Retirement savings is set to increase from the recent announcement of Singapore Budget 2015 by Deputy Prime Minister and Finance Minister, Mr Tharman Shanmugaratnam.
First, the CPF ceiling will be increased from $5000 to $6000 with effect from 1 Jan 2016. This will help to boost another $170 from employer and $200 from employee for those below 55 years old. Though the take-home pay for employee will reduce by $200, the savings for retirement will be boosted by these extra savings.
Next, the CPF contribution rate for employee 50 years and above will be increased from 1 January 2016 as follows:
|Age||Employer CPF Rate||Employee CPF Rate|
|Above 50 to 55||Increase from 16% to 17%||Increased from 19% to 20%|
|Above 55 to 60||Increase from 12% to 13%||No change, remain at 13%;|
|Above 60 to 65||Increase from 8.5% to 9%||No change, remain at 7.5%.|
In addition, for CPF members aged 55 and above from 1 January 2016, the first $30,000 from the CPF accounts will earn extra 1% per annum, on top of the current 1% extra interest on the first $60,000 of their total CPF savings. That is,
|Total CPF balance||Interest Rate|
|If in Special/Retirement/Medisave Accounts||If in Ordinary Account|
|Remaining balance above $60,000||4%||2.5%|
This translates to extra $300 savings per year for the next 10 years before CPF Life payout starts at 65. Assuming the yearly $300 interest earned goes into the Retirement Account which earns 4% interest, this translates to $3,745 after 10 years. With higher amount in CPF Retirement Account, CPF members can expect higher payout from their CPF Life.
Lastly, the caps on contribution to the voluntary retirement savings scheme, Supplementary Retirement Scheme (SRS) will be increased from 1 January 2016. For Singaporean and Permanent Resident, the cap will be increased from $12,750 to $15,300. The cap for foreigner will be increased from $29,750 to $35,700. This will help to increase the personal income tax savings, as the amount put into SRS will enjoy tax relief. Moreover, retirement cashflow will be improved when SRS money is allowed to be withdrawn without penalty from age 62 onwards.
You may wish to refer to the following articiles I wrote previously to learn more about Retirement Planning and benefits of Supplementary Retirement Scheme.