Singapore
Qualifying conditions
The minimum age to start receiving payouts from the national life annuity scheme is 65.
Benefit calculation
The maximum contribution is calculated based on a salary ceiling of SGD 6 000 per month for both employer and employee contributions. The contribution rates vary with age as indicated below. Contributions to the Ordinary Account and Special Account are for retirement, while contributions to the MediSave Account are for medical expenses. Savings in the Ordinary Account can also be used to buy a home but amounts withdrawn must be refunded with interest upon sale of the property.
Currently, savings in the Ordinary Account earn an interest rate of 2.5% per annum while savings in the other accounts earn an interest rate of 4% per annum. Individuals below 55 years old will be paid an extra 1% interest per annum on the first SGD 60 000 of their combined balances, while individuals aged 55 and above will be paid an extra 2% interest on the first SGD 30 000 of their combined balances, and an extra 1% on the next SGD 30 000. As a result, those aged 55 and above will earn up to 6% interest per annum on their retirement balances.
At age 55, savings in the Ordinary Account and Special Account are set aside in the Retirement Account to meet the Full Retirement Sum (FRS), which is SGD 181 000 in 2020. Savings above the FRS can be withdrawn in a lump sum from age 55. Individuals who own their homes may choose to set aside half the FRS called the ‘Basic Retirement Sum’ (SGD 90 500 in 2020). There is also an ‘Enhanced Retirement Sum’ (SGD 271 500 in 2020) for those who wish to set aside a larger specified sum and receive higher monthly payouts for retirement.
Savings in the Retirement Account are used to purchase a life annuity for the member. The amount of Ordinary Account savings the individual uses to buy a home affects the total amount of savings available to purchase the life annuity and in turn the retirement payouts received. As such, the modelling results below are based on Retirement Account savings from the Ordinary Account, net of housing withdrawals, and Special Account savings.
For the purposes of comparing replacement rates with other countries, this report uses a standardised set of macro assumptions. These results do not take into account other institutional features unique to Singapore. For example, many homeowners in Singapore do not need to pay rent in old age, given the high home ownership rate at 90.4% nationally. In addition, elderly homeowners also have various options to monetise their public housing flat to supplement their retirement income. These options include renting out their spare bedrooms or flats, right-sizing to a smaller flat and taking up the Silver Housing Bonus scheme, or selling back part of their remaining lease under the Lease Buyback Scheme (LBS). The LBS is a scheme unique in Singapore’s context, and is available for all HDB flat types. As such, an alternative modelling scenario where the CPF member monetises his public housing flat in retirement via the LBS has also been provided below. In this scenario, proceeds from the lease sale are used to top up savings in the Retirement Account for a larger annuity stream.
Lower-income members receive additional support. In their working years, the Workfare Income Supplement Scheme tops up the salaries and boosts the retirement savings of Singaporean lower-income workers by up to 30%. Older workers receive greater support. In their retirement years, Singaporeans aged 65 and above who had low incomes and CPF contributions during their working years may qualify for the Silver Support Scheme. Under the scheme, eligible elderly Singaporeans automatically receive a quarterly cash supplement of SGD 180 to SGD 900 (from 1 January 2021), based on their household monthly income per person and place of residence.
Variant careers
The retirement age in Singapore is age 62, but employers must offer re-employment to eligible employees who turn 62, up to age 67.
From age 55, individuals can make lump sum withdrawals of their CPF Ordinary Account and Special Account savings in excess the of Full Retirement Sum, and any Retirement Account savings in excess of the Basic Retirement Sum if they own a property. From age 65, individuals can start monthly payouts from their CPF Retirement Account. They also have the option to defer the start of their monthly payouts to age 70 and for higher monthly payouts. Individuals can receive payouts from CPF while continuing to work.
Personal income tax and social security contributions
Compulsory CPF contributions are fully tax-exempt. Individuals can also receive tax relief of up to SGD 7 000 per year for voluntary contributions made by their employers or themselves to their own CPF Special or Retirement Accounts, and an additional tax relief of up to SGD 7 000 per year for voluntary contributions that they make to their family members’ CPF Special or Retirement Accounts.
There is also tax deductible “earned income relief”, and the relief amount depends on the worker’s age as described below.
Individuals who wish to save more for their old age can participate in the Supplementary Retirement Scheme (SRS), a scheme operated by the private sector. SRS contributions are voluntary, and are eligible for tax relief. Annual SRS contributions for Singaporeans and foreigners are capped at SGD 15 300 and SGD 35 700 respectively. SRS investment returns are accumulated tax-free and only 50% of the withdrawals from SRS are taxable at retirement.
For resident individuals, income tax rates and bands are as follows for income earned from 2017 onwards:
Social security contributions payable by workers
Workers make contributions to the CPF as described above.
There is no additional tax relief for pensioners.
Retirement income from CPF is exempted from personal income tax.
Pensions from approved pension schemes may be taxed. The amount of pension accrued up to 31 December 1992 in the approved funds in Singapore is exempt from tax if the person retired at the retirement age stated in the pension or provident funds/schemes.
Pensions paid out of contributions made to the funds after 31 December 1992 will be taxed.
Social security contributions payable by pensioners
Individuals who work while receiving retirement income from CPF continue to make CPF contributions.
Note: Real rate of return 3%, real earnings growth 1.25%, inflation 2%, and real discount rate 2%. All systems are modelled and indexed according to what is legislated. Transitional rules apply where relevant. DC conversion rate equals 90% but is not applicable to CPF as CPF Board does not charge any fees. Labour market entry occurs at age 22 in 2020. Tax system latest available: 2020.
Source: OECD pension model.
Note: Real rate of return 3%, real earnings growth 1.25%, inflation 2%, and real discount rate 2%. All systems are modelled and indexed according to what is legislated. Transitional rules apply where relevant. DC conversion rate equals 90% but is not applicable to CPF as CPF Board does not charge any fees. Labour market entry occurs at age 22 in 2020. Tax system latest available: 2020.
Source: OECD pension model.