CPF cut to 33% wef 1 Oct 2003


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munfai

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:cry::cry::cry::cry::cry:
 

Bean

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That was very fast! Tot initially they stated by end of this year...

How much can business save from CPF cuts when cost of business here like utilities bills are on a constant rise? :dunno:
 

#6
Thursday August 28, 3:29 PM

SINGAPORE, Aug 28 (Reuters) - Singapore Prime Minister Goh Chok Tong said on Thursday that contributions to the state-run pension scheme will be cut to 33 percent from 36 percent of wages from October to keep labour costs competitive.
At present 36 percent of salaries are paid into the compulsory retirement savings scheme, with 16 percent coming from employers and the remaining 20 percent from the employees.

Goh said the cuts would come from employer contributions.

Singapore, facing intense pressure for investments from emerging China and India, sees restructuring of wages and costs as critical in efforts to regain an edge in the global economy.

extracted from http://sg.news.yahoo.com/030828/3/3dr3a.html
 

C

cyke

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Hey that's not so bad, I expected cut to 30% with immediate effect.
Anyway a 3% cut can't hurt that much, can it?
 

fruitybix

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cyke said:
Hey that's not so bad, I expected cut to 30% with immediate effect.
Anyway a 3% cut can't hurt that much, can it?
Depends on which side of the coin you are looking at.

Wage and price are both sides of the same coin. Cutting down on employer CPF contribution, may lead to lower disposable income, less spending may result.

But conversely, less wage payouts will mean lesser overhead costs for employer, which may translate to lower cost of operations, which may translate to cheaper prices. So it may ultimately mean that spending may not really be that badly hit. Again, this is economic theory, so remains to be seen.

But one thing is for sure, for big-ticket items utilising CPF contribution i.e. property purchase, some folks may need to shell out cash from pocket, if the monthly CPF contribution becomes insufficient to meet loan payments due to the cut.

I prefer to look at things with hope and optimism, even though popular opinion states that spending will go down, as less CPF may mean less spending power. I think it well worth to know that while this government may not have all the right answers, it certainly is trying its hardest.

After all, i come from different systems and i can tell you they all have bigger flaws.
 

#9
By S Ramesh

Prime Minister Goh Chok Tong has announced in parliament drastic steps taken by the government to cut wage costs.

The contribution by employers to the compulsory savings accounts of workers is being cut.

The cut will save employers S$1.3 billion (US$740 million) a year and boost efforts to attract investments and create jobs.

The Central Provident Fund or CPF scheme is Singapore's most important safety net for retirement, housing and healthcare.

Unveiling the changes on Thursday, he said these changes are the most drastic the Government has ever made.

Mr Goh said: "From the economic perspective we should keep the CPF contribution rate as low as possible. The lower we go, the less pressure on companies to move out because of high wages"

At the moment, the CPF rate stands at 36 percent - with workers putting in 20 percent of wages and employers, 16 percent.

But from 1st October, the savings rate for workers aged 50 and below, will be cut to 33 percent.

The workers contributions will not change but employers will only put in 13 percent - which means savings of S$1.3 billion a year.

PM Goh said: "It should be enough to help companies cut costs, but not so drastic as to puncture domestic consumption."

However that is not the end of the changes.

The Government has also decided not to adopt a fixed contribution rate for employers.

Instead, the employers' contribution will vary between 10 percent and 16 percent - depending on the economic conditions.

Mr Goh said: "We will not have any formulae to decide what the actual CPF rate should be at any point in time. If there is to be a rise or cut in the rate, we will give as much notice as possible to allow for advance planning."

The Government is also lowering the salary ceiling on which employers have to pay CPF and raising the minimum sum workers have to save, as well as the amount they can withdraw at the age of 55.

To help workers adjust, the Government is also putting together an assistance plan.

It will include measures to help home owners cope with mortgage payments, and direct help for the lower income.

Despite this, the Government has decided to go ahead and raise the Good and Services Tax from 4 percent to 5 percent on 1st January 2004.

Extracted from http://www.channelnewsasia.com/stories/singaporelocalnews/view/47796/1/.html
 

#10
FROM Oct 1, the Central Provident Fund rate will be cut from the current 36 per cent to 33 per cent. Employees will continue to pay 20 per cent, but employers will contribute 13 per cent, three percentage points less than now.


PM Goh announced the painful changes in CPF cuts in Parliament on Thursday.

