CPF Contributions 101 for Singapore Freelancers

I don’t know about you, but the last time I really paid attention to CPF stuff was in secondary school social studies classes.

Even then, I think we went only very briefly into how there were 3 different accounts and what they were used for.

And like most other things you mug for exams, what we learnt went out the window after our exams ended.

But those happy carefree days have long passed. Now, as a freelancer who has to fend for yourself in the Real World, this “CPF stuff” is now a real thing for you.

And you have to know how to navigate it, because your retirement may depend on it.

So in this comprehensive guide, I’ll be giving a crash course on Singapore’s CPF scheme – tailored specially for freelancers. You’ll learn:

• How does being a freelancer affect the contributions to your CPF accounts?
• Is it compulsory for freelancers to top up their CPF accounts? If it isn’t, should you?
• How can you top up your CPF accounts?
• What other miscellaneous CPF things will you need to take note of, as a freelancer?

And of course, along the way, you’ll also learn about the 3 types of CPF accounts, what they’re for and what their interest rates are. #BackToSecondarySchool

Ready? Let’s get started.

Content Menu

1. As a Freelancer, You’ll Need to Top Up Your CPF Accounts Yourself
2. Must You Top Up Your CPF Accounts?
3. Should You Make Contributions to Your Ordinary and Special Accounts?
4. How to Top Up Your Ordinary and Special Accounts
5. Miscellaneous Things to Note

As a Freelancer, You’ll Need to Top Up Your CPF Accounts Yourself

Here’s the first thing you need to know:

Unlike your employee friends, you will not have any CPF contributions unless you make them yourself.

I mean, as a self-employed person, you are your own employer. So, the CPF contributions you get depend on those your employer (i.e. yourself) makes for you.

Must You Top Up Your CPF Accounts?

Everyone starts with 3 CPF accounts:

The 2 rules when it comes to CPF contributions for freelancers are:

1. RULE 1: Contributing to your Ordinary and Special Accounts is optional.
2. RULE 2: Contributing to your Medisave Account is compulsory as long as you earn more than $6,000 a year.

Unless you’re freelancing on an ad hoc basis, you’re likely to make more than $6,000 a year and will therefore need to contribute to your Medisave Account.

How much must you contribute to your Medisave Account?

Your Medisave contribution amount is calculated based on:

• Your age
• How much you’ve earned for that year (as based on the Net Trade Income you’ve declared to the CPF Board)

You can find the calculation formulas on the CPF Board website. However, you’ll probably find it more convenient to use its Self-Employed Medisave Contribution Calculator.

Alternatively, you can check your actual outstanding Medisave liability by logging in to your self-employment dashboard in the my cpf digital services portal.

What’s the deadline for making your Medisave contribution?

• If the Inland Revenue Authority of Singapore (IRAS) has previously sent you a Notice of Assessment (i.e. your tax bill), you’ll have to make your Medisave contribution within 30 days of receiving a Notice of Computation of CPF Contributions (Medisave) from IRAS.
• If IRAS hasn’t previously sent you a Notice of Assessment, then you’ll have to make your Medisave contribution within 30 days of receiving a Notice of Contribution from the CPF Board.

How can you make your Medisave contributions?

To make your compulsory Medisave contribution, log in to the my cpf digital services portal and select “my cpf > Self-employment > Make MediSave contribution”.

Go through the form, and you’ll be able to make the contribution using PayNow QR.

Must you pay the entire Medisave contribution in one shot?

If you’re unable to make your compulsory Medisave contribution in full, you can pay it in monthly instalments using GIRO.

To pay your Medisave contribution in instalments, use the “Set up GIRO for MediSave contributions” digital service. You’ll need to log in to the my cpf digital services portal when using this service.

Should You Make Contributions to Your Ordinary and Special Accounts?

To recap the 2 rules of CPF contributions for freelancers:

1. RULE 1: Contributing to your Ordinary and Special Accounts is optional.
2. RULE 2: Contributing to your Medisave Account is compulsory as long as you earn more than $6,000 a year.

