In Singapore, about 37% of your salary is compulsorily set aside every month — 20% from you, 17% from your employer. That is twice the level of Japan's employees' pension contribution rate of 18.3% (employer and employee combined). Yet this is neither a tax nor a "pay-as-you-go" pension premium. Every dollar accumulates in an account in your own name, usable for buying a home, paying medical bills and funding retirement. This is the CPF (Central Provident Fund). From primary sources, we look at the design behind Singapore's 91.2% home ownership rate, the criticisms it faces, the fundamental difference from Japan's pay-as-you-go pension and iDeCo, and a point that directly concerns Japanese readers: expatriates cannot join.
How it works: 37% of salary accumulates in "your own account"
The CPF is the core of Singapore's social security system. Every month, employees and employers contribute out of the salaries of citizens and permanent residents. The contribution rates from January 2026 are as follows (for monthly wages above S$750).
| Age | Employer | Employee | Total |
|---|---|---|---|
| 55 and below | 17% | 20% | 37% |
| Above 55 to 60 | 16% | 18% | 34% |
| Above 60 to 65 | 12.5% | 12.5% | 25% |
| Above 65 to 70 | 9% | 7.5% | 16.5% |
| Above 70 | 7.5% | 5% | 12.5% |
There is a ceiling on the monthly wage subject to contributions: from 2026 it is S$8,000 a month (about 960,000 yen). The monthly amount set aside can reach as much as S$2,960 (about 360,000 yen).
Example: a 40-year-old employee earning S$5,000 a month (about 600,000 yen)
Employee share: 5,000 × 20% = S$1,000 (about 120,000 yen)
Employer share: 5,000 × 17% = S$850 (about 102,000 yen)
Total set aside each month: S$1,850 (about 220,000 yen) — roughly 2.66 million yen a year accumulating in an account in your own name.
The money is automatically allocated into three accounts, each with its own purpose.
| Account | Main uses | Interest (per year) |
|---|---|---|
| Ordinary Account (OA) | Buying a home, mortgage repayments, some investments and education | 2.5% (statutory floor) |
| Special Account (SA) | Retirement savings (withdrawal not allowed in principle) | 4% (floor guaranteed until end of 2026) |
| MediSave Account (MA) | Medical costs such as hospitalization and surgery, public health insurance premiums | 4% (same as above) |
- The allocation changes with age: when you are young, a larger share goes to the Ordinary Account usable for housing, and as you age the share going to the MediSave Account grows
- On top of that, the first S$60,000 of combined balances (up to S$20,000 from the Ordinary Account) earns extra interest, giving a government-guaranteed return of up to 5% a year below age 55 and up to 6% a year from age 55
- At 55, a Retirement Account (RA) is created and the Special Account is closed; from 65 the balance feeds into CPF LIFE, a scheme that pays a monthly annuity for life
Why it was created: not "the government hands out," but "you save under your own name"
The CPF was founded in July 1955, when Singapore was still a British colony. In Britain itself, tax-funded pensions supporting the elderly were the mainstream at the time, but Singapore did not take that path. Instead of a fiscally heavy "pension the government hands out," it chose a low-cost design in which the worker and the employer compulsorily save into an account in the worker's own name.
The design philosophy is "not a tax, but your own asset." The money you pay does not vanish into the treasury to be redistributed to someone else; it sits as a balance in your own account, visible on your statement every month. The government's role is limited to running the system and guaranteeing the interest rates — there is no built-in transfer from the working generation to the elderly.
After independence in 1965, it was the Lee Kuan Yew government that turned this mechanism into a nation-building tool. From 1968, CPF savings could be used to pay for public housing (HDB flats) and to service the loans, steering a "nation of tenants" toward a "nation of homeowners." Savings meant for old age became the engine of housing policy — this is widely seen as the turning point that made the CPF globally unique.
