UK Fact-File Part 7: UK Business Owner Welfare and Lifestyle

7.1 UK Business Social Security

The social security system

The Central Provident Fund, established in 1955, provides social security coverage for Singapore citizens and permanent residents in the areas of retirement savings, home ownership, healthcare, education, and investment.

Contributions amounting (from September 2010) to 35.5% of employee wages (15.5% from the employer, and 20% from the employee) are paid into three accounts, administered by the CPF:

• The Ordinary Account
• The Special Account
• The Medisave Account.

Contributions are tax deductible for both employer and employee.

Accumulated contributions to the Ordinary Account can be used to purchase property under CPF administered schemes, to buy insurance coverage, and certain other approved assets, or to cover education costs.

Contributions accumulated in the Special Account relate mainly to the resident’s retirement needs, and are therefore generally invested in retirement-related financial products.

Contributions to the Medisave account can be used (as the name suggests!) to cover hospital treatment and other medical expenses for the account holder and their immediate family.

From the age of 55, CPF savings can be withdrawn, except for a CPF Minimum Sum (initially set at SGD80,000 in 2003 and being raised gradually until it reaches SGD120,000 (in 2003 terms) in 2013) which is held in a designated retirement account; distributions from this (or an annuity, if the taxpayer has chosen to purchase one from a participating provider with their Minimum Sum) begin at the age of 62 (or later, if desired).

A Minimum Sum top-up scheme is also allowed, in order to boost retirement income.

A life annuity will pay out for the lifetime of the person in question, a straightforward monthly distribution will continue until the accumulated savings are exhausted.

A Medisave Required Amount must also remain in the Medisave account, if the CPF savings are withdrawn.

Foreigners resident (but not on a permanent basis) in Singapore are not required to contribute to the Central Provident Fund, although if they subsequently become permanent residents, they must do so; their contributions will be subsidised for the first two years of permanent residence, after which, they will pay the same rates as a permanent resident.

The self-employed and sole proprietors are only obliged to contribute to the Medisave portion of the CPF, but are encouraged to make voluntary contributions to the other two accounts. Further information on voluntary contributions is provided by the Central Provident Fund here.

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