SHOCKING Facts About Our CPF in Singapore! (Part 1)

Singaporeans have always been told by the government that we pay one of the lowest taxes in the world. But do you know what we have not been told?

(Part 2 of this article can be read here.)

Do you know that when comparing what we pay into our CPF with what people in other countries pay into their forms of social security, Singapore actually has the highest total contribution rate (employee 20% + employer 16% contribution rate) in the world (Chart 1)!


Chart 1: Social Security Programs Throughout the WorldSocial Security Programs Throughout the World: Asia and the Pacific, 2012Social Security Programs Throughout the World: Europe, 2012Social Security Programs Throughout the World: The Americas, 2011Social Security Programs Throughout the World: Africa, 2013Coordinating Healthcare and Pension Policies: An Exploratory Study

But not only that, what is even more shocking is that the 20% of our own income that employees pay into the CPF is also the highest in the world (Chart 2)! So, Singaporeans pay the highest proportion of our income into social security in the world.


Chart 2: Social Security Programs Throughout the WorldSocial Security Programs Throughout the World: Asia and the Pacific, 2012Social Security Programs Throughout the World: Europe, 2012Social Security Programs Throughout the World: The Americas, 2011Social Security Programs Throughout the World: Africa, 2013Coordinating Healthcare and Pension Policies: An Exploratory Study

But how did we get to paying the highest contribution rate into our CPF? Take a look at the growth of the total CPF contribution rates since 1955 (Chart 3). You can see that the contribution rate has more than tripled since the CPF’s inception.


Chart 3: The Pension System in Singapore, Contribution Rates, CPF Contribution Rates

Now, take a quick look at the growth in the Employee (blue line) vs the Employer (red line) CPF contribution rates since 1955 (Chart 4). Don’t spend too much time on this – take a look at the next chart.


Chart 4: The Pension System in SingaporeContribution RatesCPF Contribution Rates

In Chart 5, you can see the growth of the Employee and Employer CPF contribution rates since 1994. In the first few years, the contribution rates were the same at 20%. However, after the general election in 1997 under Goh Chok Tong, the employer contribution rate dropped, while Singaporeans have been made to shoulder the burden of topping up our retirement funds. However, even though the wages of Singaporeans have remained stagnant since 2000, workers still contribute more into CPF, whereas even though profits of companies have been increasing since then, companies have been paying lesser into our CPF. Note that the largest companies in Singapore are owned by the government, via Temasek Holdings.


Chart 5: The Pension System in SingaporeContribution RatesCPF Contribution Rates

However, do you know that when compared to the rest of the world, of the 166 territories with social security in the world, only in 12, or 7% of these territories, did employees contribute more than the employers into social security? Singapore belongs to this 7% (Chart 6).


 Chart 6: Social Security Programs Throughout the WorldSocial Security Programs Throughout the World: Asia and the Pacific, 2012Social Security Programs Throughout the World: Europe, 2012Social Security Programs Throughout the World: The Americas, 2011Social Security Programs Throughout the World: Africa, 2013Coordinating Healthcare and Pension Policies: An Exploratory Study

So, because Singaporeans pay the most into our CPF, our CPF assets are actually the largest among the Asian countries (Chart 7). Sounds good? Read on.

photo 1 (3)

Chart 7: Developing Asia’s Pension Systems and Old-Age Income Support

But something is not quite right – what is shocking is that even though we have accumulated so much monies in the CPF, our CPF is actually the least adequate for retirement (Chart 8)!  Our ratio of retirement income to pre-retirement income is only 20%!

photo 2 (3)

Chart 8: Developing Asia’s Pension Systems and Old-Age Income Support

The same finding is found in the Melbourne Mercer Global Pension Index, which ranked Singapore as having the least adequate minimum pension (Chart 9). Minimum pension is the “percentage of the average wage, that a single aged person will receive” upon retirement. Singapore’s score of 0.2 means that Singaporeans will receive only about “10 percent or less of average earnings”, which “offers very limited income provision”. 30% is necessary to meet the “poverty alleviation goal”, which means that Singapore’s 10% can possibly entrench poverty in Singapore further. Already Singapore’s poverty rate of 28% is the highest among the developed countries and countries in the region, and the low CPF returns does nothing to help the situation.


Chart 9: Melbourne Mercer Global Pension Index

Another report by the OECD also shows that our overall pension as a share of individual lifetime earnings, at only 13%, is the least adequate, whereas the average in other countries is about 57% (Chart 10).

photo 4 (3)

Chart 10: Pensions at a Glance Asia/Pacific 2011

So, our CPF is vastly inadequate for our retirements, even as we set aside the highest proportion of our incomes into CPF! This explains why that according to the latest Manulife Investor Sentiment Index, 69% of Singaporeans “expect to continue in full-time or part-time work during so-called retirement” – the highest in the region where an average of only 55% would expect to have to do so.

