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Extra CPF boost for older workers

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JANICE HENG on 22 Feb 2014

Singapore Press Holdings Ltd

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NO SINGAPOREAN LEFT BEHIND: HEALTH CARE AND CPF


TO BOOST retirement savings of older Singaporeans, the Central Provident Fund (CPF) contributions of workers aged above 50 and up to 65 will be raised.


With this move, the Government continues to close the gap between rates for older and younger workers, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said yesterday.


Most of the increase falls on employers, who will have help to adjust. For workers older than 50 and up to age 55, employer contribution rates will rise by 1 percentage point, with the increase going to the worker’s Special Account.


Employees’ contributions will rise by half a point, and that will go into the Ordinary Account.


This is because some older workers may still be tapping their Ordinary Account to pay for their mortgage, said Mr Tharman.


For those agedabove 55 and up to 65, employers’ contributions will go up half a point, with the increase going into the Special Account. But these workers’ own contributions will not go up.


“As a result of these changes, a 50-year-old worker earning a wage of $3,000 will have $6,500 more in his retirement savings at age 65,” said Mr Tharman.


These changes kick in on Jan1 next year. He noted that in 2012, the Government made a commitment to give workers aged above 50 and up to 55 the same rates as younger ones. The first step was taken that year. The new changes are thus “a second step towards raising the contribution rates for them”. Workers older than 50 and up to age 55 will have a new total contribution rate of 35 per cent, compared to 37 per cent for younger workers.


Currently, the respective rates are 32.5 per cent and 36 per cent.


This move follows consultation among the tripartite partners, said Mr Tharman. The labour movement had earlier called for older workers’ rates to go up by one to two percentage points.


The Singapore National Employers Federation (SNEF) supported a rise, but cautioned that it should be done gradually.


Yesterday, National Trades Union Congress president Diana Chia said the labour movement was “heartened” that the Government had heeded its call. “In particular, we are happy the workers’ contribution will go into the Ordinary Account,” she added.


As for SNEF, it was satisfied with the pacing. “The one year advance notice... will give adequate time for employers to make any necessary adjustments,” it said.


Bosses will also get help to make the transition, with a one-year increase in the Special Employment Credit (SEC). It subsidises the pay of Singaporeans older than 50 and earning below $4,000 a month. Employers who hire such workers next year will get SEC of up to 8.5 per cent of the worker’s monthly pay, compared to a maximum of 8 per cent now. This will offset the increase in older worker contribution rates, said Mr Tharman. It will cost the Government $30 million.


Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.

 

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