By 2026, you will be making an additional S$400 in employee contributions, while your employer contributes S$340 more. In total, S$740 more will be going into your CPF account every month by 2026, as compared to today.
These sums are hardly insignificant, and when compounded at the 2.5 per cent per annum interest rate in the Ordinary Account, they can make a big difference in growing your savings. The larger contributions can be helpful when it comes to financing your housing down payment and mortgage.
Moreover, when stretched over a longer term – of, say, 30 years – the growth of your savings will be substantial.
Let’s say a 25-year-old in 2022 earned a monthly salary of S$6,000. This salary then goes up on a staggered basis over four phases, starting from September 2023, to S$8,000 by January 2026 – exactly mirroring how the increases in the CPF monthly salary ceiling will be staggered through to 2026.
By the time this person turns 55, nearly S$250,000 more in contributions would have gone into his or her CPF than if the ceiling had stayed at S$6,000. This figure excludes interest and assumes the S$8,000 ceiling is unchanged from 2026 to 2053.