According to the Asian Development Bank, “Pension experts generally recommend a replacement rate of 60%–75%, adjusted for longevity and inflation risks.” Thus Singapore’s replacement rate of 20% is “not providing an adequate retirement income for retirees”. But the question is, where then did our CPF monies go if we have accumulated so much money, but they are not coming back?

This could be because around 75% of our CPF is trapped in housing (pink shaded portion in Chart 11). This is way too high, as compared to only 20% for the United States. This would also explain why from 50 years of age onwards, we would only be able to receive 17%-30% of our pre-retirement incomes when we retire (blue shaded area in Chart 11).


Chart 11: Asset rich and cash poor : retirement proŠision and housing policy in Singapore

It is thus ridiculous when Prime Minister Lee Hsien Loong had said that, “poor people are not poor by any international standard” because “the lowest one-fifth, 20 per cent of households, … each poor household has on average $200,000 of net wealth in the HDB flat.

What this means is that they would have around 75% of their CPF trapped in housing, and would only be able to retire with an amount that is only 20% of their pre-retirement incomes. If they want to be able to use the “net wealth” of $200,000 to retire, they would have to sell their flats and become homeless. Is this what the PAP recommends Singaporeans to do? Would this be what the PAP ministers would do for themselves?

According to the Asian Development Bank Institute, if Singapore wants to achieve a replacement rate of between 35% and 40%, “a contribution rate of 10 to 15 percent should be sufficient“. What this means is that either our 36% contribution is ridiculously high, or that our 36% contribution rate should be able to provide us with a replacement rate of more than 80%  (we should be able to receive 80% of our pre-retirement incomes) or even close to 100% (Chart 12a and 12b).


Chart 12a


Chart 12b

So, with the 36% contribution that we are giving, that should mean that we have more than enough to retire on, by international standards! But why is this not happening? Housing prices that have shot through the roof is one reason. But what is the other reason why are CPF aren’t earning as much as they should?

We will tell you why in the next part of the article.

You can read Part 2 of this article here. 

Part 3 of the article can be read here.

Leong Sze Hian and Roy Ngerng of The Heart Truths



  1. Churn Pang

    Well the thing is, majority of CPF contributions (23% – 19% for those Age 50 and below) actually go into the Ordinary Account, which can then be withdrawn for Housing, and does not translate into ‘reitrement income’ later on.

    If you look at our SA contributions alone (6 – 8% for those Age 50 and below), Singapore would actually be among the lowest in the world in terms of contributions towards retirement savings.

    • Churn Pang

      To add on, we could quite easily have higher IRR if we move some contributions allocated from OA to SA instead. But people would, quite understandably, become upset about having more money ‘locked up’

      So CPF is caught between a rock and a hard place.

  2. michelle

    We are cheated lor. Gahmen insist on selling us its overpriced HDB flat and insist that we pay through our noses by making us pay for the land that cost 10 times more than the construction cost so that Ho Ching can gamble it away.

  3. Christoph Wichert

    Dear Roy,
    I follow your blog with great interest and wanted to congratulate and thank you for discussing complicated matters in an understandable way and letting accurate and well researched numbers speak clearly to your readers.
    However in this post, although the numbers about the percentage of contribution into the respective retirement systems by employer and employee seem correct, you are drawing some conclusions out of the data, that are so not possible and unsound, since the retirement systems are not that easily comparable.
    The CPF-system is basically a governmentally enforced and regulated savings account. Every Singaporean more or less knows how much is in there, for what they can use it and how much they are supposed to get one day. At least that is the idea.
    Most Central European countries have though something like a PAYGO system.
    That means, that the current workforce pays with their contribution for the pensions of the current retirees. No savings. This system became necessary after World War II when a whole generation was left with nothing and the working people had to take care of the old or unfortunate.
    In return for this contribution the governments of these countries promise to take care that the future generation will take care of the current workforce once they retire. But nobody knows exactly the amount the will be getting, since that will be depending on the money available (aging population) and the democratic will (and that can change faster than a normal work-life span). The contribution rate into the system is set democratically (in Austria for example to 22,8% employer and employee combined) to what is deemed acceptable for the people without over-stretching them. Already now the sum collected from the workforce is not enough in these countries to pay for all the pensions and the system is cross-funded by the GST and other taxes, which is partially the reason for the huge national deficits.
    Whereas Singapore has a personal saving system, many European countries have what is called the generations-contract. Which system is better can be discussed seperately, but comparing them just by there rate of contribution from employers and employees -especially since one is heavily co-funded by other taxes and the other is more a state controlled investment fund – is simply not possible.
    Please keep it up and I hope to read much more of you
    All the best ch

    • Roy Ngerng


      More will be discussed in the next part where people would be able to make their own conclusions that in spite of the different systems, if the returns we obtain are justifiable.

