🗓️ 21092025 1555
📎
central_provident_fund
What is CPF?
- Mandatory social security savings scheme for citizens & PRs
- Both employee and employer contribute based on salary
- Designed for retirement, housing, healthcare, and education needs
CPF Account Types
| Account | Purpose | Interest Rate | Key Uses |
|---|---|---|---|
| Ordinary Account (OA) | Housing, insurance, investment, education | 2.5% p.a. | Property purchase, CPF investments |
| Special Account (SA) | Retirement savings | 4% p.a. | Long-term retirement planning |
| MediSave Account (MA) | Healthcare expenses | 4% p.a. | Medical bills, insurance premiums |
| Retirement Account (RA) | Monthly payouts (created at 55) | 4% p.a. | CPF LIFE payouts from age 65 |
Contribution Rates (2025)
| Age Group | Employee | Employer | Total | Monthly Cap |
|---|---|---|---|---|
| Up to 55 | 20% | 17% | 37% | S$2,220 (on S$6,000 salary) |
| 55-60 | 14% | 14% | 28% | Reducing contributions |
| 60-65 | 10% | 10% | 20% | Lower contributions |
| Above 65 | 6.5% | 8% | 14.5% | Minimal contributions |
Interest Rates & Bonuses
- OA: 2.5% p.a. (guaranteed, risk-free)
- SA/MA/RA: 4% p.a. (guaranteed, risk-free)
- Extra 1%: On first S$60,000 combined balance (if under 55)
- No tax on CPF interest earned
Key Milestones
Age 55
- Can withdraw up to S$5,000 or excess above Full Retirement Sum
- Retirement Account (RA) created by combining OA + SA
- Full Retirement Sum (2024): ~S$198,800
Age 65
- CPF LIFE monthly payouts begin for life
- Estimated payout: S$1,390-1,580/month (varies by plan)
Uses of CPF Funds
Housing (OA)
- Property down payment and monthly mortgage
- Can use up to Valuation Limit or outstanding loan
- Accrued interest must be returned when selling
Investments (OA/SA)
- CPF Investment Scheme (CPFIS): Stocks, bonds, unit trusts
- Risk: Can lose money, unlike guaranteed CPF interest
- Strategy: Only invest if confident of beating 2.5%/4% returns
Healthcare (MA)
- Medical bills, insurance premiums
- MediSave minimum: Required balance for healthcare needs
Pros & Cons
✅ Pros:
- Forced savings - automatic wealth building
- High guaranteed returns - 2.5%/4% risk-free
- Tax relief - contributions reduce taxable income
- Government backing - completely safe
- Employer matching - free money from employer
❌ Cons:
- Low liquidity - locked until 55/65
- Fixed returns - not suitable for aggressive growth
- Inflation risk - may not keep up with rising costs
- Opportunity cost - could potentially earn more in markets
- Increasing retirement age - rules may change over time
Estate Planning - What Happens Upon Death
CPF Nomination
- Must nominate beneficiaries - CPF funds don't automatically go to next-of-kin
- No nomination = Public Trustee handles distribution (lengthy process)
- Online nomination: Via CPF website or SingPass app
- Can nominate: Spouse, children, parents, siblings, or anyone
Distribution Process
With Valid Nomination:
- Fast processing: 2-4 weeks typically
- Direct transfer: Funds go directly to nominated beneficiaries
- No probate required: Bypasses court processes
- Tax-free: Beneficiaries receive full amount without tax
Without Nomination:
- Public Trustee: Government agency handles distribution
- Longer process: 6-12 months or more
- Intestacy laws: Distribution follows legal hierarchy (spouse → children → parents)
- Additional costs: Administrative fees may apply
What Gets Distributed
- All CPF balances: OA + SA + MA + RA
- Accrued interest: Up to date of death
- CPF LIFE: Remaining balance (if any) after payouts
- Insurance proceeds: If bought through CPF