This was announced by Prime Minister Goh Chok Tong in Parliament on Thursday, in a statement that included other changes to Singapore's system of enforced savings, in order to stem the outflow of jobs and to ensure that Singapore stays globally competitive.

The rate of contribution for workers aged 50 to 55 will also be brought down to 33 per cent on Oct 1, but will be further cut in stages on Jan 1 in 2005 and once again 2006, by one percentage point for employees and two percentage points for employers each time, till it hits 27 per cent -- 18 per cent for employees and 9 per cent for employers.

These cuts will shave $1.3 billion off employers' wage costs.

'The CPF is Singapore's most important social safety net,' Mr Goh said, warning that jobs, including white-collar ones, were now moving to places where business costs, particularly wages, are lower, because of globalisation.

A summary of some of the key changes:

Special Account contributions
The new target Special Account contribution rates will be 5 per cent for members aged 35 and below, 6 per cent for those aged 35 to 45 years, and 7 per cent for those aged 45 to 55 years.

Medisave Account contributions
The Medisave Account contribution rates will remain at 6 per cent for CPF members aged 35 and below, 7 per cent for those aged 35 to 45, and 8 per cent for those above 45 years old.

The Economic Review Committee had earlier this year proposed that both Special Account rates and Medisave Account contribution rates be increased, but these will now be deferred.

CPF salary ceiling
Following the ERC review last year, the Government had already decided to reduce the CPF salary ceiling in two steps: First, from a monthly salary of $6,000 to $5,500 on Jan 1, 2004 and then from $5,500 to $5,000 on the following January.

But $5,000 is still higher than the 80th percentile monthly salary, which is currently $3,700. So the salary ceiling will be further lowered from $5,000 to $4,500 on Jan 1, 2006.

Assuming a reasonable rate of wage increase and inflation, by then, $4,500 will be just a little above the 80th percentile income. The ERC had earlier this year set the principle that CPF should focus on workers earning between the 10th and 80th percentile incomes.

CPF Minimum Sum
The CPF Minimum Sum gives CPF members a monthly payment after their retirement at age 62. It is the nest egg that will see them through their old age. The current Minimum Sum is $80,000, but half of this can be in a property pledge, so most CPF members have only $40,000 in cash in the Minimum Sum.

The yield in monthly payments from this is only $252 from age 62 to 80 -- too small a sum to pay for a workers' basic needs, so the Minimum Sum will be increased from the current $80,000 to $120,000 in today's dollars. Half of this can still be in a property pledge, but the monthly yield from the remaining cash will go up to $378. It still is not much, but it will be better than before.

The CPF Minimum Sum will be raised by $4,000 a year, and adjusted for inflation, starting July 1, 2004.

Withdrawal rule at age 55
The CPF withdrawal age will stay at 55, but members will now have to first meet the CPF and Minimum Sum requirements because the newly lowered contribution rates will result in insufficient CPF savings to see workers through their retirement years.

Mr Goh said he was aware that changes to the CPF worried Singaporeans, and that they have been re-looking their finances since he first announced at his National Day Rally speech in mid-August that changes were coming.

'Most Singaporeans will be able to cope. But many may have to do some belt tightening.

'The Government will help ease their adjustment pain. We have put together an assistance package. It will include measures to help homeowners cope with their loan repayment, which may be affected by the cut in CPF,' he said.

For full reports, see Friday's edition of The Straits Times.

Summary of CPF changes
 

ahbeng

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#11
for those who are optismistic.
1) if economy dun get better, cpf may reduce further (flexible cpf scheme)
2) bangladesh and chinese pay shall be the bench mark for future singaporean wages
3) in contrast, living expenses here will never matched blangldesh and chinese
4) also with this cpf cut govt cannot gurantee that transport, gst, coe, erp, electricity bills, school fees, medical expense, retrenchments, cost of housing etc will be reduced. so mentally be prepared for this kind of temporary countermeasure.

some suggestion:
if the current govt can't perform, singapore should replaced them with lower cost and better perform foreign talents. :bsmilie: :bsmilie: :bsmilie:
 

Silverelf

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Cool, so now we will be working till retirement and may not see any of the money that we have accumulated.

The following are facts that I have to face unless I suddenly get a very well paying job that pays me above the CPF maximum contribution sum.

1) I will not be able to afford my own home
2) I will not see any of my money until I am old, decrepit and probably not interested in spending money anymore.