Since you’re free to decide whether to contribute to your Ordinary and Special Accounts, should you? Let’s weigh the pros and cons. Pros first:

Benefit #1: You help yourself save for retirement

Apart from your Ordinary, Special and Medisave Accounts, you’ll also get a Retirement Account when you turn 55. When this happens:

• The CPF Board will transfer money from your Special and Ordinary Accounts to your Retirement Account, up to the Full Retirement Sum (FRS). The FRS will be returned to you through monthly cash payouts.
• You can withdraw the rest of the Special and Ordinary Account funds that weren’t transferred to your Retirement Account.

For more info, refer to the CPF Board’s page on what happens when you turn 55.

As much as you may love your work, there will come a time when you’ll have to retire. You’ll need to ensure you have sufficient savings to cover your daily expenses when that happens.

Therefore, by making contributions to your Ordinary and Special Accounts, you’ll be setting aside money for retirement. This is especially since money deposited into your CPF accounts can be very difficult to spend before you turn 55, as I’ll discuss later.

Benefit #2: You get better interest rates than leaving your money in the bank

I haven’t mentioned this yet, but the money in your CPF accounts earns interest.

The current interest rates are:

If you’re above 55 years old, you’ll get an extra 1% interest on the first $60,000 of your combined account balances too.

Read more about CPF interest rates here.

Now, check the interest rate your bank is giving you for your savings account.

It’s probably not even 1%, right?

So if you were to park your money in your CPF accounts, you’d be able to earn more interest compared to putting it in the bank!

Benefit #3: You can use your CPF contributions to reduce your income tax liability

The IRAS has a CPF Relief for Self-Employed scheme where freelancers can reduce their income tax liability by the amount they’ve contributed:

• As part of their compulsory Medisave contributions
• From voluntary CPF contributions

Read more about this scheme here.

Think of it this way: whether you choose to make voluntary contributions to your Ordinary and Special Accounts or pay the same amount as income tax, your money will still go to the government.

BUT you can choose whether to use the money to pay for your retirement expenses (i.e. by making CPF contributions) or to fund government expenditure (i.e. by paying income tax).

Now, let’s discuss the possible cons of making contributions to your Ordinary and Special Accounts:

Drawback #1: You cannot withdraw your contributions as and when you please

Once you put money into your CPF accounts, you can’t withdraw it whenever you like. You can start cashing it out only when you turn 55.

Until then, you can use the money in your Ordinary and Special Accounts to pay for only certain specific items. For example:

• Ordinary Account money to pay for housing
• Special Account money to pay for Singapore government bonds

If you waltz into an IMAX 3D cinema and try to pay for your movie tickets with your Ordinary or Special Account money, you’ll be out of luck.

Therefore, if you intend to contribute to your CPF accounts beyond your compulsory Medisave contribution, be very sure that you can afford to.

For example, if you need the extra cash to tide yourself over the next few months or pay for your upcoming holiday, perhaps you want to hold off contributing to your Ordinary and Special Accounts for the time being.

Drawback #2: You may be able to obtain better interest rates elsewhere

This drawback applies if you intend to use your CPF accounts as a means of investing your money.

As mentioned earlier, your CPF accounts’ interest rates are likely to be better than what banks are offering for their savings account schemes. However, you may be able to obtain even better interest rates if you put your money in other investments.

Common investment schemes include investments in:

• Shares
• Real estate
• Gold

That said, higher potential rates of return come with potentially higher risks. Unlike putting your money in your CPF accounts, the chances of you losing your money in these investments are much higher. Are you able and willing to take on such risk?

You’ll need to have some knowledge and skill to manage your investments properly. This is not to mention the time (and possibly “tuition fees”) you’ll likely need to spend to acquire such knowledge and skill, too.

All this may take time away from your freelancing business, so think about whether you can afford to.

In short, using your CPF accounts as a mode of investment could be a good option if you:

• Want a very hands-off approach to investing (because you don’t need to do anything apart from putting your money in), and/or
• Aren’t comfortable with taking on more risk

But if you think you have the talent and time to make your money work even harder for you, go for it.

How to Top Up Your Ordinary and Special Accounts

To recap the pros and cons discussed above, consider carefully before deciding whether to voluntarily top up your Ordinary and/or Special Accounts.

Doing so is a huge commitment, and you won’t be able to readily spend money in your CPF accounts should you need to, even if you are getting higher interest rates for it.

