Retirement savings boost by Singapore Budget 2015

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
First $30,000 6% 4.5%
Next $30,000 5% 3.5%
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.

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