CPF Contribution Rate 2023 in Singapore, How To Calculate? With Example – If you are an employee or an employer in Singapore, you may be wondering how much CPF contribution you need to pay or receive in 2023. CPF stands for Central Provident Fund, which is a mandatory social security savings scheme that covers retirement, healthcare, housing and education needs.
In this blog post, we will explain the changes to the CPF contribution rate and ceiling that will take effect from 1 September 2023 and 1 January 2024, as announced by the government on 14 June 2023. We will also provide some examples of how to calculate the CPF contributions based on different scenarios.
What is CPF Contribution Rate in Singapore?
If you are an employer or an employee in Singapore, you may have heard of the Central Provident Fund (CPF), which is a mandatory social security savings scheme that covers retirement, healthcare, housing and education needs. As an employer, you are required to pay CPF contributions for your employees who are Singapore Citizens or Singapore Permanent Residents (SPRs), based on their wages and age group. As an employee, you are also required to contribute a portion of your wages to CPF, which will be deducted from your salary by your employer.
But how much CPF contributions do you have to pay or receive? What are the factors that affect the CPF contribution rate? And what are the benefits of contributing to CPF? In this blog post, we will answer these questions and provide some useful resources for you to learn more about CPF.
Why contribute to CPF
CPF contributions are not only a legal obligation, but also a way to secure your financial future. By contributing to CPF, you can enjoy the following benefits:
- Earn attractive interest rates on your CPF savings, which are guaranteed by the government and adjusted periodically. Currently, the interest rates are 2.5% for the Ordinary Account (OA), 4% for the Special Account (SA) and MediSave Account (MA), and up to 6% for the Retirement Account (RA).
- Build up your retirement savings in your RA, which will provide you with a monthly income for life under the CPF LIFE scheme when you reach the payout eligibility age (currently 65).
- Save for your healthcare needs in your MA, which can be used to pay for your own or your dependants’ medical expenses, such as hospitalisation, outpatient treatment, insurance premiums and long-term care.
- Save for your housing needs in your OA, which can be used to pay for your property purchase, mortgage loan repayment, home protection insurance and property tax.
- Save for your education needs in your OA, which can be used to pay for your own or your children’s tertiary education fees under the CPF Education Scheme.
- Enjoy tax relief on your CPF contributions, subject to the annual cap of $37,740. This means that you can reduce your taxable income by the amount of CPF contributions you make.
Increase in CPF Ordinary Wage Ceiling from 1 September 2023
The CPF Ordinary Wage (OW) ceiling limits the amount of OW that attract CPF contributions in a calendar month for all employees. The OW ceiling will be raised from $6,000 to $8,000 by 2026, with the first increase to take place on 1 September 2023. The increase will take place in four steps to allow employers and employees to adjust to the changes.
The CPF annual salary ceiling, which sets the maximum amount of CPF contributions payable for all salaries received in the year, inclusive of both Ordinary Wages and Additional Wages, will also increase by $2,500 to $68,500 from 1 September 2023.
There will be no changes to the Additional Wage ceiling and CPF Annual Limit, where they will remain at [$102,000 – Total Ordinary Wage subject to CPF for the year] and $37,740 respectively.
The table below shows the CPF OW and annual salary ceilings from 2023 to 2026.
| CPF OW ceiling | CPF annual salary ceiling |
|---|---|
| From 1 Jan 2016 to 31 Aug 2023 | $6,000 |
| From 1 Sep to 31 Dec 2023 | $6,300 (+$300) |
| From 1 Jan to 31 Dec 2024 | $6,800 (+$500) |
| From 1 Jan to 31 Dec 2025 | $7,400 (+$600) |
| From 1 Jan 2026 | $8,000 (+$600) |
Increase in CPF Contribution Rates from 1 January 2024
The CPF contribution rates for employees aged above 55 to 70 will be increased to strengthen their retirement adequacy. The changes will apply to wages earned from 1 January 2024:
| Employee’s age (years) | Current CPF Contribution Rates from 1 Jan 2024 | Total (% of wage) |
|---|---|---|
| Total (% of wage) | By employer (% of wage) | By employee (% of wage) |
| 55 and below | 37 | 37 |
| Above 55 to 60 | 29.5 | 31 (+1.5) |
| Above 60 to 65 | 20.5 | 22 (+1.5) |
| Above 65 to 70 | 15.5 | 16.5 (+1) |
| Above 70 | 12.5 | 12.5 |
Note: Figures in brackets () denote increase in rates
The increase in the CPF contribution rates will be fully allocated to the employees’ Special Account to provide a bigger boost to their retirement income.
For those earning monthly wages of more than $500 to $750, the employee contribution rates will continue to be phased in.
There are no changes to the graduated contribution rates for first and second year Singapore Permanent Residents (SPRs).
How to Calculate CPF Contributions
To calculate the amount of CPF contributions you need to pay or receive, you need to determine the Total Wages subject to CPF contributions based on the Ordinary Wages and Additional Wages payable in a calendar month.
Ordinary Wages are wages due or granted wholly and exclusively for work done during a calendar month. They include basic salary and allowances such as fixed monthly allowances for food or transport.
Additional Wages are wages that are not granted wholly and exclusively for work done during a calendar month. They include bonuses, commissions and overtime pay.
