In this year budget, there were two key changes initiated. An increase in CPF contribution and enhanced earn income relief. The boost in CPF contribution and the doubling of earned income relief are in line with the Singapore new goal, to help cope with the social and rising cost for the aging population that Singapore is currently facing. Further studies suggest that elderly, depending on solely CPF saving for retirement is not sufficient.
Boost in CPF contribution
The government worry that elderly will not be able to support them after retirement. Therefore, the government has implemented a new boost in CPF contribution for employees aged above 55 years old and they will be classified according to their aged group. Employee earning an annual income of $75000 and is above aged 55 would realize tax saving of over 11%. But given that in dollar term, this translates into only a $252 per year saving. The cost of living in Singapore is increasing due to inflation and economic growth. Hence, a saving of $252 per year saving will not convince older workers to retire. This amount is for a person earning $75000 annually. However, elderly who are low-income workers will face much more difficulties. Since most of them are less educated, many of them will find it hard to save for their retirement as they lack the knowledge of investing their money and will normally keep their saving in the bank earning an interest rate of about 0.05%. This interest earned will not be sufficient to curb the inflation rate of 5.2% according the department of statistic Singapore. Thus, a $252 saving per year, $21 per month saving is so meager that they could not even afford a proper meal in the market for a month. However there are other factors to be considered, such as their dependent which also include their family or children, financial and social help available for them. Recently, the Central Provident Fund Board (CPF) extend its 4% annual interest rate for...
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