The CPF Minimum Sum (MS) is the amount a member has to set aside in his or her Retirement Account (RA) for retirement needs. The RA is set up when a member reaches 55 years of age, drawing from savings in the Ordinary and Special accounts (OA and SA respectively). During retirement, the savings accrued in the RA will then be disbursed monthly to the retiree.
At present, the MS is set at $117,000. It will rise to $123,000 with effect from 1 July, as reported in the news recently. CPF members are allowed to pledge property that was bought with CPF funds toward the MS, with the value pledged capped at 50 per cent of the MS.
According to the CPF’s web site, the property pledge for the CPF MS at age 55, has been changed to the following: “If you are unable to set aside your full Minimum Sum in cash, your property, bought with your CPF savings, will be automatically pledged for up to half of the Minimum Sum”.
The important thing to note with this rule is that if the shortfall is less than half of the MS (or $58,500, at the current level), the remaining value of the property ($58,500 less the MS shortfall) becomes irrelevant.
This is different from a previous “property pledge” rule, as seen in this 2003 CPF Board press release, which allows members to choose to pledge their property for up to half the MS.
Under this rule, members who are unable to meet the MS are allowed to pledge their property for up to the full 50 per cent of the MS – rather than just making up for the shortfall. Therefore, if their MS shortfall is less than the 50 per cent of the required amount, the remainder from the property pledge would translate into funds available for withdrawal.
Here’s an illustration. Currently, in the example given in the new CPF booklet “Reaching 55”, a person with $100,000 in the CPF Ordinary (OA) and Special Accounts (SA) can withdraw 30 per cent, which is $30,000.[1]
Under the new “property pledge” rule, the MS shortfall of $47,000 (current MS of $117,000 less the $70,000 retained in the RA) will automatically be pledged with property.
Under the old “property pledge”rule, this person would have been able to pledge the full 50 per cent of the MS, which is $58,500. This means he or she would be able to withdraw $41,500 (from the $100,000 in his or her OA and SA, less $58,500), as compared to just $30,000 under the new rule.
Another implication of this new rule will take effect in 2013. For members who turn 55 on or after 1 January 2013, the CPF cash balance can only be withdrawn after setting aside both the CPF MS and Medisave Minimum Sum. If this is not met, they can withdraw only $5,000 from their CPF account, regardless of any property pledge.
With the MS in 2013 being likely to be $135,000, assuming the current rate of increase of $6,000 per year remains constant, there may be more people who will face an MS shortfall when they turn 55.
Furthermore, since February 2009 , property sale proceeds must be retained in the RA if there is a shortfall in the MS. In some cases, where the member’s MS shortfall is too great, the property sale proceeds retained may be even more than 50 per cent of the MS. Part or even all of the net sale proceeds may not be available for the member to buy another property.
The view that one’s HDB flat is an asset enhancement – something one can monetised for retirement – may increasingly become less valid, with the MS increasing every year.
Given all the significance this “property pledge” rule change has on CPF members, it should be asked as to why there was no announcement made in Parliament or to the media?
To be sure, even the previous CPF booklet “Reaching 55” (attached) covering the period 1 July 2009 to 30 June 2010 showed the new “property pledge” rule.
So when exactly was this rule changed?
[1] The booklet states that “the figures here apply to members who turn 55 from 1 July 2010 to 31 December 2010”. I believe that this is because the Medisave Required Amount (MRA), currently fixed at $22,500, is scheduled for its annual increase on 1 January 2011.
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Yes, so sad, CPF is supposadly our money and yet we cannot touch it which leads you to question in the end, is it still our money and if not we should consider it a tax instead and if it is a tax, then we have some of the highest tax rates in the world. In other counrties, you pay the tax and the goverment looks after you when u retire. here the government asks u to work, say u are lazy and tells u to go clean tables and security guards or macdonalds. We need to do national service, pay so much money, have no social security and discarded like trash when old. We give so much and they yet ask for more, we have one of the worst social contracts here. If things do not change, its better to give up your citizenship and come back as a FT. Why be loyal to a country who treats you like trash.
CPF saving is our life long hard-earned money. PAP’s behaviour is like a monkey. What is a monkey good at? Stealing bananas! PAP through CPF Board steals our CPF savings to pay for their ministers’ high salaries. It is a breach of social contract by changing the rule to stop members from withdrawing full amount when reaching age 55. PAP leaders are hypocrites by pretending that they are taking care of members’ retirement!
When will the PAP Government stop acting as if we don’t know how to take care of our own CPF savings? If PAP Government really cares, use the Government fund to take care of retirees. No one is happy to say that: Well, you can have my CPF savings, and use my savings to take care of my future! What sort of Government is this?
In China, the Government gives retirees monthly Pensions not based on what they contributed from their salaries, but from Government fund in recognition of their contribution in building up the nation’s economy. The monthly pensions even increase 10% yearly to take care of rising costs of living and inflation.
Without the older generation, will Singapore economy come to this stage? Ungrateful PAP under LKY’s style of Governance!!!
What we want is the fair share of our money to be given to us at age 55 years old. The PAP/government think that singaporean are hopelessly STUPID in terms of taking care of their finance.
Every country are giving back the money that they hold from their citizen till age 50~55years old not SINGAPORE…???
WHY…WHY LKY and company ???? From the 60′s to 80′s and now to year2000….they keep deferring the date that we can take our money….? Question here is , are singaporean become stupidier with higher level of education achieved???? Looks like it as the 60′s we have a low educated workforce and the 80′s better educated and earn more workforce….then came year 2000…..!!! It shows the more educated singaporean are the more excused they gave us in order for singaporean to get their hands of their rightful money….!!! Is this money belongs to the government…..or PAP or LKY or LHL or TCH or whoTF it may be…????
Please all you minister , do not treat us singaporean as your slave or another stupid citizen. Instead YOU minister are the greatest thieves with licence to act.
Ooops I forgot to SAY that my vote goes to the opposition. All because of the CPF issue.Period.
Me too. I voted for opposition all because of CPF issue. When will PAP PM and Ministers wake up and get their hands off our CPF savings by giving us the right to accept or reject new rules when they shift the goalpost for which they have been so fond of doing without caring how the CPF members feel about it?
Can you imagine those around 55 years are highest in numbers now.If all were to withdraw at about the same time, where to find $$$$$.I never regret voting for opposition.
I would see it as a good thing as the interest rates from cpf are much higher than banks. Firstly, The money is for retirement, what if in the future, you really have no job when u are old and your savings are depleted as u paid for your child studies, CPF is able to provide you more till you are dead. The more money you put inside, the more you will get monthly. For those who complain, you might think that they eating you more money. Ya it is true but for your own good. You might be complaining again when you are old and out of job saying the mp are not helping you and not taking care of you. So why grumble over the help of saving for you when u are working? Think before stir emotions using such comments.
Are you sure we will live to use the monies. Even if we are alive at that time, we are too old to use the monies. These monies might be inherit by our child to help fence off sky rocket inflation.