Starting in 2025, new changes around Central Provident Fund (CPF) contribution rates in Singapore are about to affect employees and employers. This article provides the updates in detail in order for you to know the impact on financial planning as well as retirement savings.
Increase in CPF Contribution Rates for Senior Workers
Starting from January 1, 2025, there will be an increase of 1.5 percentage points in the CPF contributions for senior workers between the ages of 55 and 65. This is part of a continuous process to enhance the retirement adequacy of older employees in Singapore.
For the contributions, by employers, the contribution will go from 15 to 15.5 percent, while the contribution of employees will rise from 16 to 17 percent. Thus bringing the total contribution for employees aged above 55 to 60 up from 31 percent to 32.5 percent.
For example, between the ages of 60 and 65, the increase will be from 22 to 23.5 percent. That is, the employer will contribute 12 percent instead of 11.5 percent, while the employees will contribute 11.5 percent as opposed to 10.5 percent currently. There will be no changes in the contribution rates of employees aged above 65.
Gradual Increase in CPF Ordinary Wage Ceiling
From now on, the CPF Ordinary Wage (OW) ceiling-a cap on the maximum monthly wages to which CPF contributions apply- will continue increasing in stages. It aims to avail an opportunity for workers in many years ahead to save some more for retirement as their wages increases.
This OW ceiling was raised to $6,300 in September 2023; it will be at $6,800 in January 2024; rise to $7,400 by January 2025; and reach its peak at $8,000 by January 2026.
Closure of the Special Account (SA) for Members Aged 55 and Above
The Special Account (SA) will be closed, effective from the latter half of January 2025, for all CPF members who are 55 years old and above. The savings in the SA will go to the Retirement Account (RA) up to the Full Retirement Sum (FRS). This part will earn them long-term interest.
Any remaining savings in the SA eligible for withdrawal will be transferred to the Ordinary Account (OA), where shorter interest rates will be applicable. Members may still want to voluntarily transfer such savings back to the RA, currently up to the Enhanced Retirement Sum (ERS) in order to enjoy higher interest rates and enhance payouts in monthly CPF LIFE.
Increase in Enhanced Retirement Sum (ERS)
Effective from January 1, 2025, the Enhanced Retirement Sum (ERS) rises to $426,000. This is four times the Basic Retirement Sum (BRS) and would enable a member turning 55 in 2025 to top up the Retirement Account and receive higher payouts in CPF LIFE.
For example, if a male member turns 55 in 2025 and contributes to the increased ERS, his CPF LIFE payouts from age 65 could be around $3,300 monthly instead of the around $2,500 currently.
Increased Benefits for the Matched Retirement Savings Scheme (MRSS)
Beginning on January 1, 2025, there will be two increases in the MRSS program. The first modification raises the Government’s matching grant ceiling to $2,000 a year from the preceding ceiling of $1,000. The second modification removes the age limit for MRS eligibility, so an even larger number of Singaporeans can benefit.
The MRSS supports Singaporeans with lower retirement savings by matching their voluntary top-ups to their Retirement Account, dollar-for-dollar, up to the new cap.
Introduction of the Matched MediSave Scheme (MMSS)
To enhance MediSave funding for older persons with lower credits, the Government would introduce the five-year Matched MediSave Scheme, commencing in 2026 and finishing in 2030.
With this program, the Government would match voluntary cash deposits up to $1,000 per year to the MediSave Account of eligible CPF members aged 55 to 70. This initiative seeks to support affordable healthcare for seniors by encouraging them to save for future medical bills.
Silver Housing Bonus (SHB) Scheme Enhancements
The Silver Housing Bonus (SHB) scheme will be enhanced starting December 1, 2025, to better support seniors looking to right-size their homes.
Seniors will now qualify for the SHB when they commit to a net increase of up to $60,000 in their Retirement Account after right-sizing, using their CPF housing refunds. Those who move to 2-room or smaller flats will receive an additional $10,000 cash bonus, bringing the maximum payout to $40,000.
The SHB will be expanded to include seniors who take right-sizing measures from private residential properties with an Annual Value (AV) between $21,000 to $31,000, for a bonus of up to $20,000 if they downsize to a 3-room or smaller flat.
Conclusion
The 2025 changes to CPF contributions are a major milestone toward better retirement preparedness of Singaporeans. With the increase in contribution rates for senior workers, raise in wage ceiling, closure of SA for those above 55 years, and introduction or enhancements to schemes like MRSS, MMSS, and SHB, these amendments also represent the continued commitment by the Government to assist citizens in augmenting their retirement and healthcare savings. It is important for all CPF members to understand these changes and how they may influence their contributions, saving strategies, and plans for retirement.