CPF explained: where the monthly contribution goes, account by account

The Central Provident Fund began in 1955 as a straightforward retirement fund. It is now the vehicle through which most Singaporeans buy a home, insure their health and retire, and the interaction between those three is what makes it difficult to explain quickly.

One contribution, three accounts

An employee and their employer each contribute a percentage of wages, up to a ceiling. The combined contribution is split across three accounts, and the split changes with age, weighted towards housing and general use when a worker is young, and towards retirement and medical care as they get older.

• Ordinary Account. Housing, approved insurance, some investment, and education. This is the account that buys a flat.
• Special Account. Retirement, with a higher floor interest rate and much tighter rules on what it can be used for.
• MediSave. Approved medical expenses and health insurance premiums.

The accounts earn interest at floor rates set by the scheme, with the actual rate pegged to specified benchmarks. The floors are the point: they are why the balances do not behave like a deposit account and why leaving money in the higher-floor account has a real cost attached to taking it out.

Why housing sits inside a retirement scheme

This is the design decision that shapes everything downstream. Allowing retirement savings to be spent on a home turned compulsory saving into a route to ownership rather than an alternative to it, and it is a large part of why the ownership rate is what it is.

It also means a household’s retirement position and the housing market are the same conversation. Money used for a flat is not earning the retirement floor rate; it is in the flat. When resale prices rise, more of a buyer’s compulsory savings ends up as property, and the adequacy of what remains becomes the live question. The resale medians charted on this site are one half of that arithmetic.

There are limits on using savings for a flat with a short remaining lease, which is the system enforcing the other half: a home has to still be a home when its owner is old.

What happens at 55

A Retirement Account is created and savings are transferred into it up to a specified sum. That sum is what later funds monthly payouts for life, beginning at the payout eligibility age rather than at 55. Amounts above it become withdrawable, subject to the rules in force at the time.

The structure has been adjusted repeatedly: contribution rates by age, the retirement sums, and in the mid-2020s the treatment of the Special Account for members past 55. Rates and sums are exactly the details that move, so this page does not reproduce them.

The part worth remembering

CPF is not one scheme with three uses. It is three schemes sharing one deduction, with rules governing how much each is allowed to borrow from the others. Almost every argument about whether it works turns out to be an argument about one of those rules.

For contribution rates, current retirement sums and the rules as they stand, the board is the source of record.