You will be able to describe the gap that self-employment leaves in your CPF savings over time.
Mei logged in to her CPF account for the first time in a long while, mostly to check her MediSave balance after the notice in module 2. She scrolled down to her Ordinary Account and stopped. The last contribution was dated three years ago, the month she left her agency job. Her Special Account showed the same date. Since then the balances had grown only by interest. Nothing was wrong with her account. Nobody had been paying into it, because nobody employs her.
When you are employed, CPF runs in the background. Each month, part of your salary goes to CPF, and your employer adds its own share on top. The money is split across your accounts. Part of it goes to the Ordinary Account, which can be used for housing among other things. Part goes to the Special Account, for retirement. Part goes to MediSave, for healthcare. Lesson 5.1 of The Singapore personal finance system, Your CPF accounts at a glance, sets out what each account is for.
The important thing is that none of this needs a decision. An employee builds housing and retirement savings simply by turning up to work. The employer's share is money on top of salary, so it is easy to forget it was ever part of the pay.
As a self-employed person, only MediSave may be compulsory, and only if your net trade income is above the threshold covered in lesson 2.1. Your trade income does not flow into your Ordinary or Special Account at all. Those accounts can stand still for years, earning interest on whatever was already there and nothing more.
There is also no employer share. When you set your rates as an employee, you never had to think about the extra CPF your employer paid on top. As a freelancer, if you want that money to exist, it has to come out of your own fees. Module 7 builds it into your floor rate for this reason.
Platform workers are a partial exception. If you drive or deliver through a platform, the Platform Workers Act has brought in CPF contributions from platform operators, which lesson 3.3 covers.
A gap in contributions does more than leave a few years blank. CPF money earns interest, and interest compounds, so a dollar that never went in also never earned anything on top.
Lesson 2.3 of How money works, Estimate doubling time in your head with the rule of 72, gives you a quick way to see this. Divide 72 by the yearly interest rate to estimate how many years money takes to double. At an example rate of 4% a year, money doubles in about 18 years. A dollar of contributions that went in at 30 could be roughly two dollars at 48, before any further contributions. A dollar that never went in is still zero at 48. The current CPF interest rates are on the CPF Board website, and they differ by account, so use the real figures when you check your own position.
The gap shows up in two places. The first is housing. A smaller Ordinary Account means less CPF to put towards a home, and more of the down payment and monthly instalments in cash. Lesson 7.1 of The Singapore personal finance system, How a home is paid for: cash, CPF and a loan, explains how the pieces fit.
The second is retirement. Your CPF LIFE payouts later depend on how much you have in your retirement savings when they start. Years of standing still in your twenties and thirties can mean noticeably lower monthly payouts for life. Lesson 5.3 of that course, How CPF turns into retirement income, shows how the payout is built.
None of this means you must contribute the same amount an employer would have. It means the choice is now yours, and making no choice is also a choice.
Most people underestimate how long their accounts have been still. Months blur together when you are busy finding work. The CPF statement does not.
Log in to your CPF account through the CPF Board website or app, and look at the transaction history for each account. Find the last contribution, not the last interest credit, since interest arrives whether or not anyone contributes. Note the date and the amount.
When Mei did this, she found three dates. Her Ordinary and Special Accounts last received contributions three years ago, apart from two small amounts from the weekend workshops she teaches as a part-time employee. Her MediSave account showed her self-employed contribution from last year, paid from her pot. Writing it down gave her a clear picture: three years of almost nothing for housing and retirement, during the years when compounding has the longest to work.
That picture is the starting point for module 3. Lesson 3.2 shows the ways you can contribute voluntarily, and lesson 3.4 helps you decide how much, if anything, to put in. For now, the task is simply to see where you stand. Have your Singpass ready before you open the CPF website, and write down what you find for each account in turn.
Log in to your CPF account and note the date and size of the last contribution to each account.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).