Choose a yearly voluntary CPF amount and timing that fit your base-pay system and your goals.
Mei left her job and now runs workshops, which pay her with a small amount of CPF attached (Mei and all her figures are an invented example). She already knows the size of her CPF gap and which options are open to her, but, like most freelancers, she has never written a CPF decision down.
The aim is a decision on paper with four parts: how much, into which account or scheme, in which month, and why. It draws on your gap figure from lesson 3.1 and the routes you noted in lesson 3.2. Drivers and delivery workers should also have lesson 3.3 open, since it shows what the platform pays into CPF for them. Increased CPF contributions are mandatory for platform workers born on or after 1 January 1995, and those workers receive the platform operator's share. Platform workers born before 1 January 1995 can opt in to increased CPF contributions on the CPF website. Older workers who do not opt in still have to make CPF MediSave contributions, and they do not receive the platform operator's share. For the current contribution rates, check the CPF Board or the Ministry of Manpower. Allow about twenty-five minutes.
Two earlier pieces of work come before any CPF payment. In module 1 you set up a holding account. The holding account buffer is the reserve kept there, with a target counted in months of base pay. Employees are usually told that three to six months of essential spending is enough. A freelancer's target sits higher, often several months of base pay, because freelance income can stop with no notice period at all. Lesson 3.1 of the course "The Singapore personal finance system", "How big your emergency fund should be", helps you pick your own number.
In module 2 you set up the tax and MediSave pot, a fund kept apart for this year's tax and MediSave bills. Check that it holds the full share those bills need.
If either one is below target, fill it first and put down zero as this year's voluntary CPF amount. Zero is a proper decision as long as you also write the date you will look at it again. The buffer takes priority because money paid into CPF can't be withdrawn to pay for an emergency.
Mei's target is six months of base pay. At S$2,300 a month, that comes to 6 x S$2,300 = S$13,800. Her year turns out much like the back test she ran in lesson 1.4. The holding account closes the year at S$23,460, and her tax and MediSave pot has been funded separately.
Next, run two tests on CPF as it stands.
For housing, settle how much of a future home you planned to cover from CPF. Then see whether your Ordinary Account will reach that sum if you add nothing.
For retirement, open one of the planning tools on the CPF Board website. These estimate CPF LIFE payouts from the balances you have now. Put in your actual balances and compare the monthly payout it shows with the monthly amount you think you will need.
If CPF on its own lands near both goals, a small voluntary contribution may be enough, or none at all. If it misses by a wide margin, a voluntary contribution is one way to narrow the gap, and investing outside CPF is another. The course "The Singapore personal finance system" goes through how to weigh the two.
Mei wants to buy a flat within five years. Since she left employment, her Ordinary Account has barely moved.
You can set the amount in one of two ways:
A fixed yearly sum: you pay in the same figure each year. It is simple to plan for and simple to price into your rates. A share of the surplus: this suits income that rises and falls. Surplus means whatever is left in the holding account above the buffer target, with the pot kept separate. Once the buffer and pot are both full, a set fraction of that surplus goes to CPF in a good year. In a lean year you pay in nothing.
Mei uses a share of the surplus. S$23,460 minus S$13,800 = S$9,660, so that is her surplus. She sends half of each year's surplus to CPF and leaves the other half in the business to cover slow periods and new equipment. Half of S$9,660 is S$4,830, and she rounds it down to S$4,800.
For the destination, go back to your lesson 3.2 notes and pick the account or scheme that fits. Mei picks the voluntary contribution that is divided across all three of her CPF accounts.
Add three numbers: your compulsory MediSave contribution, any CPF that comes with employment income, and the voluntary amount you plan. Compare that total with the current CPF Annual Limit, which the CPF Board lists on its website. Mei's sum is about S$5,300 of MediSave, plus the small CPF from her workshops, plus S$4,800. She looks up the current limit, and her total comes in well under it.
For the month, line the payment up with one of your module 8 quarterly reviews, preferably the last one of the year. By then the year's results are known, so you pay with money already in the account rather than with income you hope December will bring.
Write the decision in a few sentences: the amount or the rule behind it, the account or scheme, the month, and your reason. If the amount is zero for now, add the date of your next check.
Mei's paragraph reads: S$4,800, paid as the voluntary contribution divided across her three accounts, in December after her year-end review. Her reason is that she wants her Ordinary Account to build up towards a flat, and her buffer is already full.
Because her amount comes from a rule, it adjusts by itself in later years. If next year's surplus is smaller, she pays half of the smaller figure, and she doesn't need to make a new decision.
Have your buffer target, your pot balance and the current Annual Limit in front of you, and write yours in the activity.
Write down your voluntary CPF decision: the amount, the account or scheme, the month you will pay it in, and your reason.
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