savings you previously withdrew for education or housing) or your remaining OA balance (balance left after setting aside amount for housing or other schemes) to pay up to 100% of the tuition.

To be eligible, you, your spouse or child have to take full-time, subsidised, undergraduate courses at the institutions listed below:

  • Nanyang Technological University (NTU)*
  • National University of Singapore (NUS)
  • Singapore Management University (SMU)
  • Singapore Institute of Technology (SIT)*
  • Singapore University of Technology and Design (SUTD)
  • Singapore University of Social Sciences (SUSS)
  • Nanyang Academy of Fine Arts (NAFA)*
  • LASALLE College of the Arts (LAS)*
  • *Along with approved degree programmes offered by the institutions partnered with overseas universities

Ordinary Account: Investment

You can also use your Ordinary Account funds for investing as long as the investments are CPFIS-OA (Central Provident Fund Investment Scheme) approved. You can use OA funds to invest in products like bonds, unit trusts, annuities and Exchange Traded Funds. You can also transfer your OA funds to higher interest CPF accounts such as your Special Account. However, you should note that this will be an irreversible transfer.

To be eligible to invest under the CPFIS-OA, you have to be at least 18 years old, have more than S$20,000 in your OA and not be an undischarged bankrupt. You can invest up to 35% of your investible funds in stock, property bonds and corporate bonds and 10% of your investible funds in gold. Investible funds are the sum of the funds that are currently in your Ordinary Account and the funds that you used for investment or education.

What Can You Use Your Special Account (SA) For?

The SA functions primarily as your retirement account. You can use it for retirement-related investments or as a savings fund for retirement use. It has an interest rate of up to 5% (currently), which can make it a stable savings account. However, if you want to use this account for investing rather than saving, it should have at least S$40,000. Because the SA will end up as part of your Retirement Account, you can only make approved investments that are typically low to medium risk, such as Singapore Government bonds, treasury bills and annuities.

MediSave Account (MA)

Your MediSave Account helps pay for your medical bills and health insurance. You can use your MediSave for certain health treatments up to their respective limits for yourself and approved dependants. MediSave can also be used to pay for MediShield, MediSave-approved Integrated Shield Plans and ElderShield premiums.

If you choose to use MediSave for certain medical procedures, you should be aware of its withdrawal limits. For instance, there is a S$450 daily inpatient hospitalisation limit, S$500 outpatient chronic disease treatment and S$300 for outpatient diagnostic or treatment scans.

Retirement Account (RA)

When you turn 55, the funds in your Ordinary and Savings Accounts will be transferred to a newly created account called the Retirement Account (RA). It provides a monthly income for the first 20-30 years of your retirement until you turn 95. If your RA has S$60,000 or more, you will automatically be enrolled in CPF LIFE, which is a national annuity scheme that allows you to receive a lifetime monthly income. It is important to note that you do not need to top up your RA in cash if you do not meet the Full Retirement Sum.

How Much Money Will I Get Upon Retirement?

You will be able to start withdrawing from your CPF upon turning 55 years of age. The amount you can withdraw depends on how much money you had in your SA and OA, as well as whether you have surpassed your Basic Retirement Sum (BRS) or Full Retirement Sum (FRS). The BRS increases 3% per year to match the rising cost of living. For example, if you are turning 55 in 2019, your basic retirement sum is 88,000, but those turning 55 in 2020 will have a BSR or S$90,500. The Full Retirement Sum is double the BRS and the Enhanced Retirement Sum is three times the sum of the BRS. There are limits to how much you can withdraw, as seen in the table below, but you are free to withdraw the amount in full or partially.

Savings in OA & SAWithdrawal Limit
< S$5,000All (No Cash for Retirement Account)
S$5,000 > S$181,000 (BRS)S$5,000 & RA savings above Basic Retirement Sum*
S$181,000 (FRS) <S$5,000 or SA/OA savings above FRS (whichever higher) & any RA savings above BRS*
*If you own a property with a remaining lease that can last you to at least 95 years old. This limit is to ensure you will have enough funds to pay for a rental after your lease is up.

Beyond the cash you can withdraw, you will also receive monthly payouts from your CPF when you turn 65 years old. However, you can defer these payouts until you turn 70. This can be a good option for those who want to keep earning interest. If you are on the Retirement Sum Scheme (RSS), you will receive monthly payouts for 20 years until you have no more money left in your RA. However, if you have the Full Retirement Sum, your payout may be extended to 30 years, provided the monthly payment is at least S$250. If you retired with less than S$5,000 in your account, you will not receive any monthly payouts and will only be able to take out the balance of your account as a lump sum.

CPF LIFE Payouts

If you are on the CPF LIFE scheme, you will receive payouts for life. Whether you are on RSS or CPF LIFE depends on how much money you have in your RA when you turn 55. You will be automatically eligible if you have at least S$60,000 in your RA. However, if you are on the RSS and want to switch to CPF LIFE , you are able to do so until you turn 80. There are three types of CPF Life plans. The Basic CPF LIFE basic plan offers smaller monthly payouts in exchange for greater savings for your beneficiaries. The CPF LIFE Escalating Plan offers lower payouts initially, but increases them 2% annually. The Standard Plan is the default plan and offers higher level monthly payouts.

Repaying Money Taken From CPF Before Age 55

If you have taken money out of your CPF to pay for either education or housing, you will have to put it back under certain conditions.

One of the main repayments you will be expected to make is if you sell a flat that was being paid for using your CPF. Upon the sale of the flat, you have to pay back only the amount you withdrew for the home and the accrued interest. The accrued interest is the interest you would have earned if that money was kept in your OA. However, you can then withdraw that cash again for your next house purchase.

Another repayment you have to make is if you took out money from your CPF to pay for education. Since the amount you take out is considered a loan, you will have to pay back the principal sum you took out plus any interest that would have accrued had the amount stayed in the account. The repayment starts one year after the student leaves the institution. The person whom the education was for is the one who is responsible for repayment.

Understanding Your CPF is Key to Living Well During Retirement

Being well-educated on the intricacies of your CPF is the best thing you can do to prepare yourself to living a financially stable post-retirement life. While the CPF does use the money you earned, which can lead people to believe that the funds should be used for any purpose, it was set up to fund your retirement.

Having a mandatory deduction of your salary to go towards a retirement fund can prevent many issues that arise in systems where mandatory savings don't exist. For example, in the United States, where retirement contributions are voluntary, it is predicted that the average American will not have enough funds to retire. Thus, when it comes to repayments and contributions, you should think of it less as giving money temporarily to the government and more as splitting your income between your current and future self.

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Anastassia Evlanova

Anastassia is a Senior Research Analyst at ValueChampion Singapore, evaluating insurance products for consumers based on quantitative and qualitative financial analysis. She holds degrees in Economics and International Business Management and her prior working experience includes work in the capital markets sector. Her analyses surrounding insurance, healthcare, international affairs and personal finance has been featured on AsiaOne, Business Insider, DW, Vice, Her World, Asia Insurance Review, the Australian Institute of International Affairs and more.

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