What Is Central Provident Fund In Singapore?
The Central Provident Fund (CPF) is a retirement savings plan for Singapore citizens and permanent residents. It was created to help Singaporeans save for their retirement, healthcare, and housing needs. If you are working in Singapore, it is likely that you are already contributing to the CPF through payroll deductions and employer contributions. But what exactly is the CPF and how does it work?
The CPF is made up of three accounts – the Ordinary Account (OA), the Special Account (SA), and the Medisave Account (MA). The OA is used for housing, education, and investment, while the SA is primarily for retirement savings. The MA is used to pay for medical expenses in old age. Contributions to the CPF are made through payroll deductions and employer contributions, and the money in your CPF account earns interest.
At age 55, you can use the money in your SA to purchase a life annuity, which provides a steady stream of income in retirement. Alternatively, you can choose to withdraw a portion of the money in your SA as a lump sum and use the remainder to purchase a life annuity. You can also use the money in your OA to pay for housing expenses, such as the down payment on a home or the monthly mortgage payments.
In addition to the OA, SA, and MA, the CPF also has a separate account called the Retirement Account (RA). The RA is a combination of your OA and SA balances, and it is used to pay for your retirement expenses. The RA balance is used to purchase a retirement income product, such as a life annuity, which provides a steady stream of income in retirement.
One of the benefits of the CPF is that it is a mandatory savings plan, which means that you are required to contribute a certain percentage of your income each month. This can help to ensure that you are saving enough for your retirement needs. The CPF also offers a competitive interest rate, which can help your savings grow over time.
Overall, the Central Provident Fund is a valuable tool for saving for retirement in Singapore. By making regular contributions and taking advantage of the CPF’s various accounts and programs, you can set yourself up for a comfortable and financially secure retirement. So make sure to take advantage of the CPF and start saving for your retirement today!
Learn about the Supplemental Retirement Scheme in Singapore here.