Budget 2020: Increases to CPF contribution rates for older workers to come, but CPF Transition Offset to help

CPF contribution rates for older workers will be raised over the next decade or so, in order that the full rate of 37 per cent is extended to those aged up to 60. But in the meantime DPM Heng has introduced the CPF Transition Offset during the budget reading on Feb 18.

The Finance Minister & Deputy Prime Minister Heng, announced that they will provide employers with a CPF Transition Offset for the year, to offset half of the increase in employer contributions. They will also introduce the Senior Worker Early Adopter Grant to support enterprises that raise their own retirement and re-employment ages ahead of the legislated changes.

The retirement age and re-employment age ceiling will also be raised to 65 and 70 respectively, by 2030.

The number of Singaporeans aged 65 and over is projected to almost double from today and reach 900,000 by 2030.

For the first increase in CPF rates in 2021, employers and workers should each increase their contribution by 0.5 percentage point to one percentage point for workers aged 55 to 70.

In January 2021, the contribution rates for each party would go up to 14 per cent, or S$420 a month, assuming zero wage increments over the years. That works out to S$360 more in contributions each a year for employer and employee.

Each subsequent increase in CPF rates will not exceed one percentage point for either workers or employers to minimise the impact on take-home pay and wage costs. /TISG