Do Self-Employed People Need to Contribute to CPF? (And How Much to Contribute?)

As a self-employed person earning an income in Singapore, we are faced with a burning question every year – should I contribute to CPF and how much to put in? Unlike corporate employers that often make contributions on behalf of their employees.

In Singapore we know that CPF is virtually “untouchable” as once you put funds in, you are unable to take it out until the retirement age. Yet contributions to CPF also offer benefits such as tax reliefs and high interest rates.

Read on to see the full brekadown of current regulations for self-employed CPF contributions and how you can maximize your tax planning!

TLDR: Self-employed persons are not required to contribute to their OA or SA, but it is mandatory to contribute to your own Medisave account. The exact amount is determined based on your age and net trade income. You can also opt for voluntary contributions to enjoy tax reliefs and grow your CPF fund.

How Much Do Self-Employed Persons Have to Contribute to CPF Every Year?

Self-employed individuals who earn an annual net trade income of $6,000 and more are required to contribute to their MediSave Account (MA). MediSave is a national savings scheme that helps CPF members save for future medical expenses, particularly after retirement. The monthly contribution rate to your MA varies from 6% to 8% depending on your income, capped at $5,760 annually​1​.

Who Are Considered Self-Employed Persons – Give Some Examples

A self-employed person (SEP) in Singapore is someone who performs work for others under a contract for service. If you earn an income from buying and selling goods or providing professional or personal services, you fall under the SEP category. Examples of SEPs include hawkers, taxi drivers, freelancers, sole proprietors, or a partner in a partnership​2​.

Compulsory MediSave Contributions

By law, SEPs must contribute to MediSave if their annual net trade income exceeds $6,000. These contributions help provide for future medical expenses, especially after retirement. The MediSave contribution rate varies between 6% and 8%, depending on income, with a cap at $5,760 annually​1​.

Tax Reliefs for Voluntary CPF Contributions

SEPs can also make voluntary contributions to their Ordinary Account (OA), Special Account (SA), and MA. These voluntary contributions are tax-deductible, subject to certain conditions. For instance, in one example provided by IRAS, a self-employed person made voluntary contributions totalling $32,540 in a year. However, due to the CPF relief cap for SEPs, the maximum CPF relief allowable for that year was $24,050​3​. It’s also noteworthy that companies can make voluntary contributions to the MediSave accounts of their self-employed contractors and claim tax deductions on these contributions​3​.

Should You Make Voluntary Contributions?

Beyond the compulsory MediSave contributions, SEPs can choose to voluntarily contribute to all three CPF accounts: OA, SA, and MA. The allocation to each account depends on your age​1​.

Voluntary contributions can be a strategic financial move because CPF accounts earn attractive interest rates, currently 2.5% per annum for the OA and 4% per annum for the MA and SA, with an extra 1% interest paid on the first $60,000 of combined balances​1​. Additionally, OA savings can be used for housing-related expenses, such as downpayments, monthly loan instalments, and other housing-related expenses like stamp duty and legal fees​1​.

Special Schemes

Contribute-As-You-Earn (CAYE) Scheme

The CAYE scheme helps SEPs contribute to their MediSave as and when they receive service payments. This scheme is particularly beneficial for SEPs who provide services to government agencies, as they are automatically enrolled in the scheme. With CAYE, a portion of the service fee is directly transferred to the MediSave Account, making it easier to regularly contribute and grow the MediSave savings​4​. The contribution rate can be updated anytime and is calculated based on a formula that considers the MediSave contribution