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Any gotcha in full CPF contribution from employer?

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ahiwhr018
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Any gotcha in full CPF contribution from employer?

Postby ahiwhr018 » Tue, 22 Jul 2014 11:03 am

I got my PR recently and the HR at my workplace gave me two options for CPF: (1) full contribution by employer-employee (2) graduated rate.

HR informed me that if I renounce PR, I will still be able to extract the full CPF (both employer and employee contributions).

Assuming that my pay minus my full CPF contribution is sufficient for my living, is there any reason why I should NOT choose the full employer-employee option?

That option basically puts extra money from my employer into my CPF isn't it? Wondering if there is any gotcha in the fine print or something I need to be aware of for this option.

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Postby sundaymorningstaple » Tue, 22 Jul 2014 11:22 am

If you are comfortable with the cut, go for it. There isn't any downside to it. Most employers will not go for it as it also means a top up on their side. However, the employer can deduct full employee contributions and only pay graduated employer contributions or both can pay full rate. (Obviously that will be a nice employer who does that as it's additional cost to the employer).

ahiwhr018
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Postby ahiwhr018 » Tue, 22 Jul 2014 11:39 am

HR says full rate means employer pays 16% and employee 20%
Graduated rate begins with employer 4% and employee 5% in first year and so on.

As long as I have the option of pulling out whatever employer paid into CPF and there is no other gotcha, I think I'm fine with the full rate option.

Thanks sundaymorningstaple! I appreciate the time you take out answering questions on this forum :D

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Postby PNGMK » Tue, 22 Jul 2014 12:51 pm

ahiwhr018 wrote:HR says full rate means employer pays 16% and employee 20%
Graduated rate begins with employer 4% and employee 5% in first year and so on.

As long as I have the option of pulling out whatever employer paid into CPF and there is no other gotcha, I think I'm fine with the full rate option.

Thanks sundaymorningstaple! I appreciate the time you take out answering questions on this forum :D


Double check your contract doesn't have a clause about employer contributions coming out of your total remuneration number. Sometimes employers put these in so they don't suffer an extra expense when an employee becomes a PR. IF you have this clause you'll find that the ER contribution is actually from your pay, not from the employer (i.e. you'll pay both EE and ER contributions).

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Postby hellboy_sing » Tue, 22 Jul 2014 1:12 pm

I applied for Graduated rate for myself and full rate for the employer - which I feel is the best of both worlds. It's option 2 on this CPF link:
http://mycpf.cpf.gov.sg/Employers/Gen-Info/cpf-Contri/Con-Rates-SPR.htm

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Postby sundaymorningstaple » Tue, 22 Jul 2014 1:48 pm

Actually, hellboy_sing, that's the 2nd best option. Full rate for both is the best option. If you are going to top up CPF fast for a pullout later, why not put as much as possible into it at zero risk where you can draw upwards of 3.5 & 5% on the 1st 60K and 2.5 & 4% on the excess. Obviously you want to take advantage of the better interest rates vrs risk so why not get the most? Your's is a half-arsed approach that is only trying to suck from the employer but cutting your own profits in the process.

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Postby ahiwhr018 » Tue, 22 Jul 2014 2:01 pm

hellboy_sing: This option was not offered by my HR. Are all employers bound by law to offer all 3 options? If yes, maybe my folks are hiding it to reduce their burden. Should I ask for it?

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Postby sundaymorningstaple » Tue, 22 Jul 2014 2:37 pm

No, it's not a requirement that employers offer it. In fact both the employee and empoyer must request permission from the CPF board to do it. 99% of employer and employees don't want it.

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Postby beppi » Tue, 22 Jul 2014 4:00 pm

Also, CPF contributions are exempt from income tax.
The tax in Singapore is low, but not nothing, so this is another aspect to consider, especially if you plan to withdraw it after a few years (again tax-free).

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Postby Saint » Tue, 22 Jul 2014 5:01 pm

beppi wrote:Also, CPF contributions are exempt from income tax.
The tax in Singapore is low, but not nothing, so this is another aspect to consider, especially if you plan to withdraw it after a few years (again tax-free).


:mad: :x :mad:

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Postby beppi » Tue, 22 Jul 2014 5:15 pm

Saint wrote:
beppi wrote:Also, CPF contributions are exempt from income tax.
The tax in Singapore is low, but not nothing, so this is another aspect to consider, especially if you plan to withdraw it after a few years (again tax-free).


:mad: :x :mad:

???

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Postby Saint » Wed, 23 Jul 2014 8:56 am

beppi wrote:
Saint wrote:
beppi wrote:Also, CPF contributions are exempt from income tax.
The tax in Singapore is low, but not nothing, so this is another aspect to consider, especially if you plan to withdraw it after a few years (again tax-free).


:mad: :x :mad:

???


You know my stance on PR, it's not a short term tax free saving plan!

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Postby bro75 » Wed, 23 Jul 2014 9:27 am

Full rate is better IMO. It forces you to save, employer gives the full amount to your cpf and the interest rate is good. The only downside is if you consider yourself a very good investor who can make better returns from your cash.

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Postby sundaymorningstaple » Wed, 23 Jul 2014 10:03 am

bro75 wrote:Full rate is better IMO. It forces you to save, employer gives the full amount to your cpf and the interest rate is good. The only downside is if you consider yourself a very good investor who can make better returns from your cash.


I reckon, if they were that good, then they wouldn't be here as working stiffs in the first place. ;-)

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Postby Wd40 » Wed, 23 Jul 2014 10:08 am

bro75 wrote:Full rate is better IMO. It forces you to save, employer gives the full amount to your cpf and the interest rate is good. The only downside is if you consider yourself a very good investor who can make better returns from your cash.


Given all the furure that is going on right now, among certain section of the citizens, about CPF interest rate and other aspects of CPF, are you sure that full contribution from the employee is the best thing?

Its not about being a better investor or not, its about you being in control of your own money rather and deciding what to do with it rather than not having that choice.

Its true that at the moment the rule is that, you can withdraw all your CPF monies when you give up PR, but who can be sure that this rule wont be changed in the future?


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