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Economy & Finance

5 benefits our CPF system has over other pension systems

11 October 2024

If you’ve wondered how CPF measures up with other countries’ pension systems

Elderly figurines on taller stack of coins compared to a single office worker figurine

The CPF, or Central Provident Fund, is a social security scheme funded by contributions from both employers and employees.

It helps Singaporeans set aside savings for retirement, as well as for other important things like housing and healthcare.

What sets the CPF apart from other pension systems? Here are 5 considerations.

1. CPF is a 3-in-1 system

Unlike pension systems in other countries, the CPF goes beyond providing members with an income in retirement. The CPF also helps us to save for housing and healthcare.

Infographic of how CPF helps members with lifelong retirement income

2. CPF provides attractive, risk-free returns

CPF members earn an interest of up to 6% for those aged 55 and above, and 5% for those aged below 55.*

*CPF members can earn higher interest rates if the interest rate for monies in their Special, Medisave and Retirement Accounts goes beyond the current 4% interest rate floor.

3. CPF is sustainable. Payouts depend on the savings set aside by each member.

The savings required to meet retirement needs differ from person to person. To help provide for basic retirement expenses, CPF members can set aside the Basic Retirement Sum (BRS), which takes reference from the actual spending of retiree households.

To get higher CPF payouts, you can:

  1. Top up your CPF; or

  2. Defer starting your retirement payouts.

Unlike the CPF, many other pension systems are funded by taxpayers. Given rapidly ageing populations and the challenges in reducing pension benefits or deferring pension payout ages, these systems run the risk of default or insolvency.

4. Singaporeans do not rely on individual CPF contributions alone for their retirement income.

  • Aside from your contribution of 20% of your salary to CPF, your individual efforts are supplemented by your employers, loved ones and the Government.

Infographic of alternative sources of income

5. When you pass on, any unused CPF monies are distributed to your nominees and/or loved ones.

Most tax-funded pension systems stop payments upon members’ death, so not all of a member’s contributions will be paid out to them or their loved ones.

Infographic of 3 things you would need to know about CPF

In addition, there are several Government schemes that can help support expenses in retirement.

ComCare Long-Term Assistance: Provides a cash sum each month to destitute persons who cannot work permanently as a result of old age or illness and have little or no family support.

Lease Buyback Scheme: Elderly flat owners can sell part of their flat’s lease back to HDB to receive a stream of retirement income while continuing to live in their flat.

Matched Retirement Savings Scheme: Provides dollar-for-dollar matching on CPF top-ups made to eligible senior Singaporeans with lower CPF balances.

Silver Housing Bonus: Provides elderly Singapore households with a cash bonus when they right-size to a 3-room or smaller flat, which will be used to top up their CPF Retirement Account and to join CPF LIFE.

Silver Support Scheme: Provides a quarterly cash payout to elderly Singaporeans aged 65 and above, who had low incomes through life and who now have little or no family support.

Workfare Income Supplement: Provides cash payouts and CPF top-ups to lower-wage Singaporean workers.

For more information on CPF, go to www.cpf.gov.sg.

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