CPF Changes in January 2025

Hello there! Welcome to another edition of SG Retire Steady Newsletter, where I share my insights, experience, resources and knowledge so that you can achieve financial freedom in a sensible and reliable manner. Read on!

A summary of changes made to CPF in Jan 2025.

Contribution Rates Increased for Senior Workers

CPF contribution rates for senior workers aged above 55 to 65 will be increased by 1.5% effective 1st January 2025. 0.5% increase comes from employer’s share and 1% comes from employee’s share.

This change was made to accelerate the growth of retirement savings for pre-retirees.

CPF Monthly Salary Ceiling Raised

CPF monthly salary ceiling is the maximum portion of monthly salary that will attract CPF contributions. The ceiling has been raised to $7,400 effective 1st January 2025 from $6,800 in 2024. The ceiling will increase once more to $8,000 in 2026. This change results in less take home income for some but there will be more contributions by employers too.

The CPF annual salary ceiling remains at $102,000. Hence, if you earn more than $7,400 this year, up to $13,200 of your annual bonus will attract CPF contributions.

CPF Special Account Closed for Members Aged 55 and Above

This is a big one. About 1.4 million CPF Special Accounts have been closed on 19th January 2025. This was announced last year and has been implemented a week ago.

The Special Account balances will be transferred to Ordinary Account. The immediate impact is that savings that once was earning 4% p.a. will now earn 2.5% p.a.

For those below 55, your Special Account remains intact but it will still be closed when you reach 55. This should be taken into account when planning for your retirement funding.

Enhanced Retirement Sum Raised

The ERS is the maximum amount that can be placed into CPF Retirement Account after turning 55. This amount will be raised to 4x the BRS effective 1st January 2025. The ERS stands at $426,000.

Having more funds in RA will result in a higher payout for CPF Life. However, this comes at the expense of having the money locked up until age 65, when the monthly payout from CPF Life starts.

For those above 55, if you are considering moving your funds to hit ERS, please speak with your personal financial planner first as there could be other alternatives to consider. This does not necessarily mean other options are better, but it is prudent to weigh the options before making a commitment.

That’s a wrap for this edition! Thanks for being here.

Feel free to reply to this email if you have any questions, suggestions or feedback. I would love to hear from you.

Sim Jit-Vern
B.Eng (Hons), CFP, ChFC, CLU, CIAM, ADWM, ASEP, IBFA

M: 9152 7936   O: 6854 9467