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CPF: Leave at 55 at your own peril?

Leong Sze Hian /

I refer to the article 'Why do it without my permission?' (New Paper, Jul 17).

OA transfer to MA?

The article states that “(Jerry Low, age 58) a retired bank trader got a surprise when the CPF Board transferred $10,000 into his Medisave Account (MA) without his permission, after he applied to withdraw $37,000 from his Ordinary Account (OA) in June this year.

Mr Low had chosen to not withdraw all his money from his OA when he turned 55.

He opted for a partial withdrawal, leaving some money in his OA as the CPF interest rate of 2.5 per cent was higher than what the banks were offering.

He could do this as his Medisave Account and Retirement Account (RA) had the required amount.

Since 2008, Mr Low had used his Medisave to pay for some medical expenses, whittling away his Medisave Required Amount (MRA), which was $14,000 as of Jan 1, 2008.

However, the required amount was raised to $27,500 as of Jan 1 this year.”

Another COF change nobody knows about?

This is not the first time that CPF policies have been changed without anyone knowing about it – no announcement in Parliament or the media.

For example, the change in the CPF Minimum Sum (MS) property pledge rule at age 55 was changed so that it no longer helps you to withdraw more money at 55, but only to be pledged automatically against any shortfall in the MS.

Therefore, if one wants to avoid what happened to Mr Jerry Low, any CPF funds that can be withdrawn at 55, should not be left with CPF. Otherwise, as the MRA is raised annually in the future, the OA monies left at 55 may automatically be transferred to the Medisave account to make up for any MRA shortfall.

Since the MRA was increased by $5,000 this year (from $22,500 to $27,500), if this rate of increase continues, the OA monies which, in the past, could be withdrawn at any time, may gradually be eroded as a non-cashable asset – kind of like more and more money that may be stuck in your CPF that you may only be able to use when you are sick!

I would like to thank Jane (not her real name) for bringing the above issue to The Online Citizen.

I am also reproducing part of Jane's email on other problems that she has encountered with CPF below.

Parents divorce – no more 1st-timer?

“In year 2007, my fiancé's parents divorced; and in order to still have a roof over their heads, my fiancé decided to buy over half the house's share from his father, so that my fiancé and his mother could continue living in the home which they had lived in for 20 odd years.

As his father sold his share of the house to my fiancé, my fiancé and his mother would need to re-finance the HDB loan.

When applying for a new HDB loan, I believe HDB will review both parties' income and age as well. Due to the fact that my fiance's mum is working in a factory, her income is approximately $700 per month and as a result, her CPF contribution would not be enough to pay for the monthly home loan instalment Therefore, my fiancé decided to let HDB deduct the monthly instalments partially from his mother's CPF, and a bigger portion from his.

My fiancé was only 22 at that time, and by getting a HDB loan with his mother, and buying over the share of the house from his father, his CPF was wiped out. Also, he won't be considered a 1st timer should he want to ballot for a new BTO, as he's now considered a co-owner of the flat.

Early this year, me and my fiancé decided to get a flat on our own, so that we could settle down. But I realized we wouldn't be able to do so after all, unless we have at least $50k of spare cash. I checked with HDB, as well as my property agent, and I realized that our chances of getting a flat is lower than others as my fiancé is considered a 2nd timer, and chances are very low as HDB balloting would award more chances (95%) to first timers instead of 2nd timers. However, even if we are that lucky to manage to get a balloting number, I realized that by getting a new flat, and a new HDB loan with me, my fiancé would need to remove his name from the current flat he shares with his mother.

I understand fully the rationale of this as each individual is not allowed to hold on to ownership of more then one HDB flat.

We enquired with both HDB and my property agent friend about removing of his name, and what I found out makes me realize that getting a new flat for our future home is nearly impossible.

By removing his name from his current flat, whatever amount that he has used his CPF to pay for the flat - his mother would have to top up back in CASH, together with accrued interest. That's hurdle number one, as it amounts to close to $40k already. However, even if we managed to top up the $40k back in CPF eventually, his mother might not be able to get a new HDB loan on her own, due to her age & income.

All these limitations and rules makes me feel that it's a big burden which I definitely don't deserve.

Since CPF is required to be contributed monthly so that  we can use it for housing payments/purchase and even to use it when we are old, such regulations are forbidding young couples to get a new flat should he be so unfortunate that his parents get divorced.

At the rate that housing prices are rising, and the shortage of the supply, I really really pray that I could get a flat soon and then start my own family. But unless we have the cash ready to top up back into my finace's CPF account, I think we wouldn't be able to start a family on our own. Even if we did eventually manage to save $40k , by topping up into CPF, we might not have money for renovations or the purchase of furniture.

In this generation, I'm 24 this year, my fiancé is 26. I believe most of us believe that starting a family, means having our own home, and be financially stable. That's why I feel that when one of the ministers mentioned that starting a family doesn't necessary mean you need to have a home or be financially stable, I think that's rubbish.

So I have a question, what's the use of contributing to CPF, 36% per month, yet when we use it, end of day we have to top it back up, and the age for withdrawal of CPF is getting higher and higher.

I feel that, at the end of the day, when my life comes to an end, maybe all I could see and bring to my grave, is the yearly CPF statement only...

I hope to highlight to the public as well, about topping up of medisave account which happened to my father."

No Medisave, no hawker license?

"My father turned 55 in 2005. During that time, he was allowed to withdraw the full amount of CPF he had in his ordinary account, which he did. However after doing so, CPF board has been constantly sending him letters asking him to top up his Medisave account. My Father refused to as he felt that the money would not be useful. Because, even if you maintained the minimum sum required for the MA, at any point if you were to use it for medical purposes, you would have to put in cash to top it up to the minimum sum. Which is why my Father feels that it is not necessary to top up his MA Acc.

I feel that CPF board ought to explain all this clearly to the public.

To add on: my father owns a hawker stall, and the government refused to let him renew the rental unless my father's MA Acc is topped up to meet the minimum sum required.

I really do hope the government could do a detailed report on how exactly CPF works.

I'm now a working adult contributing to CPF monthly, and I'm contributing a lot, but I feel the uncertainty of making CPF contributions."

P.S. Leong Sze Hian (and TOC) would like to thank Jane for sharing the New Paper article with us, as well as sharing her story.