More cash upfront under enhanced lease buyback plan
Smaller sum goes into CPF; leases can vary and more will qualify
By Janice Heng, The Straits Times, 4 Sep 2014
Smaller sum goes into CPF; leases can vary and more will qualify
By Janice Heng, The Straits Times, 4 Sep 2014
Those who co-own flats can also unlock more cash upfront while putting less in their Central Provident Fund (CPF) Retirement Account. All owners can also choose how many years of their lease to keep, within limits.
Currently, they can retain only a 30-year lease. All flat owners will get a new option of keeping a 35-year lease. Depending on their age, they can reduce this to as little as 15 years for those aged 80 and older.
However, National Development Minister Khaw Boon Wan said he does not expect the change to result in a spike in interest in the scheme, which has seen a low take-up rate since its launch in 2009.
About 800 households have taken part so far, and Mr Khaw told reporters at a media briefing: "I don't think it will be in the tens of thousands... a few hundred definitely, maybe a few thousand."
Under the scheme, flat owners continue to live in their flats and sell a portion of their remaining lease.
The changes mean that for households with two or more owners, each owner has to top up his CPF Retirement Account to only half of his individual age-adjusted Minimum Sum, using proceeds from the sale of the lease.
Previously, proceeds were first channelled to meeting the full Minimum Sum. With the changes, flat owners can get more cash upfront, capped at $100,000.
"We have always said that the Minimum Sum is enough to look after the basic needs of a couple," said Mr Khaw. Owners will also get a cash bonus if they participate in the scheme - $20,000 for three-room and smaller flats, and $10,000 for four-roomers.
Fearing that some owners might "just spend or invest (the proceeds) unwisely", Mr Khaw urged seniors to be prudent.
Fearing that some owners might "just spend or invest (the proceeds) unwisely", Mr Khaw urged seniors to be prudent.
The Government will also raise the monthly household income ceiling from $3,000 to $10,000, making more seniors eligible. The minimum age is 63.
With four-room flats included, 75 per cent of elderly HDB households could potentially take part in the scheme, up from 35 per cent now.
About 290,000 HDB flats are owned by Singaporeans aged 55 or older, and 80 per cent of these flats are fully paid for.
Mr Khaw said that the best option for elderly couples is to live with their children and rent out their flat. "Should you need it, the option is there... but most people do not need it."
Asked if five-room flats might qualify eventually, he said: "Let's do it for the four-room (flats) first."
Property experts welcomed the changes. PropNex Realty chief executive Mohamed Ismail Gafoor said of the scheme: "It is finally ready to take off."
More cash a draw, but some prefer to bequeath their flats
Aim of revamp is to give people more options: Khaw
By Yeo Sam Jo, The Straits Times, 4 Sep 2014
Aim of revamp is to give people more options: Khaw
By Yeo Sam Jo, The Straits Times, 4 Sep 2014
Changes announced yesterday mean they could sell part of the lease on their four-room Bukit Batok flat back to the Housing Board (HDB) in return for something more in their pockets.
"If there is more cash, it will be more flexible for us. We can go for a holiday or invest the money," said Mr Wong, who is self-employed. His wife, 63, is a secretary. They have an adult son.
The couple take home about $3,200 every month. The revamp raises the income ceiling from $3,000 to $10,000.
Property experts say that, like the Wongs, other home owners will be attracted to the scheme now because of the greater cash proceeds promised.
"The most attractive incentive is the greater amount of cash that becomes available by reducing the Central Provident Fund (CPF) top-up to half of the Minimum Sum for co-owners," said PropNex Realty chief executive Mohamed Ismail Gafoor.
"The cash gives you the peace of mind that you have more flexibility with your money."
Agreeing, SLP International Property Consultants head of research Nicholas Mak said this change in the rules would make the most difference for elderly owners who are cash-strapped.
He said: "Those who need money urgently are more likely to join such a scheme, and they wouldn't want to see a large part of their proceeds go into CPF," he said.
From next April, co-owners of a flat will need to top up their CPF Minimum Sum by just half the amount that is now required, giving them more cash in hand.
The revamped scheme also gives owners more options over how much of their lease to keep. Currently, flat owners have to keep 30 years of the lease and sell the rest back to HDB.
Under the new rules, they must sell at least 20 years back to the HDB, but those aged 70 and older can keep just 25 years and sell the rest. Those aged 75 and older may keep just 20 years on their lease. Those 80 or older can choose to keep just 15 years.
All eligible flat owners will be able to keep a new maximum of 35 years on their leases.
"It is definitely something we are interested in," said Mr Wong. "But we might still hold back so we have the option of leaving the flat to our grandchildren."
Other residents, such as taxi driver Tan Ah Tee, also voiced the desire to hold on to their flats as their children's inheritance. "It is very expensive for my son to buy a new flat," said Mr Tan, 65, who lives with his wife, eldest son and daughter-in-law in a four-room flat in Bedok North. "I wish to leave it to my children and the future generations."
National Development Minister Khaw Boon Wan said the issue of bequest boils down to choice, and the aim of the revamp is to give people more options. "Different people have different needs, different preferences," he said. "It also depends on your relationship with your children, and whether you have children.
