The Central Provident Fund (CPF) monthly salary ceiling in Singapore will be increased gradually to $8,000 by 2026 to keep up with rising salaries and assist middle-income Singaporeans in saving more for their retirement. The CPF monthly salary ceiling is currently capped at $6,000. Deputy Prime Minister and Finance Minister Lawrence Wong announced the increase in his Budget 2023 statement on Tuesday, with the rise taking place progressively over four steps to allow employers and employees to adjust to the increase. The increase will occur on September 1, 2023, when the monthly salary ceiling will be raised to $6,300. On January 1, 2024, it will be increased further to $6,800. The ceiling will reach $7,400 by January 1, 2025, and $8,000 by January 1, 2026.

There will be no change to the CPF annual salary ceiling of $102,000 at this point, according to the Ministry of Finance (MOF), but this will be reviewed periodically to ensure it continues to cover the broad majority of CPF members. The CPF monthly salary ceiling will ultimately be set at one-twelfth of the CPF annual salary ceiling at steady state to ensure that employees earning the same annual salary receive the same CPF contributions regardless of their salary structure.

The move is expected to increase the retirement adequacy of middle-income workers over time. However, it could also increase business costs. Nevertheless, businesses will have to become more productive and use technology to counter this, according to Lawrence Loh, director of the National University of Singapore Business School's Centre for Governance and Sustainability.

In addition to the CPF ceiling raise, DPM Wong also stated that the Singaporean government would continue with the next hike in CPF contribution rates for older workers in 2024. The government will provide employers with a one-year CPF transition offset equivalent to half of the 2024 increase in employer CPF contribution rates for every Singaporean and permanent resident worker aged above 55 to 70 to mitigate the rise in business costs. The minimum CPF monthly payout for seniors on the Retirement Sum Scheme will also be increased to $350 per month from the current $250 per month beginning June 1, 2023, for all seniors on the plan.

Source: The Straits Times