Do You Really Know How the CPF Scheme Works?
The Central Provident Fund (CPF) is Singapore’s national social security savings scheme. It provides working Singaporeans with financial security and peace of mind, especially in their retirement years.
CPF is designed to support you across three key areas:
- Lifelong income for retirement
- Healthcare financing
- Home ownership support
Together, these pillars ensure that Singaporeans can enjoy a secure and stable future.
But here is the question: how well do you really understand the CPF scheme and the benefits it offers?
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The CPF scheme provides members with a guaranteed monthly payout for life once they reach their payout eligibility age. This ensures financial security throughout retirement, giving members peace of mind that they will always have a steady stream of income to support their living expenses.
CPF provides members with a monthly payout for life once they reach their payout eligibility age. This ensures a steady stream of retirement income, helping members maintain financial security and peace of mind throughout their golden years.
CPF members can withdraw their CPF savings once they have set aside the Full Retirement Sum (FRS) in their Retirement Account. The FRS can be set aside entirely with cash, or partially with cash (at least the Basic Retirement Sum), together with property.
This structure ensures that members maintain sufficient funds for retirement while still having flexibility in how they meet the requirement.
The CPF Housing Scheme allows CPF members to use their Ordinary Account (OA) savings to finance the purchase of property in Singapore. This includes both HDB flats and private residential properties, as well as the option to use CPF funds for building a private home.
By tapping into their OA savings, members can make down payments, service monthly housing loan instalments, and ease the financial commitment of property ownership while ensuring their CPF continues to work as a long-term retirement tool.
The Home Protection Scheme (HPS) is a mortgage-reducing insurance plan that protects CPF members and their families from the risk of losing their HDB flat. In the event of death, terminal illness, or total permanent disability, HPS ensures that the outstanding housing loan is fully or partially paid off.
This protection provides families with peace of mind, knowing that their home remains secure even if unforeseen circumstances affect their ability to continue paying the loan.
MediSave is Singapore’s national medical savings scheme under the CPF system. It helps members set aside a portion of their monthly income into their MediSave Account (MA) to prepare for future healthcare needs.
Funds in MediSave can be used for hospitalisation, day surgery, approved outpatient treatments, and eligible medical expenses for dependants.
By saving in advance, MediSave ensures that CPF members and their families are financially protected against rising medical costs and can access essential healthcare without unnecessary financial strain.
MediShield Life is Singapore’s basic national health insurance scheme that provides coverage for large hospital bills and costly outpatient treatments, such as dialysis and cancer therapies.
It is designed to give all Singaporeans and Permanent Residents access to affordable healthcare, offering lifelong protection with no exclusions for pre-existing conditions. MediShield Life helps reduce the financial burden of major medical expenses by paying a significant portion of approved charges, while patients co-pay the remainder through MediSave or cash.
The Integrated Shield Plan scheme allows CPF members to use their MediSave savings to purchase additional health insurance coverage for themselves and their dependants.
These plans are offered by private insurers and build on top of the basic protection provided by MediShield Life. With an Integrated Shield Plan, members can enjoy higher coverage limits, access to private hospitals or Class A/B1 wards in public hospitals, and greater financial protection against large medical expenses.
This scheme gives Singaporeans and Permanent Residents more flexibility in choosing the level of healthcare coverage that best suits their needs and budget.
ElderShield is a national severe disability insurance scheme that provides basic financial protection for individuals who are unable to carry out simple daily activities and require long-term care, particularly in their later years.
The scheme offers regular cash payouts to help cover the cost of care, easing the financial burden on both the individual and their family. This support can be used for nursing care, home-based assistance, or other essential long-term care needs.
ElderShield was automatically offered to Singapore Citizens with CPF MediSave accounts when they turned 40, unless they opted out. It has since been replaced by CareShield Life, which provides enhanced and lifelong severe disability coverage.
CareShield Life is Singapore’s national long-term care insurance scheme. It provides basic financial support for individuals who become severely disabled and require personal or medical care over an extended period, especially during old age.
The scheme ensures lifelong protection, offering monthly cash payouts for as long as the individual remains severely disabled. This support helps ease the financial burden of long-term care, giving both individuals and their families greater peace of mind and stability in managing care needs.
CareShield Life is a compulsory scheme for Singapore Citizens and Permanent Residents born in 1980 or later, with the option for older cohorts to join voluntarily.
The CPF Investment Scheme gives members the opportunity to grow their retirement savings by investing funds from their Ordinary Account (OA) and Special Account (SA). With CPFIS, you can choose from a wide range of approved investment products such as unit trusts, fixed deposits, bonds, insurance products, and shares.
The goal of CPFIS is to help you enhance your retirement nest egg by generating potentially higher returns, while still ensuring that your CPF savings remain a foundation for long-term financial security.
The CPF Education Loan Scheme allows members to use their Ordinary Account (OA) savings to pay for subsidised tuition fees at local tertiary institutions. This scheme can be applied not only for your own studies but also for your children’s or spouse’s education.
By tapping on OA savings, families can reduce the immediate financial burden of tuition costs while ensuring access to higher education. The withdrawn CPF savings will need to be repaid, with interest, into the member’s OA, preserving funds for future retirement needs.
The Dependants’ Protection Scheme (DPS) is a term insurance plan that provides insured members and their families with financial support in the event of death, terminal illness, or total permanent disability.
The payout acts as a safety net, helping dependents manage living expenses and other immediate needs during the first few years after such unfortunate events. DPS is automatically extended to eligible CPF members and is designed to provide essential protection at an affordable cost.
The CPF Nomination process allows members to specify who will receive their CPF savings and how much each nominee should receive upon their passing.
By making a nomination, CPF members ensure that their savings are distributed according to their wishes rather than being handled under Singapore’s intestacy laws. This provides clarity, avoids disputes, and gives peace of mind that loved ones will be financially supported in line with the member’s intentions.
The Supplementary Retirement Scheme (SRS) is a voluntary savings programme introduced to encourage individuals in Singapore to build additional retirement funds beyond their CPF savings.
Contributions to SRS come with attractive tax benefits. Amounts contributed are eligible for tax relief, helping to lower your taxable income. Investment returns earned within SRS are tax-free before withdrawal, and at retirement, only 50 percent of the withdrawals are subject to tax.
This makes SRS a strategic tool for individuals who wish to enhance their retirement planning, optimise their tax savings, and enjoy greater flexibility in managing their financial future.