Effective last year, if you sell your HDB flat after age 55 to downgrade to a smaller flat and to monetise your flat for retirement, any CPF utilised plus accrued interest has to be returned to the CPF account if the CPF Minimum Sum (MS) has not been met.
With the current MS at $117,000, what this policy change means is that this sum cannot be used to purchase the smaller flat downgrade.
Why are we making it harder for Singaporeans to downgrade to monetise their flat for retirement?
Many Singaporeans subscribed to the call for asset enhancement by purchasing HDB flats – only to be hit by the policy change now, which in effect, may result in their inability to cash out of their “enhanced” HDB asset.
The CPF Minimun Sum (MS) was raised from July 1, 2009, for those aged 55 years, to $117,000, up from $106,000.
This is an increase of 10.4 per cent, much more than the inflation rate for the previous year, which was 6.5 per cent. How can the increase in MS be “an adjustment for inflation, is to ensure that Singaporeans set aside sufficient savings for their retirement?”
Similarly, the MS was increased by 6.4 per cent in July 2008, from $99,600 to $106,000, when inflation was only 2.1 per cent in 2007.
With the current recession, some of those reaching age 55, may have lost their jobs or failed in their businesses, and thus a large increase in the MS, may cause some financial stress to them.
As last year’s increase is the highest in the history of the MS scheme, at its current quantum of increase, does it mean that by 2013, the MS may be about $161,000 ($117,000 now plus $11,000 increase for 4 years)?
The Longevity Insurance Committee’s (LIC) CPF Life report last year only projected a MS of $134,000 in 2013 (chapter 4).
Adding the projected Medisave Required Amount (MRA) of $36,000 in 2013, does it mean that those reaching age 55 may only be able to withdraw $5,000, if they have less than $197,000 (MS $161,000 plus MRA $36,000) in their CPF?
How many Singaporeans will have more than $197,000 in their CPF in 2013?
The answer can be found in the LIC report: only 60 per cent are projected to have at least $67,000 in their CPF in 2013.
At the current rate of increase of $15,500 per year ($11,000 MS + $4,500 MRA), will the combined MS and MRA be $352,000 and $507,000 in 2023 and 2033 respectively?
Leong Sze Hian