CPF contributions got limit? What Singaporeans need to know about yearly CPF contribution caps

“Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty," said Theodore Roosevelt.

This is the quote I think of when it comes to understanding our Central Provident Fund (CPF), as it can get overly complex.

Originally, CPF was created as a straightforward contributions system with the sole purpose of serving the retirement needs of workers.

But today, we can now use our CPF for healthcare, invest our CPF, and use CPF for housing . With so many purposes for CPF, things are bound to get complex.

But on balance, I understand that this complexity is a necessary evil, because of the flexibility and security it provides Singaporeans.

I am still learning about CPF even though I have been working for a few years. And one of the things that I learnt about recently is that there are actually limits to the amount of CPF you can receive and contribute in a year.

For employees, this is vital as we need to know how much CPF we are entitled to as well as how much CPF we can deposit each year.

For employers, you will need to know this information to ensure that you are not paying more CPF than required.

Disclaimer: this is not a sponsored article. The opinions expressed here are based on our understanding of existing CPF policies. Please do your diligence and check with CPF to clarify your questions before doing anything!

TL;DR: CPF contribution cap guide

These are the three CPF limits that every Singaporean and Permanent Resident (PR) employee, as well as employers, need to know:

• Ordinary Wage (OW) Ceiling: OW exclusively refers to the wages that employees receive in return for their employment in a month. The OW ceiling is currently at $6,000 per month.
• Additional Wage (AW) Ceiling: Compensation given to employees made at intervals of more than a month. The AW ceiling is currently at $102,000 – total OW subject to CPF for the year.
• CPF Annual Limit: Maximum amount of mandatory and voluntary contributions CPF members can make to their Ordinary Accounts (OA), Special Accounts (SA) and Medisave Accounts (MA) in a calendar year. The CPF Annual limit is currently at $37,740.

These caps are applicable on a monthly basis for OW ceiling and a yearly basis for AW ceiling and CPF Annual Limit.

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​​​What is CPF contribution?

Before we start, it is important that you have a basic knowledge of CPF.

CPF, short for Central Provident Fund, is a comprehensive social security system that helps Singaporeans and Permanent Residents (PRs) set aside savings for our healthcare, retirement and housing.

The funds inside can also be invested via the CPF Investment Scheme.

In other words, CPF is a mandated employment-based savings scheme that enlists employers and employees to make CPF contributions to the employee’s CPF.

However, according to CPF, there is a cap to the amount employers and employees can contribute.

To illustrate this we will use Calmond as an example.

Calmond’s profile

For the purposes of this article, Calmond is a hardworking Singaporean worker who is drawing a monthly salary of $7000.

This year is also a good year for Calmond as he received $10,000 in annual bonuses.

Calmond is also a young almond who is below 55 years old in human years.

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What is the CPF Ordinary Wage Ceiling?

OW exclusively refers to the wages that employees receive in return for their employment in a month.

For example, the monthly salary that Calmond’s receives is categorised by CPF as Ordinary Wages (OW).

As employers, you are required to pay your employee OW, before the due date for payment of CPF contributions for that month.

But, there is a cap on the CPF contributions payable each month. This is what is known as the Ordinary Wage (OW) Ceiling. At the time of writing, the OW Ceiling is $6,000 per month.

So what does this mean for Calmond?

Since Calmond earns a monthly salary of $7,000 a month: $6,000 out of $7,000 is liable for CPF contributions.

And, the remaining $1,000 is not liable for CPF contributions.

​What is the CPF Additional Wage Ceiling?

In addition, we have Additional Wages (AW) which is defined by CPF as the compensation given to employees made at intervals of more than a month.

Examples of this include your bonuses, commissions, allowances, leave pay and other forms of compensation given at intervals of more than a month.

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Calmond’s annual bonus of $10,000 falls under this category of AW.

The AW Ceiling for 2016 onwards is $102,000 — this amount represents the Total Ordinary Wages subject to CPF for the year.

Since Calmond earns more than $6,000 , his OW for the year amounts for $72,000 ($6,000 x 12).

As such the amount of AW Ceiling that applies to Calmond is calculated using this formula:

$102,000 – $72,000 = $30,000.

This means that Calmond’s entire bonus of $10,000 is liable for CPF contributions as it falls below the CPF contribution cap of $30,000.

If you are an employer or employee who would like to know your specific AW ceiling, check out this AW ceiling Calculator from CPF!

What is the CPF Annual Limit​?

Last but not least, we have the CPF Annual Limit.

This is the maximum amount of mandatory and voluntary contributions that can be contributed to a CPF member’s account in a year.

The current CPF Annual limit is $37,740.

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This $37,740 limit is the total limit and includes the mandatory amount you contributed through your salary (20 per cent) and the contribution by your employer (17 per cent).

We will be using Pistachio as an example. Pistachio is younger than 55 but unlike Calmond, Pistachio did not receive a bonus this year and only received her monthly salary of $7,000 a month.

Given that Pistachio is still below 55 years old, she would have accumulated $26,640 in her CPF within a year based on her monthly wage of $7,000 excluding bonuses.

This is so as CPF only looks at the OW of $6,000 a month.

As such Pistachio’s total CPF Contribution in a year is: 37 per cent x $6,000 x 12 months = $26,640

This will mean that Pistachio can only contribute a maximum of $37,740 – $26,640 = $11,100 this year.

Is that all the CPF I can add to my CPF account in a year?

However, if you would like to top-up more than the CPF Annual Limit contributions, there are an option or two for you.

Under the Retirement Sum Topping-Up Scheme (RSTU), you can do a voluntary top-up of CPF with cash.

Do note that voluntary contributions and retirement sum top-ups are irreversible. Meaning there is no turning back once you’ve done it.

Retirement Sum topping-up scheme limits