Every year, changes are frequently being made to financial products, policies, rules, criteria, fees and more. While changes are meant to improve existing products and policies, consumers need to be aware of the changes made in order to make the right decisions. As we head into the new year, here are 8 key developments in Singapore’s personal finance space that everyone should know.
#1 SRS Can Be Used To Buy SSB
In December 2018, the MAS announced that investors would be able to use their Supplementary Retirement Scheme (SRS) funds to invest in Singapore Savings Bonds (SSB) starting 1 February 2019. This move expands the products available for SRS members to invest in.
In conjunction with this change, the MAS has also raised the individual limit for SSB from $100,000 to $200,000. This means that investors will now able to purchase up to $200,000 of SSB using their cash and SRS funds.
#2 New Riders Will Have To Pay At Least 5% Of The Bill
The Ministry of Health has announced that new Integrated Shield Plan riders will eventually have to pay at least 5% of bill or more. However, this co-payment amount will be capped at $3,000 annually. This annual cap will help to protect policyholders against large bills.
This measure has been agreed upon for new riders and insurers have until 1 April 2019 to introduce new rider policies that include the co-payment and annual cap. Furthermore, anyone buying a rider since the announcement has to switch to the new scheme by 1 April 2021.
#3 Keep Up To $20,000 In Your CPF OA When Taking A HDB Loan
Flat buyers that choose to take a HDB loan now have the choice to keep up to $20,000 in their CPF Ordinary Account (OA). Previously, flat buyers were required to use all the funds in their CPF OA account before taking the HDB loan. This change applies to flat buyers that have yet to collect their keys as well as new resale applicants. Flat buyers taking private bank loans are already given the option to leave funds in their CPF OA.
This move provides flexibility to flat buyers in using their CPF funds and also allows them to ensure sufficient retirement funds. This also provides buyers with an option to use these funds for monthly mortgage repayments to HDB should they have cashflow difficulties at some point in time.
#4 ABSD Raised By 5% And Tighter LTV Limits
Efforts to cool the property market have seen the Additional Buyer’s Stamp Duty (ABSD) being raised by 5% for individuals buying their second and subsequent homes, while the ABSD for entities was raised by 10%. This change does not affect Singapore citizens and PRs buying their first property as there is still no ABSD charge.
Loan-to-value (LTV) limits on residential property purchases have also been tightened by 5% for all housing loans. For example, prior to this change in LTV limits, individual borrowers could borrow up to 80%. With LTV limits being tightened by 5%, borrowers will only be able to borrow up to 75% instead.
#5 Introduction Of Careshield Life To Replace Eldershield From 2020
CareShield Life was introduced to replace the current ElderShield scheme. CareShield Life will be administered by the Singapore government and will come into effect from 2020. It will provide Singapore citizens and PRs with lifelong payouts at the cost of higher premiums. CareShield Life also provides universal coverage, allowing people with pre-existing disabilities to join the scheme.
Previously, ElderShield started at age 40 and Singaporeans and PRs were allowed to opt out the scheme. CareShield Life, on the other hand, is compulsory for all Singaporeans and PRs once they turn 30. Those who initially opted out of ElderShield can choose to opt to switch into CareShield Life from 2021.
The Ministry of Health (MOH) has also recently launched an online calculator for citizens to get an estimate of the premiums and subsidies for CareShield Life.
#6 Introduction of CPF LIFE Escalating Plan
The current CPF LIFE Standard and Basic plans offer level monthly payouts for life. The CPF LIFE Escalating plan was made available from 1 January 2018 and existing CPF LIFE members could switch from their Basic or Standard plans to the new Escalating plan from January to December 2018.
Under the CPF LIFE Escalating Plan, the monthly payouts will increase by 2% each year for the rest of your life. However, in return for the annual 2% increase, CPF members would start with lower monthly payouts. Under the CPF Escalating Plan, members will begin with a monthly payout of $560, a lower amount compared to the $640 offered in the Basic plan and the $720 offered in the Standard plan. This annual increase will help to take into account inflation and also benefit those that do not require higher starting payouts.
#7 New Rules For Young HDB Applicants
Previously, couples had to show that they have been continuously employed for 12 months prior to flat application. However, new rules have been introduced to allow young couples to defer their income assessment to just before key collection.
This allows couples that have not met the minimum period of employment to qualify for housing grants or loans, such couples who are students or national servicemen. This rule will help couples to save time in buying a new flat, allowing them to build up sufficient funds while waiting for their flat to be delivered.
Read Also: BTO Vs Resale: Which Should You Choose?
#8 Introduction of The Open Electricity Market (OEM)
The Open Electricity Market (OEM) was introduced to allow residential households to choose a retailer, to purchase electricity from. There are currently 13 electricity retailers in the market. Previously, households only purchased power from one retailer – SP Group. Households that choose not to switch will continue to purchase electricity from SP Group at the regulated tariff that is approved by the Energy Market Authority (EMA).
The new OEM allows households in Singapore select their own retailer and decide on which electricity plan is best for them. With different retailers fighting to get consumers to switch, consumers stand to enjoy better offerings, discounts and promotions.
These are the 8 key developments in Singapore’s personal finance space in 2018. We look forward to sharing with you more developments in the finance space that come in 2019.
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