Singapore: Working and Living
Health, Education and Pensions
Singapore’s healthcare system provides a high standard, both in terms of facilities and services, and is funded primarily via a system of compulsory contributions known as Medisave.
Medisave was introduced in 1984 as a national medical savings account scheme; Singapore resident employees (and self-employed workers, about whom more later) are obliged to contribute between 6-8% of their monthly wages to a personal Medisave account, the contents of which can be used to pay for the medical expenses of the account holder, or their close family members.
The self-employed are required to contribute to Medisave if their net trade income is more than SGD6,000 per year, with contributions based on the previous year’s net trade income, and their age.
Contributions can be made via the Central Provident Fund website, in monthly instalments through the GIRO system, by cheque, or using cash or cash cards at Singpost offices and dedicated payment machines, or by using the NETS (Network for Electronic Transfers) system.
In addition to Medisave, the government heavily subsidises acute treatment in public hospitals, and the Central Provident Fund also operates MediShield, which is a catastrophic illness insurance scheme (operating on a co-payment and deductible system, for further details see here), provided at a relatively low cost to Singapore residents, which is designed to help meet costs brought about by major illnesses which the person’s Medisave account might not be able to meet.
For Singapore residents unable to afford healthcare treatment despite the above safeguards and schemes, the government has establishment a medical endowment fund known as Medifund.
At the time of writing, there were 10 public hospitals, 13 private hospitals, and a number of specialist clinics in Singapore.
Non-residents are able to access healthcare services in Singapore, but must pay out of their own pockets; they are not permitted to contribute to Medisave accounts. Additionally, they may pay higher costs than Singapore residents if they opt to be treated in government hospitals.
Education in Singapore is divided into 6 years of primary education (4 years of foundation stage and 2 years of orientation stage education) culminating in the Primary School Leaving Examination, 4-5 years of secondary education (studying for either O or N levels, depending on whether the student is in the Special or Express streams, or the Normal (Academic) or Normal (Technical) streams, respectively).
There are several different types of secondary school, including autonomous schools (which get greater autonomy in terms of school management and – to a certain extent – curriculum) and independent schools, specialised independent schools, integrated programme schools (which permit gifted secondary age students in Singapore to pass straight to A levels, or to an International Baccalaureate or equivalent), and privately funded schools.
This is then usually followed by 2-3 years of pre-university education (studying for A-levels), and then tertiary education, studying for either a diploma or a degree.
In addition, there are also around 30 international schools in Singapore, although they are likely to be a relatively expensive option.
The tax treatment of education costs
The payment of school fees for dependents is not included in the list of permitted deduction and reliefs provided by the Inland Revenue Authority of Singapore, and where such fees are paid by an employer as a benefit in kind (of negligible interest to a self-employed entrepreneur, however), they are deemed to be taxable as income.
However, Course Fees Relief is sometimes available for individuals looking to improve their employment related skills, although it is not applicable to university or polytechnic students studying for vocational degrees or diplomas before they enter the job market, or to students working as interns, or during their university vacations.
Courses eligible for course fee relief include seminars, courses or conferences relating to the trade or vocation of the person in question, or one that relates to a career change, and/or a course, seminar or conference leading to a vocational qualification.
With regard to vocational qualifications, in order for a vocational qualification to count for Course Fees Relief, the skills or knowledge acquired must be applicable as part of the person’s vocation, or in a specific area in their industry, and the providers of the training or seminar must be registered in Singapore with the Accounting & Corporate Regulatory Authority (ACRA).
The acquisition of general skills (such as learning to use the internet, or various types of basic office software), or recreational or ‘hobby’ based skills will not qualify for the relief.
Relief should generally be claimed (in the tax return, under the ‘course fees’ heading) for fees paid in the preceding year, and the upper limit from the 2011 year of assessment is SGD5,500 (with the upper limit set at SGD3,500 prior to that). The claim should only be made for registration, examination, tuition and aptitude test fees.
The Central Provident Fund oversees domestic pension cover.
Contributions amounting (from September 2010) to 35.5% of employee wages (15.5% from the employer, and 20% from the employee) are paid into three accounts, administered by the CPF:
- The Ordinary Account
- The Special Account
- The Medisave Account.
Contributions are tax deductible for both employer and employee.
Contributions accumulated in the Special Account relate mainly to the resident’s retirement needs, and are therefore generally invested in retirement-related financial products.
From the age of 55, CPF savings can be withdrawn, except for a CPF Minimum Sum (initially set at SGD80,000 in 2003 and being raised gradually until it reaches SGD120,000 (in 2003 terms) in 2013) which is held in a designated retirement account; distributions from this (or an annuity, if the taxpayer has chosen to purchase one from a participating provider with their Minimum Sum) begin at the age of 62 (or later, if desired).
A Minimum Sum top-up scheme is also allowed, in order to boost retirement income.
A life annuity will pay out for the lifetime of the person in question, a straightforward monthly distribution will continue until the accumulated savings are exhausted.
Since foreigners (until/unless they become permanent residents) are not permitted to contribute to the Central Provident Fund, the maintenance of a private pension scheme is likely to be necessary. Once permanent resident status is obtained, CPF contributions are required, although the self-employed are only obliged to contribute to their Medisave accounts (although voluntary contributions to the Special and Ordinary accounts are permitted).