As announced by our Prime Minister Lee Hsien Loong at the May Day Rally, employee CPF contribution will be increased by 1% from the current 14.5% to 15.5%.

This increment will be done in 2 phases:

1. On 1^st September 2010, the first 0.5% increment will be paid into employee’s MediSave.
2. The remaining 0.5% will be paid into Special Account 1^st March 2011.

Looking at the increment and the increase in threshold for CPF-IS Special Account from $30,000 to $40,000 from 1^st July 2010, it is not difficult to see that our government’s focus on long term retirement issues for our ageing population.

However, do you think this is the best time to raise CPF contribution rate? Our road to economy recovery is not without obstacles. We face uncertainties such as Greece debt issue; Goldman Sachs suspected fraud case and overheating China economy just to name a few.

Adding 1% CPF contribution may add millions of dollars in salary expense to a MNC operating in Singapore. Are they financially ready and will this make Singapore a less attractive place to do business? It is definitely very tricky.

What is your opinion in the timing of this CPF increment?

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