Singapore’s retirement income system scored 74.1 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Singapore’s retirement income system is comprised of the Central Provident Fund (CPF) at the national level, the Supplementary Retirement Scheme (SRS) at the occupational level, and other private products and plans at the individual level.
National Level
The Central Provident Fund (CPF) is a fully funded system serving as the primary source of retirement income in Singapore. It is a defined contribution plan. Employees making at least S$500 a month and their employers are required to contribute up to 20% and up to 17% percent, respectively, of the employee’s salary to the fund, depending on the employee’s salary and age (lower contribution rate for older employees). The maximum annual combined employee and employer contribution is S$37,740. Contributions are tax-exempt and are split between two retirement accounts (Ordinary and Special) and a medical expenses account (Medisave), with the vast majority going toward the Ordinary account. The normal pension age is 55 for lifetime benefits. Pension payouts last for 20 years with no guaranteed payouts beyond then.
Funds from the Ordinary account and Special account are transferred to the Retirement account at age 55. Members with at least S$60,000 in the Retirement account at age 65 are automatically enrolled in a life annuity program from the CPF Lifelong Income for the Elderly (CPF LIFE). Enrollment is voluntary for fund members with less than this amount. The CPF LIFE provides lifetime income with reduced risk due to a government minimum interest guarantee, but benefits depend on investment performance. Early withdrawals are permissible for approved activities such as housing and education, and life annuity payments are not deferrable. If an individual has a balance above the minimum sum (S$171,000 in 2018), the excess amount may be withdrawn in a lump sum beginning at age 55. In 2017, the CPF Board begin offering the CPF Retirement Planning Service to all CPF members who turn 54. Members will receive one-on-one sessions to help them understand the CPF schemes and available options.
As of January 2018, CPF members can choose to receive escalating payouts under the CPF Life national annuity scheme. The current options — CPF Life Standard and Basic plans — pay fixed monthly amounts for life. This new scheme, where payouts will grow 2% larger every year, was unveiled to address the concerns of rising living costs. CPF members who are already on Standard or Basic plans had one year from January 2018 to switch to the new plan if they wished to. Members opting for the escalating plan will see monthly payouts about 20% lower compared to those under the fixed plans at the start. Those wanting higher initial payouts can either top up their CPF Life premiums or delay the payout up to age 70.
Occupational Level
The Supplementary Retirement Scheme (SRS) is a voluntary savings program that creates a private individual account. Eligible members are not restricted to Singaporean residents — foreigners are eligible to open accounts as well. Contributions are voluntary for both employers and employees. Funds in this account may be used to invest in a variety of investment and financial products, but all proceeds must be returned to the SRS account. Contributions can be made by consumers’ discretion up to a cap and are tax-exempt, and only half of the withdrawals during retirement are taxable. Withdrawals of any amount are allowed beginning at age 62. Members have the flexibility to withdraw their SRS funds in cash or investments. Early withdrawals are subject to regular taxation in addition to a 5% premature withdrawal penalty.
In July 2015, SRS members began to apply to their SRS operators to withdraw investments from their SRS accounts without having to liquidate their investments. On January 1, 2016, the annual SRS contribution cap increased to $15,300 for Singaporeans and Permanent Residents, and $35,700 for foreigners.
Individual Level
In addition, there are other private accounts that Singaporeans can use. A Section 5 Plan can be created by companies registered in the country and only accepts employer contributions. An offshore trust fund can be established by any company and accepts contributions from both employers and employees. Taxation benefits vary depending on the plan, and contributions and withdrawals may or may not be subject to taxation.
Summary Sources
Central Provident Fund Board. “CPF Life.” Accessed 04/14/2020.
OECD. “Pensions at a Glance Asia/Pacific 2018.” December 3, 2018. Accessed 04/14/2020.
POSB. “Supplementary Retirement Scheme.” Accessed 04/14/2020.
Singapore Ministry of Finance. “Supplementary Retirement Scheme (SRS).” Accessed 04/14/2020.
Tan, Lorna. “CPF Life escalating plan available from next January.” Straits Times. March 7, 2017. Accessed 04/14/2020.
Current Issues
Starting January 1, 2022, Singapore will increase the Central Provident Fund (CPF) contribution rates for employees aged 55 to 70 years old. Originally, this increase was set for January 2021 but was delayed to help alleviate financial burdens due to the COVID-19 pandemic. Ranging from a 1.5-2 percentage point increase, these initial contribution reforms mark the beginning of Singapore’s goals of increasing contribution rates gradually over the next decade to secure and bolster their retirement capacity and support for older work employment.
In addition to raising the contribution rates, Singapore aims to increase the retirement age from 62 to 63 by July 2022, and 65 by 2030, and increase the re-employment age from 67 to 68 by 2022, and to 70 by 2030. In July 2020, the government also passed the S$1.3 billion Senior Worker Support Package to incentivize companies to raise their internal retirement age by funding a portion of senior workers’ salaries. Both measures are focused on encouraging employees to remain in the workforce for longer as Singapore’s population ages.
Summary Sources
Mokhtar, Faris. “Retirement and re-employment ages to be raised by 3 years, CPF contribution rates for older workers to go up.” Today. Updated August 27, 2019. Accessed 10/4/2019.
Medina, Ayman Falak. “Singapore to Increase Central Provident Fund Contributions From 2022.” Asean Briefing. June 29, 2021. Accessed 06/29/2021.
“Singapore Government and Institution Measures in Response to COVID-19.” KPMG. Last updated September 9, 2020. Accessed 06/29/2021.
Source: Georgetown University’s Center for Retirement Initiatives
Last Updated 3/30/22