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Understanding Singapore's CPF Thumbnail

Understanding Singapore's CPF

Ella Bruhl-Gati

The Central Provident Fund (CPF) is a system established by the Singaporean government to ensure that Singapore Citizens and Permanent Residents set aside funds for their retirement. It works by requiring participants to deposit a percentage of their monthly salary into CPF savings, with both employee and employer contributing to the individual's retirement pot.

CPF is an important tool for you to utilize, whether you are newly entering the workforce, providing for a family, or approaching retirement. Therefore, it is crucial to understand the various moving parts of the CPF model and how you, as an individual, can optimize it to support your financial goals and desired lifestyle.

Depending on your age, you will be expected to contribute different amounts. For example, if you are under the age of 55, you will contribute 20% of your wages up to a certain income level.

To begin, it’s important to understand the basic needs in retirement. These pillars help explain how CPF is designed to support Singaporeans in meeting their retirement goals.

Three Basic Retirement Needs

  1. A roof over your head—Owning a home provides housing security, removing the need to worry about rent in retirement.
  2. Savings for healthcare—Your MediSave is used to set aside part of your income for medical expenses.
  3. A stream of retirement income—CPF LIFE ensures that you receive income throughout your retirement, regardless of how long you live.

CPF consists of four main accounts that serve different purposes:

  • Ordinary Account (OA)
  • Special Account (SA)
  • MediSave Account (MA)
  • Retirement Account (RA)

If you are under the age of 55, you will have access to your OA, SA, and MA. Upon turning 55, your Special Account will be closed, and a Retirement Account will be created.

Breakdown of CPF Accounts

1. Ordinary Account (OA)

Your OA can be used for various purposes including housing, insurance, investment, and education. It is most commonly used for housing needs such as making a downpayment on a property or servicing a housing loan. Savings in your OA account have an interest rate of 2.5%, with the first $20,000 of your balance receiving an additional 1% of interest per annum if you are under 55, and an additional 2% of interest if you are above 55.

2. Special Account (SA)

The SA is meant for old age and retirement-related investments. It allows you to invest in selected financial products with potentially higher returns. As it is designed for long-term savings, the SA offers a higher interest rate of 4% per annum (up to 5% on the first $60,000 of your combined CPF balances), helping your savings grow through compound interest.

3. MediSave Account (MA)

This account is dedicated to healthcare expenses. Your MA savings can be used to pay for medical costs, long-term care, and insurance premiums (e.g., MediShield Life and CareShield Life). You can also use your MA to support the healthcare needs of family members. You will receive 4% interest on all MA savings.

There is a cap on how much can be allocated to your MA, known as the Basic Healthcare Sum (BHS). This amount reflects the estimated basic subsidized healthcare costs in old age and is adjusted annually until you reach age 65 to reflect the current healthcare landscape.

4. Retirement Account (RA)

This account is created automatically when you turn 55 and is intended solely for retirement payouts. The RA is funded mainly by transfers from your SA (and OA, if needed), up to your Full Retirement Sum (FRS)—a value that changes yearly to keep pace with the cost of living. Your RA will also receive 4% in interest.

You may begin withdrawing funds from your RA at age 55, but this will reduce your future monthly payouts. If you do not need the funds immediately, you can top up your RA to the Enhanced Retirement Sum (ERS) to increase your future CPF LIFE payouts.

The total in your RA forms your CPF LIFE premium, which provides lifelong monthly payouts starting from age 65. If you defer the start of your payouts (up to a maximum of age 70), your payouts will increase by up to 7% per year.

US Taxpayers

For US taxpayers, it is important to note that CPF interest must be reported on Schedule B, FBAR, and possibly Form 8938 depending on your offshore assets. Due to its lack of tax efficiency, it likely does not make sense to top-up CPF.

If you are a US taxpayer with a CPF account, you can consult one of our wealth planners to find out how to utilize it in the most effective manner.

CPF Nomination

As your CPF savings will form part of your estate, it is important to make your CPF nomination as it is a key aspect of legacy planning.

The CPF nomination is used to allow individuals to choose the beneficiaries who will inherit their CPF savings after death. Through making a nomination, funds shall be distributed according to the owner’s wishes in a fast and efficient manner.

Making a nomination is at no extra cost and will save loved ones from an arduous process with the Public Trustee’s Office. It’s important to note, without a nomination, savings will be distributed following intestacy laws, which may not align with your wishes.

Making your CPF nomination is a quick and easy process that can be done via the CPF website.

To conclude, the CPF system is a powerful tool that supports Singapore Citizens and Permanent Residents in managing their long-term financial security. When properly understood and utilized, CPF can serve as an effective strategy to meet your retirement and financial goals while maintaining your desired lifestyle.


Sources:

CPFB | CPF 101: What do you need to know about CPF? (no date). Available at: https://www.cpf.gov.sg/member/infohub/educational-resources/cpf-101-what-do-you-need-to-know-about-cpf (Accessed: 20 August 2025).

CPFB | CPF overview (no date). Available at: https://www.cpf.gov.sg/member/cpf-overview (Accessed: 20 August 2025).

CPFB | Making a CPF nomination (no date). Available at: https://www.cpf.gov.sg/member/account-services/providing-for-your-loved-ones/making-a-cpf-nomination (Accessed: 21 August 2025).

CPFB | What are the CPF interest rates? (no date). Available at: https://www.cpf.gov.sg/service/article/what-are-the-cpf-interest-rates (Accessed: 21 August 2025).


This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third-party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/  and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com.