"I think the key is to make sure there are different kinds of options, and to let people choose."
R'ST Research director Ong Kah Seng said that the scheme's objective is to cater to elderly people who need to and are willing to monetise their property assets, and that this should take "centre stage" over the issue of bequest.
Mr Mak also noted that the value of the balance on the lease would go into a home owner's estate upon his death. He said: "The children may not get the flat, but they will get money from the flat."
More flexibility for Lease Buyback Scheme
By Olivia Siong and Joy Fang, Channel NewsAsia, 3 Sep 2014
Four key changes were announced for the Lease Buyback scheme on Wednesday (Sep 3).
Firstly, the scheme will be extended to four-room flats. This means that 75 per cent of elderly households will be covered - up from 35 per cent currently. Four-room households will also get a S$10,000 cash bonus when they participate.
By Olivia Siong and Joy Fang, Channel NewsAsia, 3 Sep 2014
Four key changes were announced for the Lease Buyback scheme on Wednesday (Sep 3).
Firstly, the scheme will be extended to four-room flats. This means that 75 per cent of elderly households will be covered - up from 35 per cent currently. Four-room households will also get a S$10,000 cash bonus when they participate.
Secondly, the income ceiling for those participating in the scheme will be raised from S$3,000 to S$10,000. Authorities said this will allow seniors who are still working or living with their family to qualify for the scheme.
Thirdly, the CPF top-up requirement for households with two or more owners will be relaxed. Households with two or more owners will no longer be required to top up their CPF Retirement Accounts to their full age-adjusted prevailing Minimum Sum. Instead, they only need to top up to half of the Minimum Sum, and have the option to withdraw more cash upfront.
Lastly, seniors can choose the length of lease to retain. Currently, elderly owners who qualify for the scheme can sell part of their flat’s 99-year lease back to the Housing and Development Board (HDB) in return for monthly payouts, keeping only a 30-year lease.
When the change kicks in, those aged 70 to 74 will have the option of a 25-year lease, while those aged 75 to 79 will have the option of a 20-year lease. Those aged 80 and above will have the option of a 15-year lease. Seniors can choose to retain up to a maximum of 35 years of lease.
National Development Minister Khaw Boon Wan had earlier said there are concerns about outliving the 30-year lease, while others feel the 30-year lease could be too long for those who are older.
Only about 800 elderly households have taken up the Lease Buyback Scheme since it was introduced in 2009. It is hoped that these enhancements, which will kick in from April next year, might attract more to the scheme. The changes follow Prime Minister Lee Hsien Loong's National Day Rally speech last month, in which he announced that the scheme will be extended to four-room flats.
HOW THE RELAXED CPF TOP-UP REQUIREMENT WILL BENEFIT THE ELDERLY
According to the Ministry of National Development, only two out of 110 joint flat-owners who took up the Lease Buyback Scheme in 2013 were able to retain some cash after topping up their CPF retirement accounts. In comparison, 140 of the 230 sole owners that applied last year were able to retain some cash after topping up their CPF retirement accounts.
Joint flat-owners will now only need to top up their accounts to half the Minimum Sum. Here is how it works: Take the example of Mr and Mrs Wong, a 65-year-old couple whose three-room flat has a remaining 65-year lease valued at S$350,000. If they retain a 30-year lease, they can sell the remaining 35 years to the HDB for S$148,000, which takes into account the flat's depreciation over time. The proceeds are then split equally between the couple, who each get S$74,000.
Under the existing scheme, if Mr Wong has S$20,000 in his CPF Retirement Account and Mrs Wong has S$5,000, they would have had to use all their proceeds to top up their CPF Retirement Account to meet the Minimum Sum of S$155,000. This means they would have received an additional S$810 in monthly CPF Life payouts and nothing in cash.
But come next year, the couple will need to meet only half the Minimum Sum, which would be S$77,500. So after topping up their accounts, this means that Mr and Mrs Wong would have S$18,000 in cash, though their additional monthly CPF Life payouts will fall to S$700.
However, Mr Khaw said that with additional cash proceeds, he is concerned that people may spend or invest unwisely: "My word of advice is, please think a little bit. If people persuade you to invest in some Brazilian property or something ... do not believe those things."
He also urged male senior citizens to use the additional cash proceeds to top up their wives' retirement accounts, if they had no other immediate needs. He said: "You are talking about this age group where most of the homemakers will not have much CPF and therefore not much in their retirement accounts.
"So I think it is the duty of the men now that you have this additional cash proceeds. Our rules do not mandate it, but you can voluntarily use it to top up your wife's retirement account, which I think is the proper thing to do, the responsible thing to do and also it is the wise thing to do, because where else can you get such high interest rates like in CPF?"
Today, about 290,000 HDB flats are owned by Singaporeans aged 55 and above, with about 80 per cent of these flats fully paid up, with no outstanding mortgage loan. So besides taking up the Lease Buyback Scheme when they reach the CPF drawdown age, seniors can also choose to sublet, or right-size to a smaller flat should they need the additional retirement income.