Adequacy of Freelancers and Self-employed Individuals' CPF Savings

Mr Ang has suggested introducing a scheme, similar to the Temporary Employment Credit (TEC), to top up the CPF accounts of self-employed persons (SEPs) who make voluntary contributions to their Central Provident Fund (CPF). Today, under the Workfare Income Supplement (WIS) scheme, the Government already tops up the MediSave account of SEPs who make MediSave contributions. Such WIS payouts are limited to SEPs and employees with incomes below $1,900, or about the bottom 30% of the working population. SEPs are also given incentives to make voluntary contributions to their CPF accounts through a tax relief on their contributions.

Mr Ang has asked whether the CPF savings of SEPs are sufficient to meet their retirement and healthcare needs. Today, SEPs are only required to contribute to their MediSave accounts to save for their healthcare needs. The median MediSave balance of SEPs1 was $21,700 in 2014, compared to $14,300 five years ago. This is still lower than the median MediSave balance of employees, which was $27,700 in 2014.

Making sure SEPs comply with mandatory contributions to their CPF MediSave accounts has been challenging. CPF Board reaches out to SEPs through mailers and road shows to encourage them to make regular MediSave contributions. CPF Board also facilitates arrangements for those who wish to make their MediSave contributions via instalments and has partnered several licensing authorities to ensure that their licensees contribute to MediSave. These efforts are complemented by industry or company-led initiatives, such as the Drive-and-Save Scheme by the National Taxi Association and the Serve-and-Save Scheme by Woodlands Transport Services, where the companies make co-contributions to their SEPs' MediSave. In addition, CPF Board has recently introduced the Earn-and-Save Scheme to the real estate industry. Under this scheme, SEPs can authorise their companies to deduct MediSave contributions from their commissions.

With effect from 1 January this year, CPF contribution rates to the MediSave account were increased by one percentage point. The higher CPF contributions will go towards helping all CPF members, including SEPs, meet their ongoing healthcare needs, including paying for MediShield Life premiums. In addition, with effect from 1 January 2016, the Government will pay an additional interest of 1% on the first $30,000 of CPF balances for members aged 55 and above. This will be on top of the existing 1% extra interest on the first $60,000 of CPF balances. This means that CPF members aged 55 and above can earn up to 6% interest in total on their CPF savings.

Page: 130

The Government will also provide substantial MediShield Life premium subsidies to eligible Singaporeans. These include Premium Subsidies for the lower- to middle-income, Pioneer Generation Subsidies, and Transitional Subsidies to phase in the shift to MediShield Life. For those who are in financial need and are unable to pay their share of premiums even after subsidies and MediSave, the Government will provide Additional Premium Support, to help them pay for their MediShield Life premiums.

As SEPs are not required by law to contribute to the Ordinary Account or Special Account, they may not have much in their CPF for retirement. CPF members who are SEPs throughout their working lives may have to rely on family or other avenues, such as monetising their housing, if they need a source of income in retirement. Ultimately, SEPs must take personal responsibility for their retirement planning and make regular contributions to their CPF accounts if they wish to have enough in CPF for their basic retirement needs.