One of the main way Singaporeans can tap on our CPF funds before retirement is for our housing needs. We can use CPF to pay both our housing down payment and housing loan instalments. This means when we buy property, our housing decisions which can also have an impact on our CPF funds.
Here are 4 statistics that show how our housing decisions affect our CPF funds, according to CPF’s CPF Trend Report.
#1 80% Of Homeowners Had Sufficient CPF Savings For At Least 6 Months Of Instalments
According to CPF’s latest statistics, 8 in 10 homeowners under 50 years old who used their CPF funds to pay their home loan had kept aside sufficient CPF savings for at least 6 months of instalments.
Currently, flat buyers have the flexibility to leave a sum of any amount up to $20,000 in their OA which acts as an emergency buffer to cover housing instalments in times of need. By leaving $20,00 in your OA, it could carry you through one year of HDB loan repayments without topping up CPF contributions or cash.
There are additional benefits of doing so, too. The first $20,000 in OA can earn you up to 3.5% interest rate which is a higher interest than the HDB home loan interest rate of 2.6%. You can even grow your savings even further by transferring some OA savings to your Special Account (SA) and earn up to 5%. However, since you can’t transfer funds from SA back to OA, it is important to consider if you have sufficient funds before doing so.
#2 Elderly Singaporeans Having Sufficient CPF Savings For At Least 6 Months Of Instalments Drops To Below 50%
Source: Central Provident Fund
While 80% of homeowners have sufficient CPF savings for 6 months of instalments, this is less true for those in the older age groups. About half of those aged 55 and above do not have sufficient CPF savings for 6 months of instalments.
This could be due to many reasons. The elderly may just have fewer CPF savings to tap on as they had fewer CPF contributions in their younger years. They may have used up the bulk of their CPF savings in earlier repayments of their mortgage.
Also, at age 55, a significant portion of our CPF savings would be moved to our Retirement account (up to the Full Retirement Sum). Unless we choose to reserve a portion of it, our OA funds may be channelled to funding our RA. Additionally, Singaporeans aged 55 onwards are able to withdraw a percentage of their savings in Special Account (SA) and OA after setting aside their Retirement Sum, in their Retirement Account (RA). With the option to withdraw available, the elderly (especially those over the age of 65) may choose to withdraw instead of keeping funds within their OA.
Regardless, the insufficiency of CPF savings for these groups of homeowners would mean that in times of financial need, they would not have a cushion of CPF savings to fall on to service their housing loans. This could be worrisome if they do not have adequate cash savings to fall back on.
#3 87% Were Able To Fully Refund The CPF Used When They Sell Their Property
Source: Central Provident Fund
Home ownership in Singapore is high and one main reason is that people in Singapore can use their CPF savings to pay for their properties. But when using CPF savings for property, one must refund the principal amount withdrawn with the interest that would have accumulated if the funds weren’t used to pay for their property, when you sell your property.
CPF savings in our OA accumulate 2.5% interest with an additional interest of 1% for the first $20,000. If CPF savings were not used for buying property, it would have grown with interest in the OA which would go towards supporting our retirement needs in the future. So, if we used our CPF savings to purchase a property and subsequently sell it, we would have to refund the amount withdrawn with interest.
In 2020, 87% of Singaporean homeowners who sold their property were able to fully refund the CPF savings used plus accrued interest. The remaining 13% weren’t able to fully refund the CPF funds.
If they had sold their property at market value, they do not have to top up in cash, even though the selling price was not enough to fully refund the CPF savings used with interest. But if they sold the property below valuation, they will need to top up their CPF in cash.
#4 More Elderly Singaporeans Are Using Housing Monetisation Schemes
Under LBS, homeowners at least 65 or older will sell their remaining lease back to HDB and receive cash payment of up to $20,000 upfront. The amount of cash payment will depend on the size of your flat. The remaining net proceeds will be used to top up your CPF Retirement Account (RA), which can be used to join CPF LIFE, which will provide you with a monthly income for life.
For lower-and-middle income elderly homeowners who do not wish to sell their flat back to HDB can opt for SHB. The scheme basically allows an elderly homeowner to right-size from a HDB 4-room to a 3-room or smaller flat. The sales proceeds from the downgrade will then be used to top up their CPF RA. Using the sales proceeds, if the homeowner tops up $60,000 to their RA, they would receive a maximum cash bonus of $30,000 under SHB. Otherwise, a pro-rated cash bonus will be given based on a 1:2 ratio, i.e., $1 cash bonus for every $2 top-up done.
A total of $133 million was paid out in cash through these schemes to 2,500 households, averaging around $53,000 in cash bonus and take-home cash from net sales proceeds per household.
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