From early next year, freelancers working for the Government will have a portion of their fees automatically channelled towards their Medisave accounts, before they are paid the rest.
There are no plans to extend this Contribute As You Earn (CAYE) scheme to the private sector for now, Minister for Manpower Josephine Teo said yesterday.
The pilot is aimed at helping self-employed workers save for their healthcare needs and manage their cash flow, she said at real estate agency PropNex's annual convention.
Currently, such workers have to make compulsory Medisave contributions when they receive their tax bill, if their annual net trade income is more than $6,000.
Mrs Teo said the pilot will make it convenient for these workers, who will also not have to worry about bigger lump sums during periods of unemployment.
Putting money into a worker's Medisave account as and when fees and commissions are paid also means he would accrue the 4 per cent interest earlier, she said.
Explaining the reason for the pilot, Mrs Teo said it is to ensure there are no glitches, that Medisave contributions are calculated correctly, and that it is useful.
"It's not something that we will say you must use," she said in a dialogue with PropNex chief executive Ismail Gafoor.
The CAYE scheme, announced in March last year, is among various forms of government support for the self-employed.
Mr Ismail asked if self-employed people could be exempted from further Central Provident Fund (CPF) contributions if they put the maximum allowed sums into their Medisave accounts for the year. Currently, excess funds are channelled to the other CPF accounts - Ordinary, Special or Retirement.
His question was met with applause from some 4,000 agents in attendance.
The Medisave contribution rate ranges from 4 per cent to 10.5 per cent, depending on the worker's age and annual net trade income. Maximum limits range from $5,760 to $7,560 a year.
Net trade income is the gross trade income minus all allowable business expenses, capital allowances and trade losses.
Mrs Teo replied that CPF not only helps with healthcare, it also ensures retirement adequacy and can be used to pay for housing.
Self-employed people also use their CPF for the same reasons, and their contributions should, by right, be similar to regular employees', she said.
Salaried workers contribute 20 per cent of their salary to the CPF.
She added that while she would keep Mr Ismail's request in mind, if she did agree to it, "the regular employees will ask for the same (exemptions), and then the philosophy, (of the CPF) becomes different".
Property agents said they welcomed the CAYE, but felt contributions should be capped at the maximum sum for Medisave accounts.
Said Mr Roy Soegiarto, 48: "We're self-employed people, so we're obviously streetwise. There are things we are doing to ensure we are saving for our future."