A long standing CPF sore remains untreated

In Financial competency, Financial planning, Political governance on 23/02/2015 at 5:29 am

On Friday, someone (no PAP rat) mumbled something about rising expectations as though it was a bad thing. I said given high ministerial and civil service salaries, very high expectations and standards must be the quid pro quo for the salaries especially as ministers and civil servants seem to have security of office despite non-performance (think Yaacob, Mah Bow Tan, Raymond Lim, Lim Hng Khiang). He conceded the reasonableness and fairness of the link.

Yesterday, I read something in TRE which should have been solved a long time ago by the PAP administration (ministers and senior bureaucrats) but not: S’poreans, after the age of 55, having to make HDB* mortgage payments in cash , even though they have some money somewhere in the CPF accoint which remains locked up..

I been driving taxi for the past 5 years now and recently turned 55. For the past 9 years, I have had zero CPF contributions and have slowly used up all the remaining balance in my CPF Ordinary Account to pay for my monthly HDB loan. I even had to give up all my insurance policies, since I couldn’t afford to pay the premiums any longer.
Earlier in the year, I sought assistance from my PAP MP to use my CPF Special Account, which still had about $90K balance left but which is utterly useless since it falls far below the stupid Minimum Sum of $155K. After my MP’s appeal, CPF Board allowed usage of my Special Account to pay my monthly HDB loan (of course la, appeal from PAP MP what!).
To my huge surprise, I have now received an officious letter from HDB asking me to pay cash for my monthly housing loan because of my turning 55. This means that my Special Account has now been converted into a “Retirement Account” and because it falls way short of the $155K Minimum Sum, I could no longer use my stupid CPF to pay for my HDB loan. This is how idiotic the law works against those Singaporeans like myself who are struggling to make ends meet everyday.

On Facebook someone posted this in sympathy:

Many people will not have that minimum $155k in their CPF when they turn 55 because a lot of it will have been used to pay for housing. Unless they bought their house at the age of 25, many will still be serving their home loans when they reach 55**.

So, if they do not have the minimum $155,000 in their CPF by the time they are 55, does that mean they must use cash and cannot use the monies in their CPF?

What if after using cash, they only left with a few hundred dollars each month?

Who knows? Maybe after 55, they start to get pay cuts and their children are in their early 20s and servicing their own education loans?

I cannot fault the logic of these complaints.

There should be provision within the rules to ensure that someone in this situation can automatically keep on using his “Retirement Account” to fund his HDB mortgage payments. “Lose the flat so that he got retirement fund”: WTF?

Sadly the whole CPF system is in such a mess that the following extract from the FT about the USSR reminds me of the problems of reforming the CPF system: Before the Soviet Union collapsed, Russians compared the problem of breaking free from their Communist past to a frog in a swamp that wants to jump out but finds it has a hippopotamus stuck to its backside.

The PAP will only tinker with this sacred cow and Hard Truth.

But will S’poreans trust an Oppo coalition (assuming the WP joins such a coalition) to solve the problem? Somehow I doubt this too.because support for the opposition comes from disenchantment with the PAP administration – and is not a vote of confidence for the opposition parties.

So the tinkering goes on but let’s hope this sore is treated soon.

*Actually all mortgage payments but if one has private property, one can look after one’s self.

**And do remember that the really rich minister said a HDB flat was affordable because it could paot-off over 30 yrs. The HDB now restricts the period to 25 yrs.

  1. The promotion or tying in of a house to be synonymous with govt provision or with CPF OA should have never be there in the first place to begin with. It encourages less than critical thinking and short sightedness when it came to home buying. I know people who bought homes depending on simply whether their current CPF contribution could sustain the monthly installments without factoring reduction over the years.

    That surely contributed more to the asset inflation of residential property than foreign buying.

    I believe nowhere else in the world is such dependent thinking (implicit or imagined assurance that the same pot of money for retirement will take care of housing) encouraged.

    They always had to make a decision between rent or buy.

  2. That taxi uncle can pledge his flat for half of the MS i.e. $77,500. So he can withdraw $90K – $77.5K = $12.5K. He shld then use this $12.5K towards capital repayment of HDB loan. Better than nothing.

    Anyway the problem is he’s wearing a hat too big for his head. Shld have downsized back in 2013 as the property market was topping.

    PAPies already fucked the retirement system in 1986 when they allowed people to use CPF to buy properties wholesale. It was short-term thinking, an expediency to boost the lacklustre economy after S’pore’s first major structural recession, to provide a permanent lifeline to the banking & construction industry, and to tie people down to immovable assets in the name of nation building. As a result of this CPF “liberalisation”, HDB prices shot up by almost a 1000% between 1988 and 1996, destroying CPF’s capability for retirement as more & more CPF monies ended up in bricks & mortar.

    PAPies already opened Pandora’s box and they cannot undo it without destroying the economy and the lives of 3 million Sinkies.

  3. […] – TOC: Back-track for Budget 2015 – retirement adequacy – Thoughts of a Cynical Investor: A long standing CPF sore remains untreated […]

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