Several changes to the Central Provident Fund (CPF) scheme kicked in yesterday to help workers accumulate more savings for their retirement.
The CPF salary ceiling, the maximum amount of ordinary wages that employee and employer contributions are calculated on, was raised from $5,000 to $6,000.
"Middle-income Singaporeans will be able to accumulate more CPF savings during their working years," Deputy Prime Minister Tharman Shanmugaratnam said when he announced the latest change during the Budget in February last year.
At least 544,000 CPF members are expected to benefit.
The ceiling was last adjusted from $4,500 to $5,000 in September 2011 to keep pace with income growth.
As of December 2014, there were two million active CPF members, meaning that they had at least one contribution to their accounts in that month or in the preceding three.
The annual contribution cap within the Supplementary Retirement Scheme, in which people can voluntarily save money and receive tax benefits, has also been raised to $15,300 for Singaporean citizens and permanent residents and $35,700 for foreigners. The caps were previously $12,750 and $29,750 respectively.
Workers aged 50 to 65 also saw their CPF contribution rate rise yesterday. Their employers will contribute from 0.5 to 1 percentage point more of their wages into their Special Accounts. This brings the total employer contribution to between 9 and 17 per cent, depending on the employee's age group.
Workers aged 55 and above now also receive an extra 1 per cent interest on the first $30,000 of their CPF savings, on top of the existing 1 per cent extra interest on the first $60,000 of savings.
This means that the first $30,000 in their Special, Retirement or Medisave accounts can earn up to 6 per cent interest, based on the prevailing rates.
While the changes will be a boon for many workers, some such as training executive Fion Lau, 41, feel that they do not go far enough to provide retirement adequacy.
She said: "The revised changes in CPF rates are minuscule in enabling employees to accumulate retirement funds in the form of CPF savings, especially in the light of very hefty increases in property prices over the last few years."