Oral Answer by Mr Tan Chuan-Jin, Acting Minister for Manpower, to Parliamentary Question on CPF Contribution Rates

1. CPF contribution rates currently stand at 36% with 20% from employees and 16% from employers. In a Ministerial statement in 2003, then Prime Minister Goh Chok Tong explained that we would not be restoring CPF contribution rates to 40%, with equal contributions from employers and employees. The considerations then against raising employer contributions were to keep our wage costs competitive and important because it will not price ourselves out of the competition. The considerations remain valid today.

2. Ensuring retirement adequacy is important especially as Singaporeans are living longer and require more savings for retirement and healthcare because we are living for a longer period of time. Raising overall CPF contribution ratesfurther beyond the current 36-percent would be one way to help provide better adequacy, but importantly, we need to understand what that impact will be when we raise the contribution rates. It will have an impact on business costs and importantly, the knock-on effect will be on employment opportunities so it is about balancing the tensions between these two conflicting requirements. Further increases in our CPF contribution rates will have to be carefully considered, together with our tripartite partners, and we need to do it in a calibrated and gradual manner. Both wanting to address retirement adequacy, which is a valid concern but at the same time to make sure that employment opportunities are not denied as a result of decreased competitive nature of our businesses.
3. Other than raising CPF contributions, there are also different ways that we can address the issue of retirement adequacy. For example, in recent years, we have helped CPF members grow their savings. Since 2008, an extra interest of 1-percent is paid on the first $60,000 of a member’s combined CPF balances. Workers earning lower incomes also enjoy boosts to their CPF savings through Workfare. We have also gradually been increasing the contribution rates for older workers, which are currently set below the 36% rate for workers aged 50 and below, while bearing in mind the need to maintain their employability. Again, it is an issue of employability that is at stake while we balance that off with the increases in CPF contribution. The Government also makes top-ups to members’ CPF accounts from time to time. We are continuing to explore other ways to enhance the system while keeping it sustainable.
4. Lastly, I would add that as we live longer, one of the issues at hand that we need to address is the ability of Singaporeans to continue to work longer if they choose to and if they need to. This is also where we need to bear in mind how to facilitate that because as we continue to work, that would also add to our CPF contribution and will help our retirement adequacy as well. Addressing retirement adequacy spans across a few different approaches, of which, raising contributions is one.