Singapore’s Central Provident Fund (CPF) is a mandatory social security savings scheme that has evolved from providing retirement provisions to encompass home ownership, healthcare, insurance plans, and family education. CPF payments are guaranteed and savings earnings are not taxable, with various investment options available. The CPF encourages Singaporeans to work and enables them to support themselves and their family, covering three generations.
The Central Provident Fund (CPF) is Singapore’s social security savings scheme that was created in 1955. Like the American social security scheme, it was designed to give the working class a sense of security in retirement. Since its development, the Central Provident Fund has grown to encompass not only retirement provisions for members, but also includes home ownership, health care, insurance plans, and family education. The savings plan is financed by mandatory contributions from employees and employers. It was created to promote economic life and self-sufficiency, rather than relying on state or government assistance for the working class.
When Singapore gained its independence in 1965, the Central Provident Fund not only remained a major savings and investment scheme, it began to evolve. The sole purpose of the CPF when it was created was to provide financial security for workers during their retirement, and savings could only be withdrawn after a person retired. As people’s needs changed, the plan was revised to allow withdrawals for home purchases, college loans, health care and investments, as well as retirement.
Mandatory financing rates for the Central Provident Fund have also changed over the years. In the late 1960s, the contribution rate peaked at 25 percent of an employee’s salary, which was paid by the worker and by the company. This represented a total of 50 percent of a worker’s earned income. Since that time, rates have fluctuated in response to the economic state of the nation, with employees paying different amounts depending on their age. Of the total amount contributed, certain percentages are dedicated to your retirement, called ordinary; doctor, called Medisave; and expenses, special calls, accounts with the largest amount still saved for retirement.
CPF payments are guaranteed and savings earnings are not taxable. Earnings on a member’s individual account may vary, as there are various investment options available. The primary focus is prudent decision, and the CPF Board provides information to help its members make their investment and savings decisions.
The Central Provident Fund is intended to provide a comfortable retirement and social and economic security. It encourages Singaporeans to work and enables them to support themselves and their family. Since most CPF accounts cover three generations, members can use savings to care for themselves, their spouses, children, parents, and siblings. This has evolved the Central Provident Fund from a simple retirement plan to a comprehensive life savings plan.
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