Banks can consider CPF Life payouts as retirees’ income for new unsecured loans: MAS

SINGAPORE – Retirees above 65 years old who get decent monthly payouts from CPF Life can qualify for new unsecured loan facilities such as credit cards if they pass the $15,000 annual income threshold set by the Monetary Authority of Singapore (MAS).

While MAS does not prescribe specific incomes to assess a borrower’s eligibility, it notes that banks can look at regular incomes that retirees get, such as rents, interest or dividend and annuity payouts, such as those from CPF Life or private insurers. Borrowers must show that they are currently earning such income to qualify.

The issue of eligibility of older folk for credit cards was highlighted in The Straits Times Forum recently when 64-year-old retiree Brian Yim wrote about his plight of

having an existing card from Trust Bank cancelled

just because he wanted to increase its $2,000 credit limit for an overseas holiday.

He submitted his Central Provident Fund (CPF) statement, which showed that he had more than the prevailing enhanced retirement sum of $426,000, but the bank asked instead for a bank statement that shows a cash balance of $750,000.

An MAS spokesperson told The Straits Times that another qualifying test for retirees above 55 is to have a minimum net worth of $750,000 because if this amount is put in a fixed deposit that earns 2 per cent interest, for instance, the annual income would be $15,000.

This means that regular income is still preferred for paying bills. Hence, banks “may consider various up-to-date income sources, such as a borrower’s rental income and annuity payouts”, the spokesperson said.

ST learnt that most banks do not look at retirees’ CPF for credit checks, but this practice is likely to change with MAS’ confirmation that the CPF Life payout is a good income source, especially since such lifelong income is guaranteed by the Singapore Government.

Those reaching 55 in 2025 will get monthly payouts of $1,700, or $20,400 annually, from age 65 if they save $213,000 in their Retirement Account.

They can also choose to top up to the maximum of $426,000, for a monthly payout of $3,300, or $39,600 annually.

Mr Yim, who turns 65 later this year, says his expected payout would more than exceed MAS’ $15,000 threshold but he has no intention of reinstating his Trust credit card. “I am now happily charging to my five other credit cards that better deserve my business,” he said.