Starting 1 January 2026, significant adjustments to the Central Provident Fund (CPF) will take effect, impacting both employees and employers in Singapore.
These changes aim to enhance retirement adequacy and align contribution ceilings with rising wages.
1. Increase in CPF Ordinary Wage (OW) Ceiling
The CPF Ordinary Wage ceiling determines the maximum monthly salary amount subject to Central Provident Fund contributions. To keep pace with wage growth, the OW ceiling will be raised in phases:
| Effective Date | CPF OW Ceiling | Increment |
|---|---|---|
| Before 1 Sep 2023 | $6,000 | – |
| 1 Sep 2023 | $6,300 | +$300 |
| 1 Jan 2024 | $6,800 | +$500 |
| 1 Jan 2025 | $7,400 | +$600 |
| 1 Jan 2026 | $8,000 | +$600 |
Note: The CPF annual salary ceiling remains unchanged at $102,000, capping the total annual CPF contributions.
2. Revised CPF Contribution Rates for Older Employees
To bolster retirement savings for senior workers, Central Provident Fund contribution rates for employees aged above 55 will be adjusted:
| Age Group | Total Contribution Rate | Employer’s Share | Employee’s Share |
|---|---|---|---|
| 55 and below | 37% | 17% | 20% |
| 56–60 | 34% | 16% | 18% |
| 61–65 | 25% | 12.5% | 12.5% |
| 66–70 | 16.5% | 9% | 7.5% |
| Above 70 | 12.5% | 7.5% | 5% |
These adjustments aim to gradually align older employees’ contribution rates with those of younger workers, enhancing their retirement savings.
3. Impact on Employees and Employers
For Employees:
- Increased Central Provident Fund Contributions: Employees earning above $6,000 monthly will see higher Central Provident Fund deductions due to the raised OW ceiling.
- Enhanced Retirement Savings: The increased contributions will bolster retirement funds, providing greater financial security in later years.
For Employers:
- Higher Contribution Costs: Employers will incur higher Central Provident Fund contributions for employees, especially those aged above 55.
- Payroll Adjustments: Businesses may need to adjust payroll systems and budgets to accommodate the increased contributions.
4. Allocation of Additional Contributions
The additional CPF contributions for employees aged above 55 will be fully allocated to the Retirement Account (RA), up to the Full Retirement Sum (FRS). If the FRS has been met, excess contributions will be directed to the Ordinary Account (OA).
5. No Changes to Additional Wage (AW) Ceiling
The Additional Wage ceiling, which limits CPF contributions on bonuses and other variable payments, remains at:
- AW Ceiling: $102,000 – Total OW subject to Central Provident Fund for the year.
The Central Provident Fund contribution changes effective from 1 January 2026 are designed to enhance retirement savings for Singaporeans, particularly older employees.
While these adjustments may impact take-home pay and employer contribution costs, they play a crucial role in ensuring financial security for retirees.
Both employees and employers should stay informed and prepare for these upcoming changes to navigate the transition smoothly.
FAQs
How will the increased OW ceiling affect my take-home pay?
If your monthly salary exceeds the previous OW ceiling, a larger portion of your salary will be subject to Central Provident Fund contributions, resulting in a slight reduction in take-home pay. However, this also means increased savings in your CPF accounts.
Are there any changes to the CPF annual salary ceiling?
No, the Central Provident Fund annual salary ceiling remains at $102,000, capping the total annual Central Provident Fund contributions.
How should employers prepare for these changes?
Employers should review and adjust their payroll systems to accommodate the new contribution rates and OW ceiling. It’s also advisable to communicate these changes to employees to ensure transparency.