Allowing Middle-income Workers above Age 50 to Increase CPF Contributions to Reduce Tax Liability

Mr Zaqy Mohamad asked the Minister for Manpower (a) what are the measures to help middle-income, middle-aged workers above 50 years old who will see reduced personal CPF contributions that will result in higher personal income tax and inability to earn a higher interest on their retirement savings through CPF; and (b) whether the Ministry will consider enabling such persons to voluntarily contribute more into their CPF to reduce their personal income tax liabilities and enhance their retirement income.

Mdm Speaker, our objective is to ensure good employability for all Singaporeans. The CPF contribution rates for older workers

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above 50 were lowered in the past to do precisely that and, basically, to enhance employability for older workers. Why is that so? Seniority-based wage systems were common then, which discouraged employers from retaining and hiring older workers. The employment rates of older workers have since improved considerably although, by and large, when you compare older workers with younger workers, the employability of younger workers is generally higher than the older workers themselves. Good progress has also been made by tripartite partners in wage restructuring and other efforts to help them be employed and also to stay employed.

We have consulted our tripartite partners and reached consensus that the CPF contribution rate for workers aged 50 to 55 should be restored to the same level as younger workers. The increase in contribution rates has been phased in gradually to moderate the impact on business costs and take-home pay of the employees. Since September 2012, we have twice increased the CPF contribution rates for older workers aged 50 to 65, with the latest increase effective from 1 January this year. In particular, the CPF contribution rate for workers aged 50 to 55 has been raised by five percentage points since 2012, and is now two percentage points lower than for workers below the age of 50. We are now studying when to take the next step to increase CPF contribution rates for older workers.

CPF members who wish to voluntarily contribute more to their CPF can do so through the Minimum Sum Topping Up Scheme (MSTU) to build up their CPF savings for retirement. Members who top up their own Special or Retirement Account using cash can also enjoy tax relief of up to $7,000 per calendar year.