By Leong Sze Hian
I refer to the report “Govt to explore ways to increase use of CPF for buying HDB flats” (Channel News Asia, Mar 27).
One possible implication or policy change may be this: cash profits from the sale of HDB flats may have to be kept in one’s CPF account, and cannot be cashed out.
The possible implications of such a change may be as follows:-
- HDB prices may crash when people realise that no cash profits can be made
- Home buyers may prefer private property compared to HDB flats
- Those who subscribed to the asset enhancement policy may find that they have put all their eggs into one basket (HDB), and can no longer be monetised before retirement
Will HDB flat-owners only be able to monetise their HDB flat at age 55, 65?
What portion of the cash profits from the sale of HDB flats will be locked up in the CPF? All? 50 per cent? Will interest that would otherwise have been earned from the cash utilised be allowed to be cashed out?
At the current rate of increase of $15,500 per annum for the CPF Minimum Sum and Medisave Required Amount, the total at age 55 is projected to be $197,000, $352,000 and $507,000, in 2013, 2023 and 2033 respectively.
So, if you sell your HDB flat, but have less than $352,000 when you turn 55 in 2023, does it mean that you can only draw $5,000 at age 55 (unless you have property to pledge for up to half the Minimum Sum), with the balance payable as a monthly life annuity from age 65 under the CPF Life scheme?
Five things to note
With the recent CPF changes and the expected changes, there are 5 things that you may need to know before you turn 55.
ONE:
Upon reaching 55, if your CPF Special Account (SA) plus property pledge, is insufficient to meet your CPF Minimum Sum (MS), which is currently $117,000, your CPF Ordinary Account (OA) balance will be transferred to your CPF Retirement Account (RA) to make-up for the MS shortfall.
What this means is that you may no longer be able to use your OA balance to pay for your home mortgage.
So, if you are affected by this policy, use your entire OA balance to re-pay your mortgage before you turn 55.
TWO:
If you plan to downgrade to a smaller flat, the sales proceeds (CPF utilised and accrued interest) of your flat will also be transferred to your RA, if you have a MS shortfall.
What this means is that after setting aside the MS, you may have less available from your flat sale proceeds to pay for your smaller downgrade flat.
So, if you want to downgrade, do it before 55.
THREE:
Upon reaching 55, your OA and SA that is transferred to your RA to meet the MS, can no longer be invested.
So, if you want to invest your OA and SA, do it before 55. (note: first $20,000 of OA and $40,000 of SA cannot be invested.)
FOUR:
For those age 55 and younger from 2013 onwards, CPF Life will be compulsory.
So, if you plan to migrate, give up your Singapore citizenship, and want to withdraw your entire CPF as a lump sum, you should try to do so before 55.
Otherwise, only the surrender value of your CPF Life (depending on which of the 4 plans you choose) may be given to you. If you plan to migrate, choose the CPF Life Basic plan as it gives the lowest monthly annuity payout with the highest residue value.
FIVE:
When the OA is transferred to the RA to meet the MS at age 55, the OA also can no longer be used to pay for one’s own or children’s tertiary education fees.
____________________________________________
//There are too many Singaporeans who sold their flats and squandered away the sale proceeds within a short period of time. Thereafter, they would appear in front of their MPs to beg for rental flats.//
How many in respect to the total no. of withdrawals that a blanket rule has to applied to all ?
How about those who are disciplined enough not to do that ? Do you see a case of expediency that penalizes all rather than the many (how many) that you have mentioned.
//What the government is trying to do is simply to protect Singaporeans and ensure that they have sufficient funds when they retired.//
By locking their own money in accordance to a schedule of some minimum amount while that cpf money is also used to service some regular payments in the purchase of some important housing unit which happens to be priced by a public housing board belonging to same bigger interested conglomerate aka the government.
They are picking on the same circuitous trail of the housing-cpf-retirement route without really tackling (or not knowing how) the bigger issue of earning capacity (employment fundamentals) & the overall cost of living (both controllable & uncontrollable) of the general population (not those high net worth people).
I have always believe the max sum is 120k and not more.
Since when did have you decided to speak for the gov on anything more than crap sum above in your article.
Sze Hian is correct to use a projected max sum of ~$500K in 2033.
