Building Retirement nestegg: Majulah Package and CPF

By Shawn Lee

If you’ve only got a minute:

• The newly announced Majulah Package and existing schemes such as the Workfare Income Supplement (WIS) scheme and Matched Retirement Savings Scheme (MRSS) help to boost retirement adequacy for those with low income and low CPF balances.
• The Majulah Package comes with 3 components - Earn & Save Bonus, Retirement Savings Bonus and MediSave Bonus.
• WIS encourages Singaporeans to work and build up their CPF savings by providing them with cash payments and additional CPF contributions.
• The Government will match every dollar of cash top-ups made to the Retirement Accounts (RA) of eligible members up to $600 per year through the MRSS.

Approaching retirement can stir up a mix of emotions - from excitement about newfound freedom to concerns about financial stability.

The thought of having a sufficient nest egg to support your retirement lifestyle, ensuring that your retirement income lasts, and being prepared for unexpected healthcare expenses can be quite overwhelming.

Thankfully, there’s a reassuring anchor in the form of your CPF, which you have been building up over the years that can help ease some of your worries.

The Special and Retirement accounts of your CPF earn attractive interest rates of at least 4% per annum (pa). And once you cross age 65, lifelong monthly payouts can stream out from CPF LIFE scheme. This helps to mitigate concerns of outliving your savings. Meanwhile, your CPF MediSave account helps to take care of your healthcare needs, including hospitalisation, day surgery, outpatient expenses and approved insurance premiums.

Existing schemes like the Workfare Income Supplement scheme and Matched Retirement Savings schemes have been introduced in recent years to boost retirement adequacy especially for those with low income and low CPF Savings.

During the National Day Rally in August, PM Lee announced the new Majulah Package which aims to help lower- and middle-income Singaporeans born in 1973 or earlier to increase their retirement savings.

Majulah Package

The Majulah Package is a $7 billion package that will benefit 1.4 million Singapore citizens. This is more than 8 in 10 of Singapore citizens aged 50 and above in 2023. It aims to help those with lower income and less wealth and is part of a larger set of measures to strengthen retirement adequacy.

The package comes with 3 components:

1. Earn & Save Bonus
CPF bonus of $400-$1,000 each year for lower- and middle-income workers, as long as they work full-time or part-time. Self-employed persons and Platform Workers qualify as well.

2. Retirement Savings Bonus
One-time CPF bonus of $1,000-$1,500 for those whose CPF balances haven’t reached CPF Basic Retirement Sum, whether they are working or not.

3. MediSave Bonus
One-time CPF MediSave Bonus of $500-$1,000 to cope with healthcare costs.

The Majulah Package benefits are means-tested to ensure that support goes to those who need it the most. Hence, the eligibility criteria for the various benefits will include factors such as income, annual value of residence, whether an individual owns more than one property and CPF savings. More details on the Majulah Package will be announced in 2024.

Summary of Majulah Package:

Source: CPF Board

The bonuses are paid to the CPF accounts to boost retirement and healthcare savings. Monies in the CPF accounts will grow with interest and can be streamed out via monthly CPF payouts in retirement or used directly for healthcare needs.

For example, a 55-year-old lower-income worker with less wealth can receive up to an extra $12,000 in CPF savings (including interest) from the annual Earn and Save Bonuses if he works for 10 more years and retires at age 65. Additionally, he/she can receive a one-off Retirement Savings Bonus of up to $1,500 if he/she has not reached the CPF Basic Retirement Sum. He/she will also receive a one-off MediSave Bonus of up to $1,000.

Workfare Income Supplement (WIS) Scheme

The objective of WIS is to encourage Singaporeans to work and build up their retirement savings by providing them with cash payments and additional CPF contributions. The scheme is fully paid for by the Government and does not result in increased business costs for local enterprises.

Introduced in 2007, the Workfare Income Supplement is a broad-based measure that tops up the salaries of lower-income workers (both employees and self-employed) to help them save for retirement.

As of June 2023, over S$9.5 billion of WIS has been disbursed to 990,000 lower-income workers.

For employees, you qualify for WIS if you’re:

• a Singapore Citizen
• at least 30 years old (previously 35 years old) as of 31 December of the work year, or person with disabilities of any age
• earn a gross monthly income of at least $5,002, but not more than $2,500 (previously $2,300) for the month worked and in the past 12 months (average gross monthly income) as an employee

You’re not eligible for WIS if you:

• live in a property with an annual value of more than $13,000 (assessed as of 31 December of the preceding year)
• own two or more properties
• are married, and you and your spouse own two or more properties together, or your spouse’s income for the preceding year of assessment exceeds $70,000

For employees, you’ll receive 40% of your WIS in cash and 60% in CPF contributions. For self-employed persons, you will receive 10% of your WIS in cash and 90% in your MediSave account.

WIS Payments

The table below shows the maximum WIS amount you can receive each year, based on your age group from 2023.

Persons with disabilities will receive the same amount as those who are aged 60 and above. To estimate how much WIS you may receive, you can use the CPF Board’s online calculator.

Matched Retirement Savings Scheme (MRSS)

Launched in 2021, MRSS aims to help senior Singapore Citizens with low retirement savings build up more. This will boost their monthly payouts in retirement.

MRSS will first run for five years until 2025 during which, the Government will match every dollar of cash top-ups made to the Retirement Accounts (RA) of eligible members up to $600 per year. This would amount to a maximum of $3,000 over 5 years.

Your cash top-up and matching grant from the Government in your RA will earn CPF interest rates of up to 6% per annum. This will translate to higher monthly payouts for members during retirement.

Your eligibility is automatically assessed every year. You are eligible if you are a Singapore Citizen aged 55 to 70 with RA savings below the current Basic Retirement Sum (BRS), draw a monthly salary of less than $4,000, and own no more than one property with an annual value of $13,000 or less.

The CPF Board will notify you at the beginning of each year if you qualify and you can also check your eligibility via the website. As long as you are eligible and you receive a cash top-up, you will receive the matching grant by the following year.

Anyone such as yourself, your loved ones, employers, or members of the community, can make cash top-ups to eligible members. While the recipient will benefit from the dollar-for-dollar matching, the person who performs the top-up will enjoy the tax relief from doing so.