Senior employees’ CPF increased to enhance retirement cover
Concerns over the retirement adequacy of our elderly has led the Government to set up a Tripartite Workgroup in 2018, to study this. The Workgroup released its recommendations in 2019 and one of the recommendations is to raise the Central Provident Fund (CPF) contribution rates for workers aged above 55 to 70 gradually, with a longer term aim of reaching the same contribution rates as younger employees. The first increase in rates took place on 1 January 2022.
The Minister has announced that the next increase in CPF rates for workers aged 55 to 70 will take effect from 1 January 2023. With this, workers in this age group will see a total increase of three to four percentage points in their CPF contribution rates over these two years. Together with the adjustments in the CPF Basic Retirement Sum (BRS), these should go some way in helping senior workers achieve higher retirement payouts and address the rising costs of living. Table A shows the proposed change in contribution rates.
As with the 2022 increase in CPF rates, the increase will be fully allocated to the employees’ Special Account to help workers save more for their retirement. On the other hand, to help employers manage the increase in costs, a one-year CPF Transition Offset will be automatically provided to employers.
Table A: CPF Contribution Rates for Senior Workers from 1 January 2023
(Source: Budget 2022 Speech)
| Age Band | CPF Contribution Rates | CPF Transition Offset |
||
|---|---|---|---|---|
| Total | Employer | Employee | ||
| ≤ 55 | No change | |||
| >55 to 60 | 29.5% (+1.5%-pt) |
14.5% (+0.5%-pt) |
15% (+1%-pt) |
0.25%-pt |
| >60 to 65 | 20.5% (+2%-pt) |
11% (+1%-pt) |
9.5% (+1%-pt) |
0.5%-pt |
| >65 to 70 | 15.5% (+1.5%-pt) |
8.5% (+0.5 %-pt) |
7% (+1%-pt) |
0.25%-pt |
| >70 | No change | |||
Notes:
- The CPF contribution rates are stated as a percentage of wages.
- The percentage point figures in parentheses refer to the increase in CPF contribution rates from 1 January 2023, compared to current levels.
Foreign worker policies tightened to preserve Singapore core
As Singapore remains open and welcoming to talent from around the world, finding the right balance between local and foreign components of the workforce is critical to ensuring businesses have sufficient access to the global talent pool, while preserving a Singaporean core.
The increase to the minimum qualifying salary for new Employment Pass (EP) and S Pass applicants is yet another signal that Singapore is committed to attracting top-tier talent to complement the workforce. The target is to ensure that EP and S Pass holders are comparable in quality to the top one-third earners of the local Professional, Managerial, Executive and Technical (PMET) and Associate Professionals and Technicians (APT) workforce respectively.
From September this year, the minimum qualifying salary for new EP applicants will be raised from $4,500 to $5,000. For the financial services sector, which has higher salary norms, this will be raised from the current $5,000 to $5,500.
Table B: Revised S Pass qualifying salaries
(Source: Budget 2022 Speech)
| Sector(s) | Revised minimum qualifying salary for new applications | ||
|---|---|---|---|
| 1 Sep 2022 | 1 Sep 2023 | 1 Sep 2025 | |
| All sectors, except for Financial Services | $3,000 (increases up to $4,500 for a candidate in mid- 40s) | At least $3,150* | At least $3,300* |
| Financial Services sector | $3,500 (increases up to $5,500 for a candidate in mid- 40s) | At least $3,650* | At least $3,800* |
*The finalised values will be announced closer to the implementation date based on prevailing local APT wages at the time.
Similarly, in September 2022, the minimum qualifying salary for S-Pass holders will also be increased from $2,500 to $3,000 for all sectors, except for the financial services sector which will see an increase to $3,500. The minimum qualifying salary for new S Pass applicants will be increased in September 2023 and again in September 2025. Older and more experienced S Pass and EP applicants will need higher salaries to qualify, and these increase progressively with age.
Tightening of foreign worker dependency
The Minister has introduced a range of measures to reduce Singapore’s dependency on foreign workers, especially in the Construction and Process sectors. The Tier 1 S Pass Foreign Worker Levy (FWL) rate will be progressively raised from $330 to $650 by 2025. This is calibrated to encourage the sector to adopt greater automation and phase out the lower-skilled (and typically more lowly-paid) foreign workers.
In addition, from 1 January 2024, there will be a reduction in the Dependency Ratio Ceiling (DRC) from the current 87.5% to 83.3% in the Construction and Process sectors.
To mitigate the potential shortage of skills, businesses can tap on the Capability Transfer Programme which will end in September 2024.
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