DPM Lawrence Wong had announced Budget 2023 on 14th Feb 2023. As we are digesting the changes, one topic that is a hot topic among us, the financial adviser representative, is the change to CPF. Most Singaporeans use our CPF for our housing, retirement, medical and education needs. We shall look at some changes and how it might affect an individual.
CPF Contribution for Platform Workers
Platform workers(PWs) refers to delivery workers, private-hire car drivers and taxi drivers who use online platforms e.g. Grab, Food Panda in their course of work.
PWs who are aged 30 and below from 2024 will be required to make CPF contributions and those who are above 30 years old can opt-in for the CPF contribution. The platform operators will be required to make their contributions like an employer too. The purpose of this change is to improve the retirement and housing adequacy of PWs. With the implementation of this, it would mean the take-home pay will be lower. The Government will introduce the PW CPF Transition Support (PCTS) to provide support for lower-income PWs during the phase in period. More information will be announced at the Ministry of Manpower’s Committee of Supply 2023.
Raised Monthly Salary Ceiling For Employees
The current Monthly Salary Ceiling for employee is $6000. This amount will raise gradually to $8,000 by 2026. However, the CPF Annual limit and CPF annual salary ceiling remain at $37,740 and $102,000 respectively.
What this means is more contributions to the employee’s CPF and less take-home pay. The employee will also get more reliefs for their Income tax. The table below shows the effect of change for an employee below age 55.
With this raised Monthly Salary Ceiling, the personal income tax for a person getting the same salary will be lower too.
The simple illustration below compares a person who draws $8,000 of income per month in the YA 2026 & YA 2027.
For the ease of understanding, we assume there is no deduction for the person’s income tax and for better illustration, CPF Contribution is intentionally separated from Personal Relief to illustrate the effect of the raised CPF salary ceiling.
Increased CPF Contribution for workers aged 55 & above
The aim of this increase is to bring CPF contributions for older workers to a higher level by 2030.The increased amount will be contributed to the CPF-SA so as to help the employee have more retire funds.
Referring to the table above, for an employee aged 55 to 60 between 1st Jan 2023 to 31st Dec 2023 will get 29.5% of CPF contribution. For someone of this age range between 1st Jan 2024 to 31st Dec 2024 will get 31% which is additional 1.5% contribution from the previous year.
If you need any clarification or need to understand more about how these changes will affect you, just drop us your details below and our representatives will get back to you.
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