Chapter 4 Flashcards
CPF stands for…
Central Provident Fund
What is cpf
a compulsory savings scheme to ensure enough savings when retired or not working
main aim of CPF is to cover 3 basic needs in retirement
- Fully paid up home
- Insurance and savings for healthcare
- Steady stream of lifelong retirement income
CPF is a mandatory social security plan for…
- Retirement
- Healthcare
- Home Ownership
- Family Protection (HDB)
- Asset Enhancement & Investment
CPF is capped at…
- $6,800 NOW
- 1st Jan 2025: $7,400
- 1st Jan 2026: $8,000
4 types of CPF
- Ordinary Account (OA)
- Special Account (SA)
- MediSave Account (MA)
- Retirement Account (RA)
Use of OA
Housing insurance, investment, and education
Use of SA
Old age and investment in retirement-related financial products
Use of MA
For hospitalization express and approved medical insurance
RA
- created for you when you reach the age 55
- will set aside savings in SA and OA accounts
- then balance savings can be withdrawn in one lump sum
CPF contributions rates depends on…
➢ nationality (SC or SPR)
➢ Length of PR Status (for PRs)
➢ age group
➢ salary range
➢ nature of employment
CPF calculations will only consider
Standard interests, dont care about extra interest rate for ct
Standard interest for OA
- 2.5% p.a
- Reviewed quarterly
Standard interest for SA & MA
- 4% p.a
- Reviewed quarterly
Standard interest for RA
- 4% p.a
- Reviewed yearly
what is ordinary wage (OW) ceiling?
- limits the amount of OW that attract CPF contributions in a calendar month for all employees.
- will be capped at $8k in 2026
When calculating OA you need to…
- find MA and SA
- then minus from monthly contribution.
CPF allows you to use OA to…
- Buying HDB flats
- Buy or build private residential properties in SG
USE OF CPF OA
- to buy an HDB flat under the Public Housing Scheme
- to buy a private property under the Private Properties Scheme
- for full or part payment of the property price
- for payment of legal expenses, stamp duty and costs related to the property purchase.
- to service the monthly housing payments
CPF HELPS PROVIDE EQUITY
Since CPF OA can be used to help pay for the purchase of a house, this allows homeowners to take a smaller loan.
REMAINING LEASE OF PROPERTY
- Total amount of CPF that can be used for property purchases will depend on
- Extent the remaining lease can cover youngest buyer to age of 95.
How to ensure prudent use of CPF monies
- minimum lease requirement for use of CPF for property purchases.
- Lowered to 20 years (from the existing 30 years), in line with existing criteria for HDB loans
WHAT IF APPLICANTS ARE 55 YEARS OLD OR OLDER AND THE BALANCE LEASE IS LESS THAN 40 YEARS? (UNABLE TO COVER TO AGE OF 95)
- a CPF member has to set aside a FULL Retirement Sum in his Retirement Account from his Special Account. (why 40 years, because 55 +40 = 95 years)
- If insufficient, then OA savings will be used. Cannot withdraw any further to pay for his loan instalments. This applies to all cases.
AT THE AGE OF 55 YEARS, IF THE BALANCE LEASE IS AT LEAST 40 YEARS
- CPF member has to set aside a BASIC Retirement Sum in his RA from his SA.
- The same amount is pledged against his/her residential property
- If insufficient, then OA savings will be used. Otherwise, cannot withdraw any further to pay for his loan instalments.
Limits on use of CPF: HDB flat, directly from HDB, no loan…
Up to the purchase price of the flat or such amount as may be required by HDB
Limits on use of CPF: HDB flat, directly from HDB, w HDB loan
Up to the purchase price of the flat or the housing loan taken to buy the flat
Limits on use of CPF: HDB/DBSS, resale, w HDB loan
- Up to lower of purchase price or valuation price of property at time of purchase, if cannot set aside Basic Retirement Sum (“BRS”)
- Up to housing loan taken to buy flat, if can set aside BRS.
Limits on use of CPF: HDB/DBSS, resale, w Bank loan
Up to lower of purchase price/valuation price at time of purchase, if cannot set set BRS
Valuation Limit
LOWER of purchase price ( price at
which the property is transacted at)
OR
market value (based on valuation) of
property at the time of purchase
What if Balance lease is below 20 years?
- Cannot use CPF funds
- Can still buy, at your own risk.
- Have to use your own equity.
- Loans from financial institution is subject to approval
What id housing loan is still outstanding when VL is reached?
Owner can use additional CPF savings from his OA ONLY AFTER
* Current BRS is set aside in SA & OA for those below 55
* BRS set aside in RA, SA, & OA for those above 55.
Owner can only further use CPF savings up to…
Withdrawal limit (WL) only
WL
- Total amount all owners are allowed to use for property will increase by 20% of VL. No further CPF usage is allowed thereafter.
- AKA 120% of the Valuation Limit
