People think the biggest problem in life I face as a freelancer is not being able to decide whether to spend my morning sleeping in or having brunch. Only a fellow freelancer understands that for every morning you sleep in till 1pm, there’s a high chance you were up till 4am trying to meet a deadline.
Well, at least one things for sure—as a freelancer, you’re not alone. As of June last year, about 180,000 of us relied on freelance work as a main occupation. That’s about 8% of the working residents in Singapore. In addition, many Singaporeans have started earning freelance income on the side while working regular jobs, such as by moonlighting as Uber drivers.
Now, it seems the government has been studying freelancers has a group in a bid to see where they can be helped or, shudder, regulated. Retirement adequacy has been flagged as one issue. Here are what many freelancers are actually concerned about.
Most are not in favour of forced CPF retirement savings even if they make voluntary contributions
If you actually speak to freelancers on the street, you’ll find that nobody thinks forced CPF savings would help—many of whom who are actually making voluntary CPF contributions.
Benjamin, a 34-year-old private tutor who earns a five figure monthly sum, has been making voluntary CPF contributions ever since he became a full-time tutor.
“The main reason I make CPF contributions is not because I want to force myself to save, but because I thought it would make life easier for me when applying for and arranging for the loan to pay for my BTO. If not for the flat, I would not have made CPF contributions. I have my own retirement plan including life insurance and share investments and, when my BTO is ready, I will rent out rooms in my home for passive income,” he says.
Nadine, a 36-year-old freelance videographer, has been making CPF contributions voluntarily, but is glad she has the choice not to make them if necessary.
She says, “As a freelancer, my income fluctuates. When I take on contract jobs, I often find myself working very hard for a few months, but once my contract ends I may have no income for some time until I find my next job. I feel more secure if I keep more cash on hand towards the end of a job. It’s not that I want to splurge all that money. But once I transfer it to CPF I can’t take it out again.”
More flexibility with regard to Medisave contributions would help
While some freelancers willingly transfer cash to their CPF Ordinary and Special Accounts, just about every freelancer bemoans the need to transfer such a big chunk of their earnings to Medisave. Medisave contributions are compulsory for all freelancers regardless of whether or not they contribute to their CPF Ordinary and Special Accounts.
Under 35s earning more than $18,000 per year are required to make contributions of 8% of their income, up to a maximum of $5,760 per year. If you’re aged 35 to below 45 and earning more than $18,000, you have to contribute 9%, up to $6,480 per year.
For employees, the advantage of having their money held in their CPF accounts, other than the interest, is the fact that they can benefit from employer’s contributions at the same time
Freelancers, who do not have this option, often prefer to simply save the cash themselves by opening up a separate account, or in the case of excess funds, to invest it in their own ways.
Benjamin says, “As a self-employed person, I don’t have insurance from my employer, so I buy quite a lot of insurance, including medical insurance and life insurance. I need to fork out quite a bit of money for my insurance premiums. However I’m not allowed to use Medisave to pay for most of it. The irony is that the insurance prevents me from having to rely on the money in my Medisave account if I fall sick. Medisave would be more useful if I could use it to pay more of my medical insurance premiums.”
In fact, this concern about having to foot their own medical insurance bills is one many freelancers have. Many companies have a company doctor or reimburse their employees for medical and dental bills, in addition to offering paid medical leave. As freelancers have no such benefits, some feel they should be allowed to tap into their Medisave accounts more easily.
“If I fall sick I need to fork out my own money to pay for my medical bills while not being able to work and earn money. Yet I have thousands of dollars sitting in my Medisave account that I can’t use,” says Vera, a 32-year-old freelance piano teacher.
“Employees don’t have this problem as their companies still pay them when they go on MC, and many will even reimburse their doctor’s bills.”
Since Medisave needs to be topped up every year come what may so long as one is economically active, it is difficult to see how allowing freelancers (or, indeed, everyone) some flexibility when it comes to making withdrawals would be detrimental to their long-term medical needs.
The financial challenges faced by freelancers are quite different from those encountered by salaried employees, and it appears the inflexibility of the Medisave system could actually be making it difficult for freelancers to have their healthcare needs met.
What are your biggest retirement and healthcare concerns as a freelancer? Tell us in the comments!