Increase in CPF Contribution Rates for Older Workers 

 
Present Position

CPF contribution rates are lower for older workers (aged above 50 years) compared to their younger cohorts. This helps reduce employers' costs and maintain demand for older workers. The current CPF rates for older workers are as follows:

Workers earning more than $1,500 of wages per month
Age Employer CPF Rate (%*) Employee CPF Rate (%*) Total CPF Rate (%*)
>50 – 55 years 12 18 30
>55 – 60 years 9 12.5 21.5
>60 – 65 years 6.5 7.5 14
* % of wages

The Medisave contribution rate for older self-employed persons (aged 50 years and above) with annual net trade income of $18,000 and above is currently 9%.
Proposed Change

CPF contribution rates for older workers would be increased as follows:

Workers earning more than $1,500 of wages per month
Age Employer CPF Rate (%*) Employee CPF Rate (%*) Total CPF Rate (%*)
>50 – 55 years 14 18.5 32.5
>55 – 60 years 10.5 13 23.5
>60 – 65 years 7 7.5 (no change) 14.5
* % of wages
** Increases in CPF rates would be prorated for workers earning between $50 and $1,500
The allocation of contribution rates among the Ordinary Account (OA), Special Account (SA) and Medisave Account (MA) would also be adjusted, as more of the contribution rate increase would be applied towards the SA as follows:

Allocation Rate (%*) to
Age OA SA MA
>50 – 55 years 13.5 (+0.5) 9.5 (+1.5) 9.5 (+0.5)
>55 – 60 years 12 (+0.5) 2 (+1) 9.5 (+0.5)
>60 – 65 years 3.5 1.5 (+0.5) 9.5
* % of wages

The Medisave contribution rate for older self-employed persons would be increased to 9.5%.


Effective

The increase in CPF rates for older workers would be effective from 1 September 2012. The increase in Medisave rate for older self-employed persons would take effect from 1 January 2013.


Comments

To restructure the economy to become less dependent on foreign workers, more local workers need to be attracted to join the workforce. Increasing CPF contributions for older workers would help towards achieving this. At the same time, older workers would have more monies set aside to better meet their future retirement and medical needs. The Government has counterbalanced the increase in employer costs with the introduction of an enhanced Special Employment Credit and a one-off SME Cash Grant in this Budget. The long-term objective of the Government is to increase the total CPF rate for the older workers (age group of above 50 years to 55 years) to the current full rate of 36%.