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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  1. employer contribute 17% . not 16%

    1. Hi StarMaster,

      Thank you for pointing out that mistake.
      We have made the changes.
      Thank you!
      We hope you will continue supporting our site.

  2. "Liked"
    I used to think CPF contribution as a pay cut when I first started working but not now.
    The CPF contributions from myself and my employer, over the years, have accumulated into quite a sum meant for my retirement

    1. Hi Starlight,

      Thanks for liking our post.
      We are glad that our content are useful and informative to our readers.
      Do subscribe to us or like us on our Facebook page to get more updates from us!
      Thank you for your support!

  3. Thanks there, good point to highlight on the cap.

    Do you know if performance bonuses have a cap also?

    1. Hi B,

      Performance bonus is considered as "Additional Wages (AW)".
      There is a cap for AW but the cap is applied yearly instead of monthly.
      There is an annual cap of $102,000 per year - you can only contribute max $102,000 of your AW per year into your CPF.
      Meaning any bonuses you made in a calendar month, 20% of it is required to be paid into your CPF, until the cap of $102,000 is met.

      Thank you

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