The ins and outs of CPF contributions for interns in Singapore

In a Parliamentary question, Assoc Prof Daniel Goh Pei Siong raised the question of why employers hiring interns from private universities in Singapore are required to pay CPF contributions, while CPF contributions are not required for interns from the public universities.

In this, Minister for Manpower, Josephine Teo, responded that while CPF contributions are mandatory for all local employees, including interns; the concern is that employers may not welcome interns if the same CPF obligations for local employees also apply to them.

Therefore, employers are exempt from making CPF contributions for interns if they are students:

• Enrolled in an institution or programme subsidised by the Ministry of Education (MOE), or
• Employed for training approved by their educational institution.

"This approach serves to prioritise internship opportunities for students whose courses of study are most aligned with national objectives," she pointed out, adding, "On their own accord, employers may still make CPF contributions to these interns."

Also on the topic of CPF, MP Kwek Hian Chuan Henry asked how the monthly CPF payouts from CPF Life or the Retirement Sum Scheme are calculated as well as the assumptions involved in these.

To this, Minister Teo noted that payouts for Retirement Sum Scheme (RSS) are designed to last up to 20 years taking into account the base interest rate on Retirement Account (RA) savings, which is now 4%.

The CPF Extra Interest (EI) and Additional Extra Interest (AEI) provided by the Government are used to extend the RSS payout duration beyond 20 years. The period of extension depends on the member’s base payout amount, but does not go beyond 10 years.

"Unlike the RSS, CPF LIFE is designed to provide lifelong payouts. The payout depends principally on how much a member puts into CPF LIFE," Minister Teo explained.

An independent actuarial consultant appointed by the CPF Board determines the payouts taking into account factors such as mortality rates and interest earned on the amounts committed to CPF LIFE. Payouts are reviewed annually to account for changes in these factors.

For example, if more people live longer than expected, the monthly payouts may decrease and vice versa. Any adjustment is expected to be small and gradual.

Members who wish to estimate their payouts can use the CPF LIFE estimator on the CPF website.

Photo / StockUnlimited