The result: 90%-plus home ownership — but a world where "your balance is all you have"
- According to the Singapore Department of Statistics, the home ownership rate of resident households is 91.2% (2025). Japan's rate is 60.9% (Ministry of Internal Affairs and Communications, 2023 Housing and Land Survey) — a 30-point gap
- Interest rates are government-guaranteed and never fall below 2.5% on the Ordinary Account and 4% on the Special, MediSave and Retirement Accounts. With compulsory payroll saving compounding for decades, it is a powerful personal wealth-building machine
- At 55, you must first set aside the Full Retirement Sum (FRS) — S$220,400 for those turning 55 in 2026 (about 26 million yen) — in the Retirement Account, and can withdraw only the excess. You can also top up to the ceiling, the Enhanced Retirement Sum (ERS) of S$440,800 (about 53 million yen), to increase your lifelong monthly payout
At the same time, the criticisms of this design are just as clear. It is not a system with only upsides.
- Low liquidity: in principle you cannot withdraw until 55 — even in unemployment or hardship, retirement savings are off limits (apart from designated uses such as housing and medical care)
- No redistribution: because contributions are proportional to wages, little accumulates for low earners or people with short working histories. Supporting those who could not work falls to separate public assistance, and critics note that inequality is carried straight into old age
- Assets turn into a house: the more of your Ordinary Account you pour into housing, the less cash you have for retirement. Behind the 90%-plus ownership rate, the problem of being "asset-rich, cash-poor in old age" has long been pointed out
- The risk is yours: what you receive depends on your own balance. Longevity risk is handled by CPF LIFE (annuitization for life), but the risk of inflation eroding real value is essentially borne by the individual
Comparison with Japan: funded vs pay-as-you-go — a fundamental difference in design
Japan's public pension is a pay-as-you-go system (supplemented by reserve funds): the premiums of today's workers fund the pensions of today's elderly. The flow of money is fundamentally different from the CPF, where savings accumulate in your own account.
| Singapore (CPF) | Japan (public pension) | |
|---|---|---|
| Method | Funded (account in your own name) | Pay-as-you-go plus reserve funds |
| Contribution burden | Total 37% (employee 20% + employer 17%, age 55 and below) | Employees' pension 18.3% (split evenly, employee pays 9.15%) / National Pension is a flat 17,920 yen a month (fiscal 2026) |
| Where the money goes | Your own three accounts (housing, medical, retirement) | Benefits for today's elderly (intergenerational support) |
| Permitted uses | Retirement, plus home purchase and medical costs | Old-age, disability and survivors' pensions (cash-benefit insurance) |
| Redistribution / insurance function | None in principle (your balance is everything) | Yes (benefit design favoring low earners; disability and survivors' coverage) |
| Strengths | Less directly exposed to falling birthrates | Resilient to inflation and longevity (indexed to prices and wages) |
| Weaknesses | Inflation, inequality, liquidity | Shrinking working population (benefits adjusted via macroeconomic indexation) |
The important caveat: this is not a question of which system is superior. A funded system is less affected by demographics, but the individual shoulders inflation and longevity risk. A pay-as-you-go system feels the strain of an aging society, but benefits track prices and wages, and it carries insurance functions — disability and survivors' coverage. As we explained in detail in our article examining whether the National Pension is a bad deal, judging Japan's pension purely as a "savings return" misses its essence.
Japan's closest equivalent to the CPF is iDeCo — but the scale is different
In the sense of "compulsorily locked retirement savings in an account under your own name," Japan's closest counterpart to the CPF is iDeCo (individual-type defined contribution pension). Its contributions are fully deductible from income — a powerful system — but its position is entirely different from the CPF's.
- Voluntary: the CPF is compulsory for everyone; iDeCo covers only those who sign up
- Small limits: iDeCo's contribution cap is 68,000 yen a month for the self-employed, and for company employees 23,000 yen a month (no corporate pension) or 20,000 yen a month (with a corporate pension). That is an order of magnitude below the CPF's 37% of salary — up to about 360,000 yen a month (note that Japan has decided to raise the caps; check official sources for the latest timing of implementation)
- Retirement only: unlike the CPF, it cannot be used for housing or medical costs, and in principle cannot be withdrawn before age 60
Put the other way round, a Japanese employee stands on the "pay-as-you-go foundation" of the employees' pension and can add a "funded second floor" with iDeCo and NISA. As we estimate in our article on iDeCo's tax savings and filing procedure, the income deduction on contributions alone can change your tax bill by tens of thousands of yen a year.
