Singapore’s Central Provident Fund (CPF) is a comprehensive social security savings scheme that aims to provide retirement, healthcare, and housing needs for citizens and permanent residents. It is mandatory for employed Singaporeans and permanent residents to contribute a portion of their monthly salary to their CPF accounts, which is then invested by the CPF Board in various investment instruments such as government bonds, corporate bonds, and stocks.
The CPF system is divided into three accounts: the Ordinary Account, Special Account, and Medisave Account. The Ordinary Account is primarily used for housing, education, and investment, while the Special Account is focused on retirement savings. The Medisave Account is specifically for healthcare expenses, such as hospital bills and insurance premiums. The contribution rates for each account are set based on the individual’s age and income level, with a cap of 37% of the monthly salary for those below the age of 55 and 13% for those above 55 years old.
One of the main benefits of the CPF system is its ability to generate returns for its members. The interest rates for the Ordinary Account are pegged to the 12-month average yield of 10-year Singapore Government Securities. The Special and Medisave Accounts have a fixed interest rate of 4% per annum. This ensures that CPF members’ savings will grow over time, providing them with a stable source of income
