Key CPF Changes from the National Day Rally

At the recent National Day Rally, Prime Minister Lee Hsien Loong addressed the issue of whether people have enough savings for their old age. He assured Singaporeans that home ownership and the CPF scheme - Singapore's twin pillars for ensuring that people have enough for retirement - will be improved to better support the poor and be made more flexible for all.

CPF members will be allowed to take out a part of their savings as a lump sum during retirement, subject to a limit, perhaps 20%, to ensure they receive monthly payments throughout their later years.

The Silver Support scheme will be set up to make annual bonus payments for the elderly poor who have insufficient CPF savings, no HDB flat or family support.

An advisory panel to be set up by Ministry of Manpower to study CPF changes like the the adjustment to the Minimum sum and how to invest CPF savings more widely to achieve higher returns.

Citing an example of the Tan family with a monthly income of $4,500, the Minimum Sum for the Mr Tan's cohort is $155,000. If he pledges his house, he needs to set aside only $77,500 in cash. But this means that he will get only $600 a month in CPF Life payouts after he retires. Most in the audience think that the Tans will need $2,000 a month after retirement at age 65. To get this monthly payout, he must set aside $250,000 in his CPF account at age 55 - more than the $155,000 Minimum sum for his cohort. Hence, the Minimum Sum scheme's requirements were not unreasonable. For comparison purposes, if they need $1,000 a month, he must set aside $120,000. If they need $3,000, he must set aside $380,000.

Mr Tan can get more money each month if he keeps working, rely on support on his children, use his personal savings or get money out of his house. 
(1) He can rent out one room and get about $700 a month. 
(2) He can move in with his children, rent out the whole flat and get about $2,500 a month. 
(3) He can sell the flat and move to a three-room flat or a studio apartment. If he tops up his CPF with the proceeds, he will get an extra $20,000 in Silver Housing Bonus. If he moves to a studio apartment, he will get $210,000 in cash and $800 more a month. 
(4) He can apply for the Lease Buyback Scheme. If he sells back 35 years of his flat's 99 year-old lease to the HDB, he will get a lump sum of $27,500 in cash and $900 more a month.

CPF Minimum Sum to go up from S$155,000 to S$161,000 for the cohort that turns 55 next year, but there is no need for more major increases.

The Housing Board's Lease Buyback Scheme, which allows owners of three-room flats and smaller units to sell a part of their 99-year lease to the Government in return for a regular income, will be extended to four-room flat owners as well. That means more than half of all flat owners can use their homes to ensure an income this way. However, the take-up rates are low so far as most elderly may prefer to leave the flat to their descendants.

Singaporeans are reminded of the retirement options that they have and to start saving for it when they are younger, so as to be adequately covered in their old age.