CPF salary ceiling to be raised to $6,000

CPF salary ceiling to be raised to $6,000
Published on Feb 24, 2015 2:40 AM
By Joanna Seow

MIDDLE-INCOME workers will be able to grow their retirement savings as more of their income will be used to calculate Central Provident Fund (CPF) contributions. The CPF salary ceiling will be raised to $6,000 from Jan 1 next year, up from $5,000, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said in yesterday's Budget announcement. "Middle-income Singaporeans will be able to accumulate more CPF savings during their working years," said Mr Tharman. Based on the new salary ceiling, a 45-year-old worker who earns $6,000 or more today will save an extra $60,000 by the time he reaches 65, said Mr Tharman. At least 544,000 CPF members are expected to benefit. This is the first time since 2011 that the figure has been adjusted. It was last raised from $4,500 to $5,000 to keep pace with income growth at the 80th percentile income. The adjustment to $6,000 brings the salary ceiling back to what it was before 2004. From 2004 to 2006, it was gradually lowered to be in line with 80th percentile income and to reduce the burden on employers. From next year, the caps on contributions to the Supplementary Retirement Scheme, which are based on the salary ceiling, will also be raised to $15,300 for Singapore citizens and permanent residents. The scheme gives tax incentives to people who set aside additional money for their retirement besides CPF savings. Mr Tharman noted that both the CPF Advisory Panel and the National Trades Union Congress (NTUC) had called for the ceiling to be raised in proposals this year. NTUC assistant secretary-general Cham Hui Fong said the labour movement was pleased that the proposal had been accepted. "The (measure) will allow our workers to strengthen their CPF savings to meet financial needs in key areas such as health care, home ownership and retirement," said Ms Cham. Some employees who stand to gain said they would be glad to have their savings topped up more by their employers. But it also means a reduction in disposable income. "It's money in CPF which I can't touch," said Ms Lilian Low, 37, a manager in the finance industry. "When I grow old, I will look forward to using it. Hopefully, the CPF system is more flexible by then."
 joseow@sph.com.sg