Thursday, July 03, 2014

Lighten Medisave burden on self-employed seniors

Contributed by Dr. Tommy Wong

From 1 January 2014, the Medisave contribution rate for non-pensioners and for those who are age 60 and above is 9.5%. This rate applies to both employee (monthly wage ≥ $750) and self-employed (average monthly income > $1,500). There is a cap of $5,700- on the annual contribution for the self-employed. While this practice appears fair on surface, there is actually a hidden burden to the self-employed.

For the employee, the following table shows the contribution rates by the employer and employee to the employee’s CPF account. So even though the Medisave contribution rate is 9.5%, depending on the age, the employee's ​​contribution rate is ​7.5% or 5.0%.

Employee
Age (Years)
Contribution Rate (for monthly wages ≥ $750)
Contribution by Employer
(% of wage)
Contribution by Employee
(% of wage)
Total Contribution
(% of wage)
Above 60-65
7
7.5
14.5
Above 65
6.5
5
11.5

On the other hand, for the self-employed, since there is no employer’s contribution, they have to pay the entire 9.5% contribution all from their own income. So, compared to an employee, his take home pay is lower. For the self-employed whose financial situation is not well off, this is a real burden.

Can the Government review the Medisave contribution rate for the self-employed seniors so that their burden​ can be lightened?​

Dr. Tommy Wong is the author of the book series "Wisdom on How to Live Life" The ebook series can be ordered at http://c-opal.com/pdfbook/6. His website is at http://wisdomlife.page4.me/.

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