Personal Finance

This year's Jubilee budget saw a significant focus on the middle class, or rather, the 'sandwiched' class. It refers to the lower-middle class citizens who on average earn between the income bracket of $3,500 to $5,000 a month. Although we cannot this group of citizens 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 the middle class? Because the majority of the population falls into this category. While we do not need to eat from our home-made lunch-boxes everyday, there are defnitely some areas where we feel constrained or stuck in life. 

The most immediate policies introduced at this year's budget that targets to help the middle income group include the following:   

  1. increase the CPF ceiling from $5,000 to $6,000

  2. a 50 per cent personal income tax rebate, subject to a cap of S$1,000

Employer and employee: more money out of the pocket

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, employers contribute 17% to your CPF up to a salary of $5,000 while you contribute 20% on your side. If you earn $6,000, 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 $5,000. 

Under the new scheme, the employer's contribution will increase from $850 to $1020, while you will contribute $200 more, leaving your take home pay to be at a lower $4,800.

From an economic perspective, you gain an extra $185 in your CPF account per month, although you lose out on $100 from your disposable income. Given that the current CPF interest rates are much higher than the basic bank rates, on a nett basis you are still left in a better-off position.

Other policies that are set out to help the middle income include lower levy for domestic workers(lower cost to help out career mothers!), waiver of school exam fees as well as a Skillsfuture initiative to help mid-career workers undergo training subsidised by the government.

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, being prepared for healthcare support and less work security in a fast-changing society. 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!