Monday 18 January 2021

Inconvenient Truths About CPF Voluntary Contributions

Looking at the title of this post, and reading the CPF contribution rates below, can you see or guess where I am going with this post?

 CPF Contribution Rates from 1 Jan 2016

Its painfully obvious for those old fogeys that are older than me; I'll be 54 years young this year.

Let's start with a bit of foreplay to make things smoother for youths to appreciate. Wink.

Just look at the Employee Contributions Rates for now.

At age 55 and below, its mandatory (forced) that you contribute 20% of your pay every month to CPF - all the way to the CPF salary cap of course.


Once you hit age 56 and beyond, you can contribute less and less? 

So when old fogeys age 56 and beyond share they are voluntarily contributing to CPF, are they?

I mean, they have to voluntarily contribute in dollar amounts beyond what they had previously contributed at age 55 to really meant its extra money into CPF right?

Remember, we are still looking just at the Employee Contribution Rates side of the equation.


I think some of you know where I'm going with this.

Mind you, I am completely happy with the current Employee Contribution Rates setup.

I've always liked options.

Some don't. 

Ai yeah! Have to make decisions again!!!

Imagine in an alternative universe, we put the mandatory Employee Contribution Rate at 5%, and allow CPF members to decide how much extra they would like to voluntarily contribute to CPF up to a cap of 25%?

Just saying.


I don't think we are ready yet... 

I'm super impressed with the Swiss for rejecting helicopter money just for being a Swiss citizen,

One day when Singapore is ready for small government; not a nation of daddy's little girls and mama's little boys.


OK, enough foreplay. 

Let's do it!

Get ready for some pain though...

Now look at the Employer Contribution Rates column.

Pain right?

Especially for those of us old fogeys who tasted what's it like to have our employers contribute 25% into our CPF.

My only regret was that I was earning too little at age 16 to really benefit from the higher employer contribution rates then. I mean 25% of $500 is not the same as 25% of $2,000...

But its for our own "good".

I mean if we don't lower the employer CPF contributions (pay cut is pay cut), how can we be competitive? Wait recession how?

Wait a minute.

When CPF was first introduced, I would think there were smart people (scholars?) that did the math to come up with the 25%/25% formula for us to have enough after our retirements at age 55 right?

Did they just pluck the 25%/25% figures out from thin air?

OK, that was then. Now is now.

Especially when we are living longer, have higher standard of living, with ensuing higher inflation (HDB 1 million); and all the wonderful things that come with growth and longevity...

See the irony?

We moved the goal posts on CPF withdrawal age, increased the CPF minimum sum, introduced CPF Life so we can patch West wall with East wall; yet, as we grow older, our CPF contribution rates in percentages are going southwards... 

Even more interesting when compared to the initial 25%/25% contribution rates!!!

What gives?

Of course something has got to give.

They tried it with CPFIS. 

That's the Earn More option for CPF members with higher testosterone levels to close the gap.

That turned out "not fit for purpose"....

Got to feel sorry for big daddy.

He must be face palming himself and muttering, "My children can't do anything without me..."

Sometimes its good to know a bit of financial history to get the total overview.

If more CPF is good, better, best, wouldn't it be better to restore the Employer Contribution Rates back to 25%?


Buy you are most welcomed to voluntarily contribute from your Employee Contribution side anytime!

I see what you did there daddy!



  1. Hi Smol,

    Yeah I'm very impressed with the Swiss way of allowing the plebs to directly affect or change their national laws. I'd still be impressed EVEN if they had voted for UBI. If it causes more problems than good, they will simply vote it out in a couple of years.

    Btw, when the Brits** setup CPF in 1955 (coz they didn't want to pay lifelong pension to their colonials), the contribution rate for both employer & employee was just 5% each.

    And it wasn't until 13 years later in 1968 that the govt increased CPF contribution rates ... to 6.5% each for employer & employee. 🤣

    ** PS: Almost all former colonies of UK e.g. M'sia, India, Pakistan, Brunei etc have similar CPF-style setups. Brunei still adheres to the original 5% contribution rate of 1955!

    1. Spur,

      Impressive right?

      Oh well, lao goh only aspires for Singapore to reach the SWiss standard of living - the easier parts where we can measure.

      The messy and grey grey parts where citizens decide what's good for themselves... Eh, don't ask; don't tell!

      Fans of CPF voluntary contributions will remember 1st July 1984 fondly when our CPF contribution rates peaked at 25%/25% :)

      After that climatic top, CPF voluntary contributors remind me of that adult joke about men coming out from the wombs of their mothers...

      All their lives after is just trying to get back in!


    2. Smol,

      Here's a lesson of correlation may or may not be causation. 😛

      From 1971 to 1980 when CPF contribution rates were relatively low:-

      Average GDP growth in this decade: 8.8% per annum
      Total returns (capital gains + reinvested dividends) of S'pore large cap stocks: 21.7% per annum 😲

      From 1981 to 1990 when CPF contribution rates hit 25%/25% & govt only slashed employers' rate to 10% in 1986 in response to the 1985/86 recession:-

      Average GDP growth during the 1980s: 7.8% per annum
      Total returns of S'pore large caps in this decade: 4.3% per annum. 🙄

      The last 20 years from 2000-2020 are even worse. No need to waste time calculating the numbers. And guess what? CPF contribution rates went up(!) during this 2 decades.

      So for those who invest heavily into S'pore stocks, does this mean we should go Hong Lim to lobby for return to average 15%/15% CPF contribution rates like in the 1970s? LOL! 😁

      PS: Link to the entire CPF contribution rates starting from 1955.

    3. Spur,

      Its interesting looking back, isn't it?

      I was poking koala/panda passive "investors" who bought the STI ETF some years back.

      Surely there are other regions that are growing faster, with younger, and growing populations over Singapore?

      Now I see some capitulations as a few have discovered our STI has not been going anywhere in recent years, and have now added China/HK ETFs onto their radars ;)

      But going by my "logic", US markets shouldn't be outperforming emerging markets last year!? Yet it has!!!

      Silly me!

      With the US Fed juicing and distorting the markets, I need to throw economics 101 out the window.

      Just buy, buy, buy! Stocks only go up what!?


  2. CPF is passive income after 55 at this time and the next few years! Best in Singapore!

    1. CW,


      Big daddy is making it harder for snake oils that peddled the virtues of investing in REITs or corporate high yield (aka junk) bonds as passive income...

      Who would want to use CPF as passive income when we can "smelly, smelly" easily get 6% (Hyflux perpetual) from corporate bonds or more than 10% dividend yield (First REIT) from REITs?

      Of course when "crash got sound" happened, the "low" and "boring" rates from CPF now look mighty appealing ;)

      Especially the capital preservation part!!!

      Then again, my former colleague was very sore with his decision to switch to capital protected funds during 2003...

      Especially when he saw those who stuck with "dangerous" stocks doubled/tripled tripled their money when STI recovered.

      The trick for those who use CPF as passive income is to stay away from those who doubled/tripled their money investing with REITs, and are sitting on double digits dividend yields.

      Makes socking money away in CPF look real dumb :(

      Of course you must selective perception and focus on those who lost money with REITs or corporate bonds ;)


      CPF is the best!!!

  3. Hi Smol,

    The only thing that keep ringing in my mind is



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