The only slightly good thing that I can see in this thing is that I potentially stand to get 2% more cash in hand by 2006 due to the reduction in employee contribution rates.

While I do understand that these are necessary measures, I am griping because I do not think that these are the ONLY measures.

Oh, how I dreamed that with my current pay, I will be building up a nice nest egg real soon. Seems like that isn't really possible now unless I try some wonderful stunts.
 

Knighthunter

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#13
I dun't believe in CPF cuts, theoritically we are asian still have the highest saving rate compared to western country. The cut in CPF may event drive the saving rate higher, since people start feel insecure for their future, which leads to drop in spending rate.
I think it may work the opposite if the CPF contribution higher (bring less cash home) people may starts spending and the drive economy wheel faster since they are feel secure for their future.
Well, just idea the idea from stupid engineer after reading hulla ballo economic and investment theory book.
 

Silverelf

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My theory is more basic.....

CPF cut. Not enough money pay for house. Top up in cash. No cash to spend. Retail sectors suffer. Economy suffers. Jobs suffers.

Vicious cycle.

Cutting pay to save jobs is never the only solution, there are so many factors at work. I wouldn't mind the cuts but there must be other solutions set in place and the pay cuts must not be the only hope or the miracle pill that is hoped to save our economy.

Why? Because it just ain't.
 

skyflash

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#16
Silverelf said:
My theory is more basic.....

CPF cut. Not enough money pay for house. Top up in cash. No cash to spend. Retail sectors suffer. Economy suffers. Jobs suffers.

Vicious cycle.

Cutting pay to save jobs is never the only solution, there are so many factors at work. I wouldn't mind the cuts but there must be other solutions set in place and the pay cuts must not be the only hope or the miracle pill that is hoped to save our economy.

Why? Because it just ain't.
CPF cut and lowering of ceiling (eventually) => more taxable incomes.
So that will help to balance the government budget.

As for housing, it is very likely that HDB will start to rent flats (rather than sell them). If so, the cost of housing *maybe* more realistic. Frankly, which flat really still standing after 99 years -- and not many of the flats in the first decade of our nation's history still standing. :)

Cutting pay is probably a gesture. Fixed overheads -- such as rental expenses -- are not trivial either.
 

munfai

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#17
skyflash said:
As for housing, it is very likely that HDB will start to rent flats (rather than sell them). If so, the cost of housing *maybe* more realistic.
renting flats out doesn't help those who have just purchased a flat, and looking at a 20-year repayment term.
 

skyflash

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munfai said:
renting flats out doesn't help those who have just purchased a flat, and looking at a 20-year repayment term.
That's a big problem. If there are cheaper options, it will force the price of existing properties down. Having negative asset is one problem, facing with a reduced (projected future) income add more salt.
 

Silverelf

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This simply goes against the Government's movement of everyone owning where they live in.

Anyway, I've come to realise in the past few days that I will probably never be able to upgrade or own my own home. probably have to stay where I am staying now till we get chased away...
 

blurblock

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#20
Silverelf said:
Cool, so now we will be working till retirement and may not see any of the money that we have accumulated.

The following are facts that I have to face unless I suddenly get a very well paying job that pays me above the CPF maximum contribution sum.

1) I will not be able to afford my own home
2) I will not see any of my money until I am old, decrepit and probably not interested in spending money anymore.

The only slightly good thing that I can see in this thing is that I potentially stand to get 2% more cash in hand by 2006 due to the reduction in employee contribution rates.

While I do understand that these are necessary measures, I am griping because I do not think that these are the ONLY measures.

Oh, how I dreamed that with my current pay, I will be building up a nice nest egg real soon. Seems like that isn't really possible now unless I try some wonderful stunts.
2% in 2006? fat chance .... that is just a "carrot" to be used by the government for their election year ... after that????? :blah:

Remember what Goh Chok Tong said about gradually increasing the CPF contibution to 40%? Guess where is the 30% to come from next time?

by the way, for those who said is not much, it's a $90 pay reduction for a person who earn $3000 per month and $180 pay reduction in the year to come. You get back $60 on hand, but it is still your own money, mind you. For those who are paying mortage the $60 back does not help much because it goes back to the bank coffer .....

It may not be much to you, but to a house owner who is now paying a bomb for a 100sqm house, which cost peanuts to build, $180 is a lot.
 

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