What this means for Japanese readers: expatriates cannot join the CPF
The first thing to know if you are posted to Singapore: foreigners cannot join the CPF. It covers only Singapore citizens and permanent residents (PRs). Japanese expatriates working on an Employment Pass or other work passes owe nothing — neither the employee share nor the employer share. There is no need to worry about "37% of my salary being taken."
- No social security agreement: Japan has social security agreements with 24 countries, but Singapore is not among them. Since foreigners are outside the CPF anyway, double payment of contributions basically does not arise. If you are seconded from a Japanese company, the usual arrangement is to remain enrolled in Japan's employees' pension
- Local hires — beware a pension gap: if you are hired directly by a local entity and leave Japan's employees' pension, you cannot join the CPF either, so doing nothing leaves a blank in your pension record. Japanese citizens living abroad can voluntarily enroll in the National Pension — worth considering if you want to preserve your future benefits and disability/survivors' coverage
- If you become a PR: obtaining permanent residency makes CPF participation mandatory (at reduced rates for the first two years). If you later renounce PR status and leave for good, you close your CPF account and receive the full balance. How Japan taxes the payout after your return depends on the timing and your residence status, so we recommend confirming with a tax accountant or other professional
Incidentally, Singapore has no inheritance tax and, in principle, no capital gains tax, which is why it constantly comes up as a destination for the wealthy. For the Japanese-side issues of moving abroad and taxes, see our article on wealthy foreigners relocating to Japan and taxes.
What to do today
What to do today
- Log in to Nenkin Net and check your pension record and projected future benefits (unlike the CPF you cannot see a balance — which is exactly why knowing your projection is the first step)
- Take the employees' pension premium on your payslip (your 9.15%), add the equal employer share, and write down how much is being "invisibly contributed" each month
- Check your own iDeCo contribution limit (23,000/20,000 yen for employees, 68,000 yen for the self-employed) and, if you are not using it, start by requesting information from one financial institution
FAQ
Q. Is the CPF a tax?
A. No. The full amount accumulates in an account in your own name — "forced savings" that you yourself use for housing, medical care and retirement. That said, 20% is withheld from your salary every month, so the felt burden on take-home pay is no different from a tax or social insurance premium. What differs fundamentally from Japan's pension premiums is not the shape of the burden but where the money goes.
Q. Do Japanese expatriates have to join the CPF?
A. No. The CPF covers only Singapore citizens and permanent residents; foreigners on work passes cannot join (no employee share, no employer share). If you are seconded from a Japanese company, staying enrolled in Japan's employees' pension is the norm. If you are hired locally and leave the employees' pension, consider voluntary enrollment in the National Pension.
Q. Is old age more secure in Singapore than in Japan?
A. Not necessarily. The CPF is a funded system in which your own balance determines your benefits, so little accumulates for low earners, and the individual bears the risk of inflation eroding its value. Japan's pay-as-you-go system is exposed to demographic aging, but benefits track prices and wages and it includes disability and survivors' coverage. It is a difference in design philosophy, not a ranking.
Q. Can CPF savings be withdrawn early?
A. In principle, not before 55. However, the Ordinary Account can be used directly for home purchases and mortgage repayments, and the MediSave Account for hospitalization and surgery costs and public health insurance premiums. From age 55, after setting aside the prescribed retirement sum (S$220,400 for those turning 55 in 2026) in the Retirement Account, you can withdraw the amount above it.
References (sources)
* Figures are based on materials published as of August 2026. Yen conversions use an approximate rate of S$1 = 120 yen. CPF rates and retirement sums are revised over the years; check CPF official sources for the latest. This article is general information for comparing systems; for individual pension and tax decisions, consult a tax office, tax accountant or pension office.