      More importantly – even just with looking at only the Singapore’s system, we pay the highest contributions but earn the lowest returns and are left with the least adequate retirement funds.

      Mathematically and logically, it should be clear this doesn’t make sense to anymore. More will be discussed in the next part, which will allow people to draw clear conclusions on how the CPF system in Singapore is severely dysfunctional.


      • Jos

        He compares Singapore’s CPF with Western Social Security schemes.

        Social Security is a TAX. The money deducted from payrolls goes into Government REVENUE which is then used to fund welfare payouts and pensions for the general population. What you pay in Social Security Tax is used not only to fund yourself, but every other citizen. You could have paid a lot of Social Security Tax as an individual, but receive very little back if you do not qualify for any welfare assistance; on the other hand, your neighbour who does not go to work, and does not pay any tax could be receiving handouts that YOUR TAX funds.

        CPF is compulsory PERSONAL SAVINGS. The money that is goes into our CPF account are OUR PERSONAL SAVINGS that we can use to buy homes, unit trusts, and eventually help fund our own retirement. Whatever we have in our CPF is directly correlated to how much we make in our lifetimes. It is not a TAX. It is our own savings. If a person has little in his CPF at retirement, it is entirely because his income was low during his lifetime. Other assistance would then be given to these low-income individuals, assistance funded by TAX not by other people’s CPF contributions.

        Secondly, Roy takes issue with the returns on CPF. He obviously has done very little investment himself.

        The returns on CPF paid to us are GUARANTEED.

        Investment returns are a function of risk.

        You will find that there are almost no investments that GUARANTEE an interest rate of 2.5% a year much less 4% on investments.

        Contrary to what Roy asserts, because they are guaranteed, these are HIGH interest rates.

        It is also completely silly to compare what GIC and Temasek gets in returns, to what the CPF pays. GIC and Temasek’s returns are risk-adjusted and obtained from a portfolio of investments. They are not guaranteed. Moreover, any government investments that make losses, like during the GLOBAL financial crisis, are not deducted from our CPFs because they are Singaporean’s personal savings.

        Thus, contrary to being truths, the ‘shocking revelations’ on CPF in the article are built on basic falsehoods.

    • Adam Latip

      First off, a big thumbs up to Leong Sze Hian and Roy Ngerng for illustrating some key issues so clearly, this is seriously enlightening. Also a big thank you Christoph for your comments, they are really insightful. Officially Singaporeans save for ourselves through CPF, but at the same time, government policy ultimately forces citizens to bear the burden of past/future generations i.e. many sons & daughters here take on the mortgage/healthcare debts of their parents or similarly many parents here support their children well into their 30s due to studies/marriage. So Christoph it almost feels as if Singaporeans are subject to a 2-system scheme of both personal pension and an unspoken generations contract that seems to be engineered by the government. I think this 2-system scheme would work if our pension savings were enough for retirement but right as shown above, the personal pension scheme is grossly inadequate even though we have the highest personal contribution rate in the world. I hope we can find the root cause or a solution to this problem. In any case, thank you all for your effort put in here, well done.

  4. Wen Zhao

    Hi, just want to point out that the graph that is presented from the Melbourne Mercer Global Index is very misleading, as the table in document shows that Korea, India and Indonesia have a 0.0 score, which means that Singapore is not ranked the lowest like the authors mentioned. Also, this is an unfair comparison as that particular statistic is for a minimum pension provided by the government and “eligibility for this minimum pension requires no period in the paid workforce, but will often require a minimum period of residency” (page 38). This is not how Singapore operates (as we all know we use the CPF) and thus explains for our low score in this index.

    Also, if you look at the Melbourne Mercer Global Index in it’s entirety you would see that it ranked Singapore as a B grade overall (and only 3 countries got A and B+, Denmark, Netherlands and Australia respectively). A B grade is a “system that has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system.” (page 6). So Singapore is not as bad as the authors make out (at least in the context of that report) as this report considers different aggregates and factors in the study and picking on one particular index out of 29 is really taking things out of context. Singapore actually does okay in the adequacy index with a score of 59.

    • Roy Ngerng

      Hi Wen Zhao,

      Singapore is ranked the lowest, compared to all the high-income countries. Mind you, Singapore is the richest, if not, one of the richest countries in the world. South Korea’s GDP per capita is far from being on par with Singapore’s. Quite obviously, India and Indonesia are no where near the wealth that Singapore has accumulated.

