What is CPF?
Central Provident Fund (CPF) scheme was set up in 1955 as a social security savings system. The main objective of the scheme is to ensure that Singaporeans are self-reliant in society. Back then, it only functioned as a retirement savings scheme for employees. Today, the savings scheme has expanded to include more aspects of social security functions which include asset enhancement, family protection, healthcare and home ownership. Singapore registered companies are required to contribute CPF monthly for its employees at the rates set out in the Central Provident Fund Act (Cap. 36).
Under the CPF scheme, Singaporean employees and employers are required to make monthly contributions. CPF contributions by both the employees and employers (in both SMEs and MNCs) are determined by the employees age, wage rate and their year of PR status (for permanent residents). The total CPF contributions required from both employees and employers are summarized on the table below:
Details of the specific CPF contribution rate can be found on the CPF website.
The contributions will be divided into the three accounts of the employees, which are the Ordinary Account, Special Account and the Medisave Account respectively:
- Funds in the Ordinary Account can be used to pay for housing, insurance, investments as well as education.
- The funds in the Special Account can be used for if employees wish to invest in financial products which are retirement-related.
- Employees in Singapore can use the Medisave Account to pay for hospitalization and other medical needs.
CPF savings may be withdrawn by employees upon reaching the age of 55. However, a CPF Minimum Sum would need to be set aside. This Minimum Sum ensures that the retired would be able to afford basic necessities during retirement. The retired have the option to place the sum in a participating bank, in CPF’s Retirement it to purchase a life annuity with an insurance company.
Upon reaching the drawdown age, currently 63, monthly payouts will be received by CPF members. In addition, CPF Members may also opt for the CPF LIFE scheme. In this scheme, CPF members will receive a monthly income for life, starting from their drawdown age.
Under the healthcare function, employees in Singapore have a Medisave Account which assists in accumulating savings for healthcare needs. Funds from this account can be used to pay for hospital expenses as well as specialized outpatient treatment, like chemotherapy and radiotherapy, for both the employees and their dependent.
Employees can use their Medisave Account to pay pre miums for the following programs:
- MediShield- A medical insurance scheme that assists CPF members to pay for large hospital cost.
- ElderShield- An insurance scheme which covers healthcare needs of older CPF members requiring long term care.
CPF members can use funds in their Ordinary Account to purchase a home. Home buyers can choose to either purchase a HDB Flat through the Public Housing Scheme, or a private property through the Residential Properties Scheme. In addition home buyers can also use the funds to pay their monthly housing payments.
Under the Family Protection function, a Dependent’s Protection Scheme is available, which ensures that families can cope for a few years in the event where the CPF member’s dependents face permanent incapacity or death.
Under the CPF scheme, CPF members can invest funds from the Ordinary Account to purchase assets such as Fixed Deposits, Unit Trusts, Bonds, Treasury Bills, Shares as well as Gold.
What is MENDAKI Funds?
Mendaki Funds is a scheme whereby contributions by the Muslim community in Singapore are used to fund educational and social welfare programs for the Muslim community in Singapore.
This scheme requires all Muslim Singaporeans, PR’s and foreign workers working in Singapore to contribute to the Mendaki Fund. The required contribution amount depends on the contributor’s wage level as shown below:
|Monthly total wages1||Minimum monthly contribution|
|Less than $1,0012||$2.00|
|$1,001 – $2,000||$3.50|
|$2,001 – $3,000||$5.00|
|$3,001 – $4,000||$12.50|
|$4,001 and above||$16.00|
One of the functions of the Mendaki funds is to provide training to the Muslim workforce in Singapore, through the MENDAKI Social Enterprise Network Singapore Pte. Ltd. This ensures that they would be ready for employment in the job market. SMEs will benefit from such programs as organizations like these would assist employers in finding suitable employees with the necessary skills set for the required job.
What is CDAC funds?
The CDAC funds is a funding scheme similar to the Mendaki Scheme, except it caters to the needs of the Chinese community. Similarly, all Chinese employees can choose to make contributions to the CDAC funds, according to their wage level, as shown below, although employees may choose to opt out of contributing:
Minimum monthly contribution
Less than $2,000
$2,000 and above
Similarly, part of the funds from the CDAC scheme would be used for the CDAC Skills Training Award Scheme, which helps low-income and low-skilled Chinese workers learn industry-related skills to assist them in finding employment. SMEs will also benefit from these as the companies can now have a wider range of lower waged and skilled labor to choose from when recruiting candidates for employment.
What is SINDA funds?
The SINDA funds is a scheme similar to both the Mendaki and CDAC funds, except it is used to provide social and employment help for the Indian community in Singapore. All employees in the Indian community in Singapore may choose to contribute to the funds based on their wage levels (shown below), although it is not compulsory.
Minimum monthly contribution
|Up to $600|
|Above $600 – $1,500|
|Above $1,500 – $2,500|
What is Skill Development Levy (SDL)?
The Skills Development Levy (SDL) is a scheme by which the CPF Board collects a levy, which would then be allocated as grants to help companies send their workers for training. Thus, SMEs can benefit from this scheme as it would enable the companies to obtain a better qualified team of employees which would in turn boost the company’s productivity.
Under this scheme, employers (in both SMEs and MNCs) must contribute a Skills Development Levy at a rate of 0.25% of the employees’ monthly remuneration, up to the first $4,500.
SDL is currently administrated by the Singapore Workforce Development Agency (WDA).