Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Sunday, 14 May 2017

Yes, CPF takes 20% of your Monthly Salary, BUT....

A lot of people have the misconception that the Central Provident Fund (CPF) takes away 20% of your salary every month.
While that is true, there is more to that than just what it seems like.
There are a few things you should know about this 20% "pay cut".

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1) The amount that you give actually decreases as you age
At the start, your contribution rate is 20% of your monthly salary
As you grow older, the percentage of your salary CPF takes decreases.
Source: CPF Board

2) There is a cap to your salary contribution!
Yes, there is a limit to how much you can INVOLUNTARILY contribute to your CPF.
Currently, the limit is set at $6,000.
If you earn $6,000 or less, your contribution rate is 20%. Meaning you only contribute $1,200 to your CPF.
However, if you earn more than $6,000, you are only required to contribute base on $6,000.
If you earn $10,000, you still only need to contribute $1,200 into your CPF. There is no need to contribute 20% of your extra $4,000 salary into your CPF (although you could if you want to).

3) Your Employer also contribute to your CPF
Your employer contributes 17% of your salary into your CPF.
This means you are actually getting an extra 17% of your salary - but it goes into your CPF.
This 17% is also cap at a monthly salary of $6,000, similar to your own contribution
If you earn $6,000, your employer contributes an extra $1,020 into your CPF (17% x $6,000)
If you earn $10,000, your employer also still contributes an extra $1,020 into your CPF.

4) If your salary is below $750, your CPF Contribution is Different from others
If your monthly salary is below $750, your CPF contribution percentage is different from the normal CPF contribution rates
Source: CPF Board

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