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CPF: can’t withdraw more at 55 even with property pledge?
Posted by Spiegel on May 23, 2010 60 Comments
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?
If you do stay in a HDB, contribute CPF like any other slave
and work as an employee. Then you got no right to critisize PAP .
Posted by Spiegel on May 23, 2010 60 Comments
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?
If you do stay in a HDB, contribute CPF like any other slave
and work as an employee. Then you got no right to critisize PAP .
:oIo:
