by Leong Sze Hian
I refer to the article “CPF Minimum Medisave Amount to be raised” (Today, Dec 23). It states that-
“From next month, the CPF Medisave Required Amount will be raised from the current $22,500 to $27,500. This is to enable members to have enough savings to meet their healthcare needs during old age”.
This is an increase of about 22 per cent. According to the CPF board’s web site–
“after adjusting for inflation, the Required Amount (MRA) will increase by $2,500 (in 2003 dollars) each year until it reaches $25,000 (in 2003 dollars) on 1 January 2013”.
Since inflation for this year (2010), is only expected to be about 3.8 per cent, why is the MRA increase about 22 per cent (inclusive of the $2,500 increase)?
The year after the MRA was introduced on 1 January 2004, the increase was only from $2,500 to $5,100 on 1 January 2005.
Increasing the MRA now to $27,500 ($20,000 in 2003 dollars adjusted for inflation), means that the inflation adjustment for the last seven years is 37.5 per cent or 4.7 per cent per annum.
According to the Department of Statistics, inflation for the last seven years until November 2010, is about 17 per cent or about 2.3 per cent per annum.
Withdrawal rule reduced to 20%
What this MRA increase means is that for example, if a CPF account holder has $150,500 in his Ordinary and Special accounts but zero in his medisave account, he can only withdraw $24,600 (20 per cent withdrawal rule from 1 January, 2011 on current Minimum Sum (MS) of $123,000), at age 55, regardless of any MS property pledge.
At the current rate of annual increase in the MS and MRA totalling $11,000 a year (MS $6,000 plus MRA $5,000), when the MS withdrawal rule is phased out to zero in 2013, those who have less than $183,500 (current $150,500 plus $11,000 times 3 years), may not be able to withdraw anything at all at 55.
