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/
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