CPF issue: 15 per cent use properties to meet up to half of Minimum Sum

About 15 per cent of active Central Provident Fund members used their properties to help meet up to half of the Minimum Sum last year, Minister for Manpower Tan Chuan-Jin said in Parliament on Tuesday, July 8, 2014. -- ST PHOTO: KUA CHEE SIONG
About 15 per cent of active Central Provident Fund members used their properties to help meet up to half of the Minimum Sum last year, Minister for Manpower Tan Chuan-Jin said in Parliament on Tuesday, July 8, 2014. -- ST PHOTO: KUA CHEE SIONG

SINGAPORE - About 15 per cent of active Central Provident Fund members used their properties to help meet up to half of the Minimum Sum last year, Minister for Manpower Tan Chuan-Jin said in Parliament on Tuesday.

He gave this figure when pointing out that, contrary to what some might believe, only half the Minimum Sum needs to be set aside in cash. Savings above that amount can be used to finance housing purchases, or be withdrawn through a property pledge.

The Minimum Sum is the amount a CPF member must set aside in his Retirement Account on turning 55.

In 2013, 50 per cent of those who turned 55 that year met the Minimum Sum. That includes those who did not have enough savings in their CPF and thus had their housing withdrawals pledged to meet it, as well as those who did meet it but pledged their property so they could withdraw CPF savings above half the Minimum Sum.

In a speech addressing eight MPs' questions on CPF, Mr Tan set out to "dispel misconceptions and myths that have surfaced in the recent public discussion" on the topic.

On the Minimum Sum, Mr Tan said the quantum is cohort-specific: "Once it is set for a particular cohort, it does not change."

For instance, the Minimum Sum for someone turning 55 between July 2014 and June 2015 is $155,000. That is higher than the $148,000 which had to be set aside by those who turned 55 last year - but the quantum has not changed for the older cohort.

How is the quantum decided? The $155,000 figure, for instance, is the amount needed for a monthly payout of about $1,200 in 10 years' time, when the current cohort reaches age 65. This is the Government's estimate of what a lower-middle income household will spend on daily living when they retire then.

Mr Tan said: "$1,200 per month in 10 years' time is not an excessive amount - it is equivalent to only about what $1,000 would buy today."

Correcting another misconception, he pointed out that if someone does not meet their Minimum Sum at 55, they do not need to top up the shortfall in cash nor do they need to sell their property to make up the shortfall. With a smaller amount, the monthly payout will be smaller - "and that is all".

Mr Tan also noted that while some CPF members are unhappy at their savings being locked up, others have voluntarily left their CPF savings in their accounts, even though they have funds in excess of the Minimum Sum.

"One reason why they do so is to continue to earn the risk-free returns on their CPF savings." As at December 2013, about 20 per cent of the cohort who turned 55 that year had balances above the Minimum Sum that were not withdrawn, he added.