In Singapore, as long as the salary of Singapore citizens and permanent resident employees exceeds SGD 50, they are required to pay the Provident Fund (CPF).
This is to ensure that Singapore citizens and permanent residents still have a reserved fund after retirement, which is sufficient to support their retirement life. Secondly, it can also assist in the purchase of residential real estate, medical care, family security and asset appreciation.
CPF is calculated and paid according to the monthly salary of the company’s Singapore citizens and permanent resident employees and a certain percentage. Employers need to complete the provident fund declaration before the 14th of every next month.
The salary earned by employees every month needs to be calculated into the provident fund. The salary that should be paid to the provident fund includes monthly basic salary (basic salary/ wages, overtime pay, cash incentives, allowances, commissions and bonuses.
How CPF can help me prepare for retirement？
In order to have a worry-free retirement life, we need a monthly income. At the same time, you also need a sum of money to meet unexpected needs.
CPF helps to balance these two needs. CPF members need to deposit part of their monthly salary into each provident fund account to accumulate pension during their working life.
CPF LIFE is a program that gives you monthly income for the rest of your life and ensures that you don’t lose your income when you run out of retirement savings.
The CPF Life Income Plan allows you to provide a lifetime of monthly income from your accumulated CPF savings starting at age 65.
- CPF LIFE Escalating Plan
CPF LIFE Escalating Plan offered by the step-up plan increases by 2% every year, which means you can maintain your standard of living even if prices rise year by year.
For example: If your monthly income is $1,000 at age 65, your monthly income will increase by $1,500 by age 85.
- CPF LIFE Standard Plan
CPF LIFE standard plan will initially be higher than the CPF LIFE escalating plan. However, the income amount will remain the same for life and will eventually be lower than the income from the CPF LIFE escalating plan.
- CPF LIFE Basic Plan
The income under the basic plan is relatively low. When the total provident fund is less than 60,000, the income will decrease. Because the extra interest earned on the first $60,000 of the total provident fund will be transferred to your retirement account as part of your monthly income.
Any unspent CPF LIFE premiums and any CPF deposits will be passed on to the statutory beneficiaries in the event of an accidental death of the insured.
Why do you need to return the provident fund with principal and interest when you sell a house?
This is because if you did not use your CPF to buy a home, your CPF savings will earn interest.
When you sell your home, refund your CPF savings and accrued interest, just to bring your CPF back to the amount you bought the home if you didn’t withdraw the money.
Nonetheless, you can continue to use your CPF savings, including CPF refunds from previous resale homes, to buy another home.