New CPF scheme for older employees
After scrapping its retirement age, Prudential becomes the first financial institution to raise its CPF contribution rate for employees above 55.
In a move to help its older employees to be financially ready for longer life expectancy, Prudential Singapore has raised its Central Provident Fund (CPF) contribution rate for those above the age of 55. It is said to be the first financial institution to introduce this CPF scheme.
From August 7, 2019, this group of employees will have the option to enjoy the total CPF contribution rate of 37 percent – similar to that offered to their younger colleagues. This comprises 17 percent which will come from Prudential if an employee voluntarily increases his individual CPF contribution rate to 20 percent. Currently, the Government-mandated total CPF contribution rate for employees above 55 is between 12.5 percent and 26 percent.
Prudential’s new CPF scheme for its older employees is an opt-in scheme as the insurer recognises that some individuals may prefer to have more disposable income to meet their current needs. It is introduced in close consultation with the Singapore Insurance Employees’ Union (SIEU).
Prudential Singapore’s CEO Wilf Blackburn said this new CPF scheme is in line with the company’s ambition to create a more age-friendly workplace. “We believe in rewarding our people based on performance. It is with this in mind that we have decided to make equal our CPF contributions for all employees, regardless of age.
“Additionally, with rising lifespan and healthcare costs, we recognise that our employees will need to save more to fund their extended years. The additional CPF monies could help them build a bigger retirement nest egg so they will be more financially ready for the future,” said Blackburn.
This new scheme follows its decision in October last year to remove the retirement age to enable its employees to work for as long as they continue to perform. Again, it was the first financial institution to do this. Currently, Prudential has seven employees aged 62 and above who are eligible for re-employment in the next five years. With the lifting of the retirement age, they can stay on in their jobs and be entitled to the same benefits, including medical, as all employees while drawing the same salary as before. They will still receive a retirement payout any time they choose to leave their jobs.
Sue Li, 63, a customer service officer with Prudential, is one of the 46 employees who will benefit from the company’s new CPF scheme. “It was a bonus when the company scrapped the retirement age as I can continue to work for as long as I am able to. Now, they are going a step further by contributing more money to my CPF funds. Although I must top up my CPF account as well, I am more than happy to do so.
“The additional savings would help finance my retirement years and potential healthcare expenses. More importantly, I do not have to depend on my children for financial support,” said Li, who has been working with Prudential for 24 years.
Currently, she contributes 7.5 percent of her monthly salary to her CPF account while the company contributes 9 percent, which makes it a total of 16.5 percent. Under the company’s new CPF scheme, her total CPF contribution rate will more than double to 37 percent.
With the increase in CPF contribution rates, the extra savings for a mature worker will be significant. For instance, a 61-year-old employee with a monthly salary of S$5,000 could save S$1,025 more in CPF funds each month. In 12 months, his accumulated additional savings will be S$12,300.