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.
But not everyone is rich enough to migrate, and there are many
factors to really able to migrate. Do remember that in Singapore,
we kpkb about so much foreginers and PR. In EU, they kpkb on many
muslims from Middle East going northwards (Which is Europe,
dude!)
In Australia, there are also people looked down on Asian
people.
So why migrate because the end result is as good as we become
the 'PR of Singapore', but in another country's context!?
