CPF contribution rates to stay the same despite COVID-19 economic downturn

CPF contribution rates to stay the same despite COVID-19 economic downturn

cpf building after circuit breaker
A long line of patrons waiting to enter the CPF building at Tampines on Jun 2, 2020, the first day of Phase 1 post circuit-breaker. (Photo: Gaya Chandramohan)

SINGAPORE: The Government will not be lowering Central Provident Fund (CPF) contribution rates temporarily despite the economic fallout caused by the COVID-19 pandemic, Manpower Minister Josephine Teo said in Parliament on Thursday (Jun 4).

She was responding to Member of Parliament Seah Kian Peng’s question on whether the authorities will consider reducing CPF contributions by both employees and employers for the time being, until the economy recovers from the COVID-19 crisis. 

Mrs Teo said that the Jobs Support Scheme (JSS) has helped to reduce the cost burden to employers “with fewer drawbacks” compared to if CPF contributions were to be trimmed. 

"For example, those who depend on CPF contributions to meet housing and healthcare needs can continue to do so. Singaporeans’ ability to save for retirement is also not eroded," she explained.

“As an added advantage, JSS is able to target stronger support at sectors that are more affected by the COVID-19 outbreak."

READ: Budget 2020: New scheme to help those with less CPF savings to save more

Nonetheless, Mrs Teo said that the Government will monitor the situation and consider if CPF contributions need to be adjusted in future, along with other forms of support. 

Mrs Teo also noted that employers could look into reducing non-wage costs first and making use of official support measures such as the SkillsFuture Enterprise Credit to send their workers for training. 

READ: National Jobs Council will open pathways to jobs amid COVID-19 pandemic: Josephine Teo

Otherwise, companies could consider using the Monthly Variable Component to adjust wages to save jobs. 

In response, Mr Seah, who is also FairPrice Group’s chief executive, said in his supplementary question that while the stimulus packages targeted at employers have been helpful to save jobs, more still needs to be done in the face of more layoffs and pay cuts.

READ: More companies announce wage cuts, no-pay leave amid COVID-19 economic downturn

“Every little bit we (employers) could put on the table for them is something which will certainly help them (employees),” Mr Seah said.

“I know you have said that … this is still on the table but I think we need to do it a bit more proactively given the looming and likelihood of more wage cuts,” he added. 

While she acknowledges that an interim cut to CPF contribution rates could help employers keep their workers, Mrs Teo said this could cause permanent losses to workers' ability to save for their retirement. 

READ: COVID-19: National Wages Council suggests management lead by example when cutting pay

“Once that savings opportunity is forgone, it cannot easily be reclaimed and it usually takes a very long time to eventually restore whatever rates that have been cut,” she added.

The decision has to be taken “very carefully” in light of people living longer and managing healthcare expenditures. 

As for workers who are inevitably displaced, Mrs Teo said the Government is now trying to create more job opportunities through programmes like traineeships and skills upgrading courses. 

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Source: CNA/rp(gs)

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