      Also, I would welcome all readers to analyse the reports for themselves. When it comes down to it – what purpose are our pension funds supposed to serve?

      If our pension funds are not even able to provide us with an adequate amount to retire or even sustain ourselves, it would be quite meaningless to look at the other measurements.

      Mind you, this report is not the only report to state that Singapore has the most inadequate pension funds among all the high-income countries. Several reports and studies have concluded with the same worrying statistic.

      For all readers, please read Part 2 of this article to complete your understanding of the inadequacy of the CPF and the irresponsibility our government has misled of with:

  5. TheHardTruth

    Hey Roy,

    You might want to have some banker friends go over your objective opinions and see if it’s robust as bankers are the best are test-proofing claims on the local scene.

  6. Russell Jack

    I remember back in the early 1980s total CPF contribution rate was 50% (25% both ways). During the recession in 1986 the total contribution rate was slashed to 40% to bring business cost down and stop the rampant retrenchments. As many used the CPF to pay for Housing their mortgage payment was no longer fully covered by CPF. Consequently many of us had to top up our mortgage payments with cash – jilat. Until today the full restoration to 50% remains elusive. Singaporeans generally do not mind a higher contribution rate provided the increase is matched by the employer like is was in the early 1980s. I am now retired and when I was able to withdraw from my ordinary account I was a happy camper taking out a high 6 figures. So let’s think long term and not quibble with high contribution rate – is all your money at the end of the day. My 2 cents take here.

  7. Objective

    There is a something this research missed out. If you go to you will see that many social security are funded by government while in Singapore case it’s none. At the first look it seems that we are worse off. However if we compare our income tax with the rest, you will know why ours is so much more lower. The high tax in other countries is required to fund part of the social security too. This research is totally flawed By not considering the income tax as we’ll.

  8. Mel

    I’m from the Netherlands and I’ve lived in sg for 8 years myself. The Singaporean CPF CANNOT be compared to the Dutch and/or European social welfare. The money we contribute to the government kinda goes up into thin air. We pay for people that are unable or are just too damn lazy to work. There is no personal benefit from it. It’s not money we can use to buy a house with, retire with or to see our kids through college. The contribution rates vary from 37% to freakin 52% depending on your income. If I were you I would be happy to be able to live in Singapore where everything is so well organised. I also think that it’s good that your government helps to save money for all Singaporeans and PRs. Maybe you should try to live in the Netherlands, or any other country, if you ask me, for a change and see how much it sucks there, maybe the experience would open your eyes and you would be grateful for what your government does for you.

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  10. ria

    CPF contributes to your personal needs. Who benefits in the end? Still YOU. Singapore is very progressive country and a nice place to live in.

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  12. theheartfalsifications

    Roy why don’t you analyze domestic interest rates along the lines of external interest rate policy, internal debt / interbank lending rates / monetary policy to cover the BIGGGGGG picture? Will that be too difficult because it involves REAL fact finding? But I’ll wager it’s fine since you will cherry pick anyway!

    Did you pass math or are you trying to pull a fast one? My CPF is $100, I use $75 to buy a house. Even if interest rate goes up to 5%, I will get 2.5% more on the remainder of $25. How do you reduce your share of housing to 30-40%?

    • Roy Ngerng

      The Singapore government pays the lowest interest rates to its citizens’ life savings – how is this not clear to you?

      Your maths is wrong – the interest rates are charged from whence one starts accumulating CPF.

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  16. Ad

    Even if we got a SHOCK from reading this article, we actually don’t have a choice whether or not we want to contribute to our cpf. I think u are the joke. HUGE ONE

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  29. A nobody

    Firstly, you are brave to tackle such a difficult topic but I think you are wrong.
    I would admit that I am not an economist and I try to read through the replies to understand where you are coming from.
    a. CPF is used to buy govt bonds. Now given that our bonds are AAA+, I think the interest rates compare well to US 10-year, 20-year treasury bonds.
    b. If the private citizen thinks he can generate a better income using CPF, he can choose to invest the part of the CPF in private equity. He assume all risks. I seriously doubt many people can make 5-10% annualized. I put most of mine in REITs and let it compound.
    c. CPF cannot trade in the equity market because of the risks involved. GIC can and that is the returns they earned for the risk they take. Will they be able to get annualized returns of 16% over 30 years, I doubt.
    d. You compare the saving rates and conclude that we are the lowest. That is because we are allowed to withdraw to pay for housing and medical care. What if you had taken the total CPF (without housing and medical care), would we have better returns?

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