Saturday, 15 February 2020

5 Basic Things You Should Know About CPF


Just a few days ago, the CPF Board announced that the CPF interest rates will remain the same for the second quarter this year. Below is the report published by the Straits Times. 

This means that the money that we contribute to our CPF every month will continue to grow at the same rate depending on the account type. 

Just in case you might not know the implications of the above news, this blog post will give you a better understanding of the Central Provident Fund or CPF for short.

If you just started working or entering the workforce soon, knowing more about CPF will help you in the long run. 

Here are the 5 basic things you should know about CPF that will help you to save money and also make more money. 


1. Three Accounts in CPF (Ordinary, Special, and Medisave)
The first thing to know about CPF is there are three accounts inside. They are the Ordinary account, Special account, and Medisave account.

source: CPF


Your Ordinary account is mainly used ​for housing, insurance, investment, and education. So if you are looking to buy a house, you can use the money in your CPF ordinary account to pay for the downpayment, monthly mortgage, legal fees, and stamp duty

source: pixabay

The second account which is the Special account is for old age and investment in retirement-related financial products. The money can be used for investment in selected  low-risk financial products only for the amount beyond its minimum amount of S$40,000

And Medisave account is for hospitalization expenses and approved medical insurance. So if you have to be warded in the hospital and stay overnight, then your Medisave account will be handy in paying for the cost.

2. Earn Interest for OA, SA, and MA
The three accounts in your CPF will earn different interest rates.

Your ordinary account will earn up to 3.5% per annum
Both your special and Medisave accounts will earn up to 5% per annum.

source: https://www.cpf.gov.sg/Members/AboutUs/about-us-info/cpf-interest-rates

3. CPF Contribution Rate to each Account
If you are working as an employee, the CPF Contribution will come from both you and your employer. The salary cap is at $6000 monthly salary. This means if you earn more than $6000 a month, employee CPF contribution is capped at $1200. Do note that at different ages you will contribute different percentages but generally the older you get, the lesser the CPF contribution.

source: https://www.cpf.gov.sg/employers/employerguides/employer-guides/paying-cpf-contributions/cpf-contribution-and-allocation-rates#Item587

4. Interest on CPF is credited on the 1st of the following Year
This means the CPF interest earned in 2019 will be credited to members’ CPF accounts by the end of 1 January 2020. You can go ahead to check in your CPF accounts if the interset is already credited to you.

5. Top up to CPF to enjoy Income Tax Relief
If you want to reduce the amount of income tax to pay every year, you can consider topping up your CPF Special/Retirement Account to earn tax relief equivalent to the top-up amount, up to $7,000 a year.
The maximum CPF Cash Top-up Relief per Year of Assessment (YA) is $14,000 (maximum $7,000 for self, and a maximum $7,000 for family members).

Now that you know more about CPF, you can start by logging into your CPF account to find out how much you have inside. Do try to keep track of the money in your CPF and continuous learning more about CPF and its uses from the CPF website (https://www.cpf.gov.sg/Members/) Don't forget to subscribe via email or like our Facebook page for the latest updates! Stay tuned for my next blog post as I share “How Does Elite Commercial REIT Makes Money”. Also, let us know what you would like us to blog about next!

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