The CPF contribution rate is the percentage of your wages that goes into your CPF account every month. The rate depends on your citizenship status, age group and wage band.
1. Citizenship status
There are different contribution rate tables for different citizenship statuses. You can find them on the CPF website or download them as PDF files. Here are the main categories:
- Table 1: For Singapore Citizens or SPRs from the third year of SPR status
- Table 2: For SPRs in the first year of SPR status
- Table 3: For SPRs in the second year of SPR status
The year of SPR status is determined by the date of SPR conversion. For example, if you became an SPR on 15 June 2022, your first year begins on 15 June 2022, your second year begins on 1 July 2023, and your third year begins on 1 July 2024.
If you are an SPR in the first two years of SPR status, you and your employer can jointly apply to contribute CPF at a higher rate. The options are:
- You and your employer both contribute at full rates (Table 1)
- Your employer contributes at full rates while you continue to contribute at graduated rates (Tables 4 and 5)
2. Age group
Different rates apply to different age groups. The age groups are:
- 55 and below
- Above 55 to 60
- Above 60 to 65
- Above 65 to 70
- Above 70
The new contribution rates apply from the first day of the month after your birthday. For example, if you turn 55 on 15 June 2023, the new rates will apply from 1 July 2023.
3. Wage band
Different rates apply for different wage bands. The wage bands are:
- $50 and below
- Above $50 to $500
- Above $500 to $750
- Above $750
The wages are divided into two components: Ordinary Wages (OW) and Additional Wages (AW).
OW are wages due or granted wholly and exclusively for the month, such as basic salary and allowances. OW are subject to a monthly ceiling of $6,000.
AW are wages due or granted wholly or partly for any other period other than the month, such as bonuses, commissions and overtime pay. AW are subject to an annual ceiling of $102,000 minus the total OW subject to CPF for the year.
To calculate the CPF contribution rate, you need to determine the Total Wages (TW) subject to CPF contributions, which is the sum of OW and AW after applying the wage ceilings.
For example, if your monthly OW is $7,000 and your annual AW is $20,000, your TW for January 2023 is:
$6,000 + ($20,000 – ($6,000 x 12)) / 12 = $6,167
You can use this online calculator to compute your TW.
Once you have determined your TW, you can use the formula in the contribution rate table to compute the total CPF contribution (employer’s and employee’s share) and the employee’s share of CPF contribution. The employer’s share is the difference between the total contribution and the employee’s share.
For example, if you are a Singapore Citizen aged 55 and below with a TW of $6,167 in January 2023, your total CPF contribution is:
[37% ($6,000)] + [37% ($167)] = $2,220 + $62 = $2,282
Your employee’s share of CPF contribution is:
[20% ($6,000)] + [20% ($167)] = $1,200 + $33 = $1,233
Your employer’s share of CPF contribution is:
$2,282 – $1,233 = $1,049
Examples of CPF Contribution Calculation
Here are some examples of how to calculate the CPF contributions based on different scenarios.
Example 1: Employee aged 40, Singapore Citizen, earning $7,000 monthly salary and $10,000 annual bonus in 2023
For this employee, the Total Wages subject to CPF contributions are:
- For the OW component: $6,300 (capped at the OW ceiling from Sep-Dec 2023)
- For the AW component: $10,000 (capped at the lower of the AW ceiling of [$102,000 – ($6,300 x 12)] = $24,400 or the CPF Annual Limit of $37,740)
The CPF contribution rates are:
- For the OW component: 37% (17% by employer and 20% by employee)
- For the AW component: 37% (17% by employer and 20% by employee)
The amount of CPF contributions payable are:
- For the OW component: $6,300 x 37% = $2,331 (of which $1,071 by employer and $1,260 by employee)
- For the AW component: $10,000 x 37% = $3,700 (of which $1,700 by employer and $2,000 by employee)
- Total: $2,331 + $3,700 = $6,031 (of which $2,771 by employer and $3,260 by employee)
Example 2: Employee aged 58, SPR in second year of SPR status, earning $4,500 monthly salary and $5,000 annual bonus in 2024
For this employee, the Total Wages subject to CPF contributions are:
- For the OW component: $4,500 (below the OW ceiling of $6,800 from Jan-Dec 2024)
- For the AW component: $5,000 (capped at the lower of the AW ceiling of [$102,000 – ($4,500 x 12)] = $46,000 or the CPF Annual Limit of $37,740)
The CPF contribution rates are:
- For the OW component: 21.5% (9.5% by employer and 12% by employee) under graduated contribution rates for second year SPRs
- For the AW component: 31% (15% by employer and 16% by employee) under full contribution rates for third year SPRs and onwards
The amount of CPF contributions payable are:
- For the OW component: $4,500 x 21.5% = $968.25 (of which $427.50 by employer and $540.75 by employee)
- For the AW component: $5,000 x 31% = $1,550 (of which $750 by employer and $800 by employee)
- Total: $968.25 + $1,550 = $2,518.25 (of which $1,177.50 by employer and $1,340.75 by employee)
Conclusion
CPF is a key pillar of Singapore’s social security system that helps you save for your retirement and other needs. As an employer or an employee, you need to understand how CPF contribution rates are calculated and what factors affect them. You also need to be aware of the benefits of contributing to CPF and how to maximise them. We hope this blog post has given you some useful information and resources on CPF contribution rate in Singapore.
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