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Changes in CPF Contribution Rates, Retirement Age and Re-Employment Age

Category:

Date:

November 9, 2023

The Singapore Government announced in August 2019 that the Central Provident Fund (CPF) contribution for older workers will increase and similarly the statutory retirement and re-employment age will also increase.

This article seeks to provide more information on these changes.

‍Changes in CPF Contribution Rates

The raising of CPF contribution rates for employees age above 55 to 70 years will take effect from 1 January 2022. The increase was originally intended to take place on 1 January 2021 but was deferred by a year to help employers manage costs resulting from Covid-19 pandemic. The CPF contribution increase will be shared between employers and employees. The new rates will only apply to employees earning more than S$750 per month. The increment will be fully allocated to employees’ special account which accrues higher interest rate.

The table below summarises the changes.

For Employees earning monthly wages of > S$750

Note:
-The employee contribution rate will continue to be phased in for those with monthly wages of
S$500- S$750
-No change to the graduated contribution rate for 1st and 2nd year Singapore Permanent Residents (SPRs)
– No changes to Ordinary Wage Ceiling and Additional Wage Ceiling

The government is expected to progressively increase CPF contributions for the following groups of employees by year 2030:

Changes in Retirement Age

In addition to increasing CPF contributions, the government is expected to increase the retirement age from 62 to 63 by July 2022, and eventually to 65 by 2030. Currently, the minimum statutory retirement age is 62 years. In accordance with the Retirement and Re-employment Act (RRA), Employers are not allowed to dismiss any employee based on the employee’s age. By increasing the retirement age, the government hopes older employees will have the choice to work longer and build more savings for their retirement.

‍Changes in Re-employment Age

The re-employment age is also set to increase from 67 to 68 by 2022 and to 70 by 2030. Since July 2017, it is mandatory for employers in Singapore to offer re-employment options to employees who have turned 62 years old, and up to 67 years of age. To be eligible, the employee must have served their current employer for at least three years before turning 62, and have a satisfactory work performance, as assessed by the employer.

The employee can be re-contracted on a yearly basis up to age 67. With changes in the re-employment age effective July 2022, the employer must offer eligible employees re-employment on a yearly basis for up to 68 years. If the employer is unable to offer re-employment to the employee, then the employer must either transfer the re-employment obligation to another employer, with the employee’s agreement, or offer a one-off Employment Assistance Payment (EAP). With the above changes and the growing reality of an aging workforce, employers are strongly encouraged to restructure the workplace. Employers will need to consider the impact of these changes and how it will affect their employee benefits and processes.  

References:

For information on changes in CPF contribution:
https://www.cpf.gov.sg/employers/general/employer-pages/increase-conrates-from-1-jan-2022

For information on Retirement and Re-employment Act:
https://sso.agc.gov.sg/Act/RRA1993

For information on Employment Assistance Payment:
https://www.mom.gov.sg/employment-practices/re-employment#employment-assistance-payment-eap

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