Singapore Budget 2015


How it affects the man on the street

The last few days saw a bombardment of news from the media about Singapore’s latest budget policy. If there were too much budget jargon going on there for you, let us here at Enjoycompare break it down into bite-sized bits to help you understand how it might affect you.

This year’s Jubilee budget saw a significant focus on the middle class, or rather, the ‘sandwiched’ class. No, not ham and cheese, but rather, it refers generally to lower-middle class people who feel ‘squeezed’ – although they are not poor, they are not able to achieve their aspirations as people with a higher income. In Singapore, the increasing phenomenon of middle class workers not finding housing affordable is an example of a ‘squeeze’ on them.

So why a focus on this group? Because many of us fall into this category, drawing perhaps a monthly salary of around $3,500 to $5,500. While we do not need to confine ourselves to eating home-made sandwiches or porridge everyday, there are defnitely some areas where we feel constrained.

The most immediate policies introduced that targets to help the middle income group include the following:

  • An increase the CPF ceiling from $5,000 to $6,000
  • A 50 per cent personal income tax rebate, subject to a cap of S$1,000

The first policy is a rather interesting one, though it may or may not be good news to some of us. Under the current scheme, emplyers contribute 17% to your CPF up to a salary of $5,000 while you contribute 20% on your side. If you earn $5,500, your employer will contribute 17% of $5,000 or $850 to your CPF, while you put in $1,000. Your take home pay is thus $4,500.
Under the new scheme, the employer’s contribution will increase from $850 to $935, while you will contribute $1,100, leaving your take home pay to be at a lower $4,400.

From a economic perspective, you gain an extra $185 in your CPF account per month, although you lose out on $100 from your take home pay. Given that the current CPF interest rates are much higher than the basic bank rates(check out some higher interest deposit schemes here!), we think its a cheer for this new policy.

Other policies that are set out to help the middle income, but less explicitly include lower levy for domestic workers(obviously to help out working mothers!), waiver of school exam fees as well as a Skillsfuture initiative to help mid-career workers undergo training with government subsidies.

Looking at the big picture, the government’s concerns exactly reflects what most of us should be prepared for – a need to save more for our retirement, less work security in a fast-changing society and increasing costs. While the government can only do so much to help each of us, it is important that we are responsible for our own well-being and future.

In other words, save and invest smartly, take care of your healthcare insurance and continue to upgrade yourself!