The Fresh Graduate’s Introduction To CPF In Singapore

So you have graduated from university and have stepped out into the “real world” after landing your first job. Upon receiving your paycheck, you might be excited to spend your first monthly salary on the latest handbag or the latest mobile device.

But don’t be in a hurry to splurge just yet, as part of your monthly salary would go into your CPF (Central Provident Fund) accounts. Your employer would channel 17% and you would channel 20% of your total monthly salary to your CPF accounts.

Furthermore, you would be pardoned for thinking that the CPF scheme in Singapore is so confusing or “too cheem” to understand.

Indeed, the CPF can be a complex scheme to understand at first glance.

Hence, we will explain what the CPF scheme is for you in the following sections, as you kickstart your working life and journey in adulthood.

What Is CPF?

CPF is an acronym for the Central Provident Fund, a mandatory savings scheme based on one’s employment. Based on this scheme, all Singaporeans or PRs (Permanent Residents) have to contribute on a regular basis to the fund for healthcare, housing, education and retirement purposes. Every qualifying Singaporean or Singapore PR would have his or her own CPF accounts to contribute towards. Think of CPF accounts like bank savings accounts that earn interest. By earning interests, you as the CPF account owner can grow your own money. By saving and accumulating interests ,you can deal with their financial needs as you live through the various stages of life.

What are the 4 CPF Accounts?

Until you reach the age of 55, you would have 3 CPF accounts. When you hit 55, you would have a fourth account. Let us delve more into what each of these accounts are for.

Ordinary Account (OA)

The contributions you and your employer(s) make to your Ordinary Account (OA) can be used for investment, education, insurance and housing. For example, if you want to purchase a private property or an HDB (Housing & Development Board) flat, you can use your OA funds based on current regulations at the point of purchase. Nonetheless, when you purchase a private property using OA funds, such OA funds must be paid back into your OA when you sell the said property. This regulation does not apply if you buy an HDB property.

If you are helping your younger siblings subsidise their education fees, you can use your OA funds to pay for them. If you are more adventurous and decide to use your OA funds for investment purposes, you can do so in several approved financial products. Do note that with every investment comes a risk and you could suffer a loss with your OA investments. Thus the rule of thumb is to do your own due diligence before investing.

The initial $20,000 in your OA can earn up to 3.5% interest per annum. When your OA exceeds $20,000 you can earn 2.5% interest per annum, due to the short-term nature of OA funds.

Special Account

Unlike the OA, the Special Account (SA) has a narrower range of uses as the money in the SA is meant to be used to meet retirement needs. If you want to invest with your SA funds, you can only do so with a more limited range of financial products such as, but not limited to, treasury bills, unit trusts and Singapore Government bonds.

If you want to top up your SA with OA funds, you do so unalterably. This means that once you transfer funds from your OA to your SA, you cannot reverse your decision.

Just like your Medisave Account (MA), your SA funds can help you earn up to 5% interest per annum, if your combined balance does not exceed $60,000 (including $20,00 from your OA). Once your SA funds exceed $60,000, your SA and your MA would grow at 4% interest per annum.

Medisave Account

Use your Medisave Account (MA) to offset medical and healthcare costs.

For example, you can use Medishield Life, a national health insurance scheme,to pay for basic medical procedures, selected outpatient fees, hospitalisation bills and day surgery. Tap into your MA to pay for Medishield Life premiums, as well as for remaining amounts on your hospital fees.

Retirement Account

Once you hit 55, you would have an additional Retirement Account (RA). Whatever funds remaining in your OA and SA would be channelled into your RA. These funds would give rise to interest in your RA. When you hit the age of 65, you can obtain payouts from your RA every month. The amount of monthly payouts you can receive would depend on how much money was in your RA at age 65. Your RA currently can earn up to 6% per annum.

How does the CPF scheme function?

If you are employed in Singapore or for a Singapore-based company and are earning more than $500 monthly, you and your employer would have to channel part of your salary to your CPF account. Both your employer’s and your contribution rates would vary based on your age. If you get a bonus at work, or commission from a successful sales deal, you would also have to contribute to your CPF too. That being said, if you decide to relocate and move overseas for work, you do not have to contribute to your CPF.


As can be seen, each of the four CPF accounts has an aim, be it for educational, healthcare, investment or retirement expenses. As complex as it might seem, the CPF scheme tries to encompass your needs and wants as you enter each life stage. You cannot withdraw the money in one’s CPF account unless for special reasons like emigration (and giving up Singapore citizenship) or if you have been officially certified to have a shortened life expectancy due to illnesses.. These include a renouncement of citizenship if you migrate and being officially certified to have a reduced life expectancy.

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