Is the Medisave contribution rate doubled when you earn $500 more?
I met an elderly self-employed person who complained that because he struggled to earn more in order to make ends meet from $12,000 to $18,000 a year – he was very unhappy that despite being a low-income person – his Medisave contribution rate doubled (increased by 100 per cent).
I was stumped by his remarks. So, I used the CPF Medisave contribution calculator to test what he said to try to figure out what is going on.
For age 50 and above – the self-employed Medisave contribution for $12,000 and $18,000 annual income is $630 (5.25 per cent) and $1,890 (10.5 per cent), respectively.
So, he was correct – the Medisave contribution rate increased gradually from 5.25 to 10.5 per cent, for annual income of $12,000 to $18,000.
From the perspective of this elderly low income self-employed person who was already earning very little – 21 per cent ($1,260) of the additional $6,000 (from $12,000 to $18,000) which he earned went to Medisave.
Leong Sze Hian