SINGAPORE, Feb 16 — From 2025, the Central Provident Fund (CPF) Special Account of those aged 55 and above will be automatically closed and the money in there, up to the Full Retirement Sum, will be transferred to their Retirement Account. The balance will then go into their Ordinary Account.
Concurrently, the government will raise the Enhanced Retirement Sum, which is the maximum amount that people can put into their CPF Retirement Account to receive monthly payouts after they turn 65.
The Enhanced Retirement Sum will be raised to four times the Basic Retirement Sum, up from the current three times.
These changes are part of the government’s move “to rationalise the CPF system”, Deputy Prime Minister and Finance Minister Lawrence Wong said in announcing the changes during his Budget speech today (February 16).
This means that the Enhanced Retirement Sum next year will be S$426,000 (RM1.5 million), instead of S$319,500, based on the Basic Retirement Sum of S$106,500.
“This will allow more (CPF) members aged 55 and above to fully commit their accumulated CPF savings to receive higher CPF payouts, should they wish to do so,” he added.
A male Singaporean who set aside the new Enhanced Retirement Sum of S$426,000 in the Retirement Account at age 55 can expect to receive S$3,330 a month at age 65 for the rest of his life under the CPF Life Standard Plan.
This is in contrast to the estimated S$2,530 monthly payout with an Enhanced Retirement Sum of S$319,500.
Why it matters
Currently, Singaporeans aged 55 and above have two CPF accounts that hold savings intended for retirement payouts: Special Account and Retirement Account.
Both earn the same interest rate, which is now 4.08 per cent, higher than the 2.5 per cent for Ordinary Account.
However, like Ordinary Account savings, some money in the Special Account can be withdrawn from age 55, and this goes against the principle where only money that cannot be withdrawn from CPF earn higher long-term interest rate.
With the closure of the Special Account, the sums transferred to the Ordinary Account will earn the lower interest rate.
However, CPF members can still transfer money from their Ordinary Account to the Retirement Account at any time, up to the Enhanced Retirement Sum, to earn higher interest and to receive higher retirement payouts, Wong said.
Retirement support schemes
Wong also announced enhancements to retirement support schemes for seniors who need more help.
The first covers the Silver Support Scheme, which provides quarterly payments to seniors who had low incomes during their working years and have less family support.
From January 1, 2025, the government will:
• Raise the qualifying per capita household income threshold from S$1,800 to S$2,300
• Increase the quarterly payments by 20 per cent to keep pace with inflation
The move will benefit around 290,000 Singaporeans aged 65 and above.
The enhancement means that those living in one- and two-room Housing and Development Board flats and with a monthly per capita household income of S$1,500 or less will get a quarterly payout of S$1,080, up from S$900.
There is no need to apply for the scheme, as all Singaporeans aged 65 and above are automatically assessed for eligibility.
Those eligible will receive their first enhanced payouts in December this year to cover the first quarter of 2025.
The second change applies to the Matched Retirement Savings Scheme, which the government introduced in 2021 as a pilot to help Singaporeans aged 55 to 70 with less CPF savings to save more, by providing dollar-to-dollar matching for cash top-ups to their accounts.
The government will extend the scheme beyond the current pilot and from January 1, 2025:
• Expand it to those aged above 70, so it will cover anyone aged 55 and above
• Increase the annual matching from S$600 to S$2,000 and set a lifetime matching limit of S$20,000
“This will enable more Singaporeans to meet their retirement needs, with help from their families, employers and the community,” Wong said.
He added that currently, the government provides a tax relief to encourage Singaporeans to top up their CPF accounts.
“But the matching grant is already a significant benefit extended by the government. So we will remove the tax relief for the cash top-ups that attract the matching grant.”
With the enhancement, the number of CPF members who are eligible for the Matched Retirement Savings Scheme is expected to double from 395,000 to 800,000.
CPF contribution rates
In line with the recommendation from the Tripartite Workgroup on Older Workers in 2019, the Government had announced that the CPF contribution rates will be raised gradually each year over the next decade for workers aged above 55 to 70.
When fully implemented, those aged 55 to 60 will have the same CPF contribution rates as younger workers.
Today, Wong said that the government will continue with the next step of the planned contribution rate increase for older workers.
So in 2025, CPF contribution rates for those aged 55 to 65 will increase by a further 1.5 percentage points.
One percentage point of increase will be contributed by workers and the other 0.5 percentage point by employers.
The government will also provide the CPF Transition Offset to employers for another year to cover half of the increase in employer contributions for 2025.
“This will help to cushion the impact of business costs,” Wong said. ― TODAY