For now, let’s assume you’ve decided to go ahead. There are 2 main schemes for doing so:

1. Topping Up All 3 Accounts at One Go
2. Topping Up Just Your Special Account

1. Topping Up All 3 Accounts at One Go

If you were thinking of topping up just your Ordinary Account and not your Special Account, unfortunately, that’s not possible.

If you want to top up your Ordinary Account, you’ll have to also top up your Special Account AND your Medisave Account. The CPF Board calls this the Voluntary Contribution scheme.

How much can you contribute to each CPF account?

So first, you decide how much money you want to deposit into all 3 of your CPF accounts as a whole. This sum of money will then be split among your 3 CPF accounts.

You can’t decide how much should go into each account as this will be determined by the current allocation rates for your age group. You can check the allocation rates here.

Generally, however, money is allocated to your Medisave Account first, followed by your Special Account. The balance is channelled to your Ordinary Account.

You can use the CPF Board’s CPF contribution allocation calculator to calculate how your voluntary contribution will be split among your 3 CPF accounts.

What’s the maximum contribution that you can make?

Currently, the max amount you can put in your CPF accounts (through both compulsory and voluntary contributions) is $37,740.

In other words, the total amount of money you can voluntarily contribute is $37,740 minus the amount of compulsory contributions you have already made.

How to top up all 3 CPF accounts

To make the voluntary contribution, log in to the my cpf digital services portal and select “Tools and services > View forms > Top up CPF accounts”.

Go through the form, and you’ll be able to pay for your contribution using PayNow QR.

2. Topping Up Just Your Special Account

If you want to top up just your Special Account, you can do so via the Retirement Sum Topping-Up Scheme. You don’t need to prepare any supporting documents to make the top-up.

How to top up your Special Account

To top up your Special Account, log in to the my cpf digital services portal and select “Tools and services > View forms > Cash top-ups and CPF transfers for retirement”.

When asked how you want to make the top up, select “Cash top-up via PayNow QR” to make a one-off top-up. If you want to make recurring top-ups, select “Recurring cash top-up via GIRO” instead.

Pro tip: Top up earlier in the year

Top-ups made earlier in the year will earn more interest compared to top-ups made later in the year.

This is because your Special Account money earns interest every month. So, the earlier you put your money into your Special Account, the more interest you’ll earn. (This is even though the interest is credited to your account, and compounded, only in December.)

Topping up your Special Account is a one-way transaction

You cannot undo any top ups made to your Special Account under the Retirement Sum Topping-Up Scheme, so be very sure that you want to proceed!

Miscellaneous Things to Note

Apart from Contributing to Your CPF, Continue to Keep Saving

Settling your CPF contribution strategy doesn’t mean you can let go and spend all the remaining money you earn.

You’ll need to save for rainy days, or for that big-ticket item you’re eyeing, or in case work temporarily dries up and you need some savings to dip into.

Remember that money put into your CPF accounts is very difficult to take out early!

Recap

Phew, this has been a massive article. Here’s a recap of what we’ve covered:

• Your situation. As a freelancer, you are your own employer and have the responsibility of making your own CPF contributions.
• Must you top up your CPF accounts? Contributing to your Medisave account is compulsory (if you earn more than $6,000 a year). However, contributing to your Ordinary and Special Accounts is optional.
• Should you contribute to your Ordinary and Special Accounts? This really depends. Do you want the income tax savings? Can you afford to set aside the money? Do you think you’ll think you can get better interest rates elsewhere? These are questions which you’ll have to answer yourself.
• How to top up your Ordinary and Special Accounts. There are 2 schemes: topping up all 3 accounts (Ordinary, Special and Medisave) together, or just your Special Account. Take your pick.
• Miscellaneous info. For example, continue to build your savings apart from what you’ve deposited into your CPF accounts.

Now that you know what Your CPF Situation as a Freelancer is, you should be more aware of your compulsory obligation to contribute to your Medisave and how you can make the contribution.

You should also have a better idea of how you can leverage your Ordinary and Special Accounts to save for retirement (or not, if you decide to put your money in other investment schemes instead!)

But having all this knowledge isn’t going to help unless you put what you know into action. Take some time off your freelance work schedule to decide on your CPF strategy moving forward, and then set up your contributions as necessary.

After all, complying with your contribution obligations is only one part of the picture. You’re also safeguarding your retirement.

Do you have CPF contribution tips to share? Leave a comment!