SINGAPORE - Insurer Prudential Singapore raised the Central Provident Fund (CPF) contribution rate it pays for its employees above the age of 55 on Wednesday (Aug 7) to 17 per cent, bringing it up to that of younger employees.
Currently, the government-mandated contribution rates for workers up to 55 years old are 17 per cent for employers and 20 per cent for employees, for a total of 37 per cent of wages.
The employer contribution then drops progressively to 13 per cent for workers aged 55 to 60, 9 per cent for those aged 60 to 65, and 7.5 per cent for those above 65. The workers' contribution drops as well, to 13 per cent, 7.5 per cent and 5 per cent respectively.
However, the new rise will kick in only if the Prudential employees voluntarily increase their individual contribution rate to 20 per cent - the mandatory rate for staff up to 55.
Prudential calculated that with the increase in contribution rates, a 61-year-old employee with a monthly salary of $5,000 could save $1,025 more in CPF funds each month, or $12,300 over a year.
It has 46 staff who are aged over 55, or about 4 per cent of its employee count of 1,200 which does not include financial advisers.
The company said on Wednesday that the new scheme is opt-in as some individuals may prefer to have more disposable income to meet their immediate needs.
It added that it is the first financial institution to introduce this and has done so in consultation with the Singapore Insurance Employees' Union.
Prudential Singapore chief executive Wilf Blackburn said that with rising lifespans and healthcare costs, employees will need to save more to fund their extended years.
"The additional CPF monies could help them build a bigger retirement nest egg so they will be more financially ready for the future," he said.
Prudential has also scrapped the retirement age of 62 for staff since October last year.
CPF contribution rates and their impact on retirement adequacy are being looked at by the Tripartite Workgroup on Older Workers which will give an update by September. The group, which was formed last year, is also looking at a timeline for raising the retirement and re-employment ages.
Earlier this year, the People's Action Party Seniors Group, which champions elderly causes, proposed raising the contribution rates for older workers so that all workers have the same rates regardless of age.
The Institute of Policy Studies also said in June that raising the CPF contribution rates for older workers to put them on a par with those of younger workers could help them save between $31,000 and $145,000 more by the time they retire.
Its researchers found that a worker aged 55 last year would be able to accumulate those savings in his Ordinary and Special accounts, depending on his income bracket, if the total contribution rate is 37 per cent until he is 65 years old.
Prudential customer service officer Sue Li, 63, will be more than happy to top up her own CPF contribution rate to receive the higher contribution from her employer.
“The additional savings would help finance my retirement years and potential healthcare expenses," she said. "More importantly, I do not have to depend on my children for financial support."