Understanding the Impacts of the CPF Monthly Salary Ceiling Changes on Individuals

So what is CPF Salary Ceiling?

The CPF salary ceiling refers to the maximum income eligible for CPF contributions. Currently, the CPF salary ceiling is set at $6,000 per month until 1st September 2023. If an individual’s monthly income exceeds $6,000, only the first $6,000 will be subject to CPF contributions. The CPF monthly salary ceiling will gradually increase from $6,000 to $8,000 by 2026 for all employees. The increase will take place in four stages to allow employers and employees to adjust to the changes.

Understanding the Impacts of the CPF Monthly Salary Ceiling Changes on Individuals — Engage


However, there is no change in the annual salary ceiling for CPF Contributions – $102,000 (Total Wages).

Total Wages = Ordinary Wages + Additional Wages

Ordinary Wages refer to the basic salary earned by the employee.

Additional Wages refer to any wages paid to the employee in addition to their Ordinary Wages, such as bonuses, leave encasement, etc.


So how does it affects me?

Specimen A:

Monthly Income: $4,000
Toal Annual Bonus: $8,000

Individuals whose income falls below the CPF salary ceiling will not be affected by the changes, and their take-home salary and bonus will remain unchanged.


Specimen B:

Monthly Income: $10,000
Total Annual Bonus: $40,000

In 2026, the CPF contribution will be based on the first $8,000 of an individual’s monthly income. This means that an individual whose monthly income is $10,000 will have a take-home salary of $8,400 instead of $8,800, and only $6,000 of their bonus will be subjected to CPF contribution.

Before 1 Sep 2023: Take-Home Salary

Monthly Income:

Monthly Take-Home Income: $8,800 [$10,000 – ($6,000 X 20%)]

Total Take-Home Monthly Income in a Year = $8,800 X 12 = $105,600


$102,000 (Total Wage) – $72,000 (Ordinary Wage) = $30,000 will be subjected to CPF contribution

Bonus Take-Home Income: $34,000 [$40,000 – ($30,000 X 20%)]

Total Take-Home Income in Year 2023 = $105,600 + $34,000 = $139,600


After 1 Jan 2026: Take-Home Salary

Monthly Income:

Monthly Take-Home Income: $8,400 [$10,000 – ($8,000 X 20%)]


However, for your bonus, it will only take $102,000 – $8,000 X 12 = $6,000 for CPF contribution.

So the bonus of $40,000; only $6,000 will be subjected to CPF contribution. Hence, take home bonus will be $38,800 [$40,000 – ($6,000 X 20%)]

Total Take-Home Salary in the Year 2026 with the new changes will be:

$8,400 X 12 + $38,800 = $139,600

Which is exactly the same as what you will receive as of 2023.

The total take-home salary in the year 2026 will be the same as in 2023, but the monthly take-home income cash flow will be reduced, which may affect individuals with narrow positive monthly cash flow due to loan repayments, such as mortgages or motor vehicles. It is therefore important to maintain emergency funds and strategies for cashflow usage.


Specimen C:

Monthly Income: $9,000
Total Annual Bonus: $0

Before 1 Sep 2023: Take-Home Salary

Monthly Income:

Monthly Take-Home Income: $7,800 [$9,000 – ($6,000 X 20%)]

Total Take-Home Income in a Year = $7,800 X 12 = $93,600

After 1 Jan 2026: Take-Home Salary

In 2026, your CPF contribution will be on the first $8,000 of your Ordinary Wage aka Monthly Income, hence your take-home income will be $7,200 [$9,000 – ($8,000 X 20%)] instead of $7,800

Total Take-Home Monthly Income in a Year = $7,200 X 12 = $86,400

The actual take-home salary will be reduced, and the difference will be contributed to the individual’s CPF account. While some individuals may prefer higher cash receivables to deploy into other instruments, such as investments or mortgage repayments, the higher CPF contribution helps reduce income taxes without putting the money into SRS (one of the many methods).

Also, the CPF RA account is able to withdraw a certain amount at 55 years old depending on the criteria.


Potential Impacts if CPF increases Annual Total Wage Ceiling

At present, CPF has chosen to maintain the Annual Wage Ceiling for contributions, although this decision may have certain implications if certain assumptions are made.

As a result, it would be advisable for you to consult with a trusted Financial Advisor for further guidance on this matter.

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Nicholas Low

Nicholas is a Wealth Advisor that prepares professionals for their road ahead – juggling between family & career -.

In his years of service, Nicholas has adopted and further developed his own brand of Financial Advisory for his clientele.

Being part of the 90s generation, Nicholas is familiar with pains of starting out and being oblivious about what to do. Nicholas empathises with people who are clueless and is willing to provide as a beacon of light for his clients.

Nicholas has hone his skills to discern and to put himself in the shoes of his clients and to apply the skills and knowledge he has acquired throughout his career.

As a fellow investor, Nicholas has taken it upon himself to study the fundamentals and macros to advice his clients on how to take advantage on opportunities in the financial markets to boost their capital returns. In doing so his clients can accumulate enough capital to work towards their financial milestones.

Feel free to speak to Nicholas here


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