Look at the cpf website, the max ‘Minimum Sum’ is based on 120k in 2003 dollars and CPF’s projected inflation rate is about 5% per annum.
http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/Reach55-2.htm
Good luck with your calculations masterservant.
I don’t understand why a city which has so many so-called “talents” (foreign and local alike) still fails to see the pricing strategy for HDB flats. Where are all the so-called consultants and management gurus and marketing experts? I am sure they are also subjected to these pricing conditions since they live here. Perhaps they are all living in mansions and condos????
Well, I am a nobody, for sure. But after hearing what Mah Bow Tan kept saying in an interview with two other “guests” on CNA, I am surpprised no one picked up the truth in between the lines.
In that interview which was aired about a month ago (late April or early May 2010?), he kept insisting that the prices of HDB flats are priced according to “affordability”. After reflecting on this statement, I concluded that what MBT said can only be the truth. See, this is what he meant….(this is a simplistic illustration but you will get the idea):
I have no doubt that the govt definition of “affordability” is based on an average Singaporean income throughout his average “economic-active” life span (say between 21 ann 62 years old) or 40 years of working life. Let’s say the average income for this period is $1,500,000. After subtracting the average household expenditure, the average entertainment expense and travel and other personal expenses, the person is left with $700,000 disposal income for the 40-year period.
Well, this is the “value” ($700,000) the HDB flat will priced. Of course, there are several levels of pricing because there are several income levels but this is just an illustration. This “clever” way of pricing can resolve many political, economic and social issues in our society. Let’s enumerate some of them here:
1. Sporeans will not retire comfortable. They will have to keep working until they die. This is good for the economy when there is a shortage of workers. We can’t attract foreign companies if we have no workers, right?
2. This also means that if every Singaporean continues to work, they will have CPF and medi-shield and insurance paid for by companies, so the govt won’t have to bother much about them in old age, right?
3. Keeping Singaporeans thinking about their mortgage until they reaxch 62 is also an excellent politcal solution to silence Singaporeans because they won’t be sitting in coffeeshops and shopping malls thinking of ways to start politcal parties and complaining to the forums and creating all the flak about the government (same thinking here when they sent youths to NS too). You now know that the prices of flats are increasing because they have raised the retirement age!
4. If Sporeans are only self-sifficient (with little savings), they won’t be thinking about migrating too, which the govt is trying to curb. Afterall, how do you stop 70% of the population with goals to emigrate?
The pricing of HDB flats resolves all these issues with one stroke, don’t you think?
So, all you so-called property gurus, economists, financial advisors and what not, non of you really know what is going on, so you all should stop giving nonsensical summaries.
I share this not to make you more angry with the govt. I share this to tell fellow Singaporeans to ask an even deeper question – why do you think our society has come to this state? What is the real issue here? It is certainly not the govt or MBT. The real problem is you – Singaporeans. It is your state-of-mind, your attitide, your values, your lack of appreciate, your lack of guts, your lack of knowledge and your lack of will to make Singapore yours. Just look around you – you haven’t change. So, my guess is that the PAP will be here to continue to control your lives until you are able to see what matters in life.
Think about it. Stop blaming the govt. Is it not you who put the power in their hands? Now, the octopus has a tight grip on you.
From http://mycpf.cpf.gov.sg/Members/Gen-Info/Sch-Svc/S-and-S.htm
The CPF Minimum Sum is set at $123,000 from 1 July 2010 and will be raised gradually until it reaches $120,000 (in 2003 dollars) in 2013.
If you meet the CPF Minimum Sum, you will need to set aside a Medisave Required Amount when you withdraw your CPF. If you have less than the Medisave Required Amount, you can use your Special and/or Ordinary Accounts, in excess of the CPF Minimum Sum to set aside the Medisave Required Amount. This includes the first withdrawal upon reaching 55 and all subsequent withdrawals.
The Medisave Required Amount is set at $22,500 from 1 January 2010 and will increase by $2,500 (to be adjusted for inflation) each year until it reaches $25,000 (in 2003 dollars) on 1 January 2013.
You can also withdraw your CPF savings if you leave Singapore and West Malaysia permanently or become permanently incapacitated.
————————————–
Compared to the article’s “facts”…
YEY!! You little hottie, cool article in the Womans Days!