Due to the rather ‘complex’ CPF system, most people do not understand what it is and what they can use it for, or how they can optimize it. It is then a waste of years while they are contributing to CPF and not growing it at its optimal speed.

CPF in One Glance

For PR and citizens in Singapore, contributing to CPF is compulsory. The percentage varies from age bracket to age bracket. Not only that. the employer also contributes a significant amount to the employee’s CPF. The contribution rate is in the table below. This applies to PR from 3rd year and citizens.

There are three accounts in CPF: Ordinary Account (OA), Special Account (SA), and Medisave Account (MA). Your CPF money is split based on the table below:

source: CPF Board

Contribution Limitations

It is not that you earn more you can have more money in your CPF, it is capped at a salary of $6000. If you earn more than $6000 per month, your contributed amount will be the same as someone who earns $6000.

You can top up voluntarily, the total amount of CPF contribution is capped at SGD 37,740.

If you are at age 30 and your monthly income is SGD6000, your yearly CPF will be SGD26,640 (37% of your total salary). However, it is less than the maximum cap of CHF37,740. You can top up SGD11,100 yourself. This part is called a voluntary contribution. You will see how a voluntary contribution can make a big difference in your CPF retirement sum.

Interest Rate Per Account

Money in CPF accounts accrues interest, and the interest rate is not bad at all, thanks to the Singapore government.

Ordinary Account: 2.5%

Special Account: 4%

Medisave Account:4%

And the first SGD60,000 in your CPF has a 1% more interest rate.

You can move your money from OA to SA to accrue a higher interest rate, on the condition that you have limited access to the money. Because the criteria for using the fund in OA and SA are different.

Thanks to the compound effect, your CPF money will grow to a big lump sum if you start early. And you can even speed up the process if you do not withdraw and contribute the voluntary amount every year.

Having SGD Millions in CPF

I made 5 scenarios to show you the effect of

1. Transferring money from OA to SA vs. not transfer

2. Top up with voluntary contribution vs. not top-up

3. Starting contributing to CPF at age 25 and 30

1.Comparison of Transferring from OA to SA and No Transfer

Working adult Peter and Rachel, both start at age 30 to contribute to CPF with an annual salary of SGD 72,000. No salary change for the simple illustration. Not considering a 1% additional interest rate in the first SGD60,000 in the calculation for simplicity.

Peter moves his money from OA to SA to accrue a higher interest rate every year. Rachel does not.

Download the spreadsheet to calculate your own pension amount here.

When they are 65:

• Rachel has SGD1,6 million in her CPF, and she reaches 1mil in CPF when she is 55.

• Peter has SGD 1,9 million in his CPF, and he reaches 1mil in CPF when he is 53.

By moving money from OA to SA, Peter has gained more than SGD 300,000 than Rache, due to the 1.5% interest rate difference.

2. Top up with voluntary contribution vs. not top-up

Working adults Tom, Lisa, and Edwin all start at age 25 to contribute to CPF with an annual salary of SGD 72,000. No salary change for the simple illustration. Not considering a 1% additional interest rate in the first SGD60,000 in the calculation for simplicity.

Tom moves his money from OA to SA to accrue a higher interest rate every year, and he tops up SGD 11,100 to reach the maximum CPC contribution amount.

Lisa only moves money from OA to SA, she does not top-up.

Edwin does nothing.