Home / Politics and Government

Central Provident Fund

Since its inception on 1 July 1955, the Central Provident Fund (CPF) has affected the lives of every Singaporean. The fund, which covers all Singaporeans and Permanent Residents, helps them in major decisions such as purchasing a home, paying of medical expenses and caring for the family.

Early history
The CPF had its beginning in 1951 when a CPF bill was introduced in the legislative council. It was later sent to a Colony Select Committee. However, a commission set up to look into a retirement scheme for workers recommended a pension scheme. It was only after 16 months of public debate by the Select Committee that in October 1953, a save-as-you-earn scheme was finally decided and a new department was formed to operate it.

On 11 December 1953, the CPF Ordinance was enacted. Nonetheless, it took the department an additional eight months to set up an office at the Victoria Memorial Hall. It was only on 4 January 1955 that the registration of employers began.

The launch that was previously scheduled for 1 May 1955 was also postponed due to the communist-led bus strikes organised to disrupt the newly elected Labour Front coalition. Finally on 29 June 1955, a change was made to the 1953 Ordinance and was rushed through the Legislative  Assembly, exempting workers earning $200 or less a month from contributing while their employers were required to do so. Two days later, the fund was made a reality.

Description
Each CPF member has three accounts with the Fund, the Ordinary, Medisave and Special accounts. Ordinary Account savings can be used for housing, approved investments, insurance, education and transfers to top-up parents' Retirement Accounts. Medisave Account savings are for meeting hospitalisation expenses and certain approved outpatient treatments such as Hepatitis-B vaccinations, Renal Dialysis and Chemotherapy. It can also be used to buy MediShield/MediShield Plus and approved private medical insurance under the Private Medical Insurance Scheme (PMIS). Savings in the Special Account are set aside for old age, contingency and investment purposes.

Under this scheme, both the employer and employee contribute to the Fund. The contribution rates are 36% of wages for employees age 55 years and below, 18.5% for those who are above the age of 55 to 60 years, 11% for those above the age of 60 to 65 years, and 8.5% for those above 65 years old. Besides providing for CPF members' needs, these rates also encourage the continued employment of older workers.

Employees aged 55 years and below contribute 20% of income earned while employers contribute 16%. Monthly contributions are subject to a maximum of S$960 for the employer and S$1,200 for the employee, based on a salary ceiling of S$6,000 a month, beyond which no CPF is payable.

For members below age 55, the total contribution rate of 36% is distributed into the three accounts in the proportion of, 26% points for the member's Ordinary Account, 6% points for Medisave Account and 4% points for Special Account.

For members aged 35 to 44 years, 7% points goes to the Medisave Account, 6% points goes to the Special Account and 23% points to the Ordinary Account.

Members aged 45 and above, will contribute 8% points to the Medisave Account, with a corresponding decrease in contribution to the Ordinary Account. Therefore, 22% points will go to these members Ordinary Accounts. There is also a Retirement Account for members who after withdrawing their CPF savings at 55 need to set aside a Minimum Sum in the account for their old age.

The CPF scheme was further extended to all self-employed persons earning a net trade income of more than S$2,400 a year in July 1992. By contributing 6% to 8% (depending on age) to the Medisave Account, the self-employed are able to enjoy healthcare benefits as other members.

The future challenges for the CPF is centred on how it can achieve its vision and still continue to be successful in meeting the peoples needs and expectations.



Author
Gabriel Tan, 2001



References
Central Provident Fund Board. (2000). A People's wealth, a nation's health: The CPF story. Singapore: Author.
(Call No.: RSING 354.5957 CEN)

Central Provident Fund Board. (2003). Central Provident Fund Board. Retrieved November 6, 2003, from www.cpf.gov.sg/cpf_info/home.asp



The information in this article is valid as at 2001 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.

Subject
Politics and Government
Commerce and industry>>Labour and Employment
Savings and loan associations--Singapore
Retirment--Singapore
Business, finance and industry>>Finance>>Investment markets>>Mutual funds
Law and government>>Public finance>>Insurance



All Rights Reserved. National Library Board Singapore 2004.