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Singapore - Retirement
Although there are some government welfare schemes, these are generally directed at the elderly or those who receive an extremely low income. They are used very sparingly and the guidelines for being approved for the schemes are strict. At any given time, there are only around 3,000 Singaporeans receiving government assistance.
The Central Provident Fund (CPF) is the Social Security system for citizens and permanent residents working in Singapore. It is one of the oldest contribution-based retirement schemes in Asia. As an expat living and working in Singapore on an employment pass, you are not liable to contributions and therefore may not receive government support. The majority of international employers do provide group health insurance schemes for their expat employees, though. Those who aren’t covered by an employer scheme or a CPF fund are encouraged to take out private health insurance.
If you receive your permanent residency then you will begin paying CPF contributions based on the length of time you have spent in Singapore, your age and your income. You can also request a CPF pay-out if you decide not to stay in Singapore. As an employee, contributions range from 5 % to 20 % of your monthly salary. The employer contributes from 6.5 % to 16 % of the employee´s salary. All of the payments and withdrawals are tax free.
There are 3 CPF accounts: the Ordinary Account with a 2.5 % interest rate, the Special Account and the Medisave Account, both earning 4 % interest. You can use the funds in the Ordinary Account to buy property and insurance, paying for education and other things. Conversely, the Special Account can only be used for retirement savings. The Medisave Account is basic medical insurance.
As a US citizen, you must pay US Social Security and Medicare taxes on your earnings if you are living in a foreign country and are self-employed. However, you won’t have to do this if you are employed by a foreign company in another country and are responsible for paying taxes into that country’s social security equivalent.
For more information about the CPF fund, you can visit their website at http://www.mycpf.gov.sg.
Retirement age in Singapore is 62. However, some people continue working until age 65. Singapore is generally considered to be one of the best countries to retire to. The Singaporean’s CPF fund helps them save for retirement and many people own their own homes which might have also been partly funded by their CPF fund. If you do not invest in the CPF fund or have not obtained permanent residency, then the only option allowing retirement is to provide significant investment into the economy.
In addition, the Singaporean system operates on a fully funded basis and, as such, the CPF does not take social risk pooling and redistributive elements into consideration. Instead, citizens rely solely on defined contribution funds that accumulate in their own accounts. The CPF itself is managed by government, employee, employer and industry representatives that ministers appoint.
In 2002, a plan to allow Singaporeans to be able to withdraw money from their CPF fund and invest it in private pension plans (PPPs) was shelved. Although it appeared to be an idea that would boost Singapore's efforts to attract fund managers, the government decided to study other options in order to offer CPF members better returns.
The Ministry of Manpower does offer a supplementary retirement scheme. This is operated by the private sector and complements the CPF. Participation in the Supplementary Retirement Scheme is voluntary and the amount that is contributed is at the individual’s discretion, although it is capped. The contributions are eligible for tax relief and investment returns are accumulated tax-free and only 50% of the withdrawals from SRS are taxable upon retirement.
Some banks also offer retirement plans and investment linked insurance plans to help individuals plan for their retirements and futures.
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