WHAT’S IN A CPF PROPERTY PLEDGE? ~ FACT or FALLACY Looking for a handy introduction to the property pledge? QUESTION 1. [Whats the property pledge all about?] ANSWER: When you reach 55, savings from your Ordinary Account (OA) and Special Account (SA) will be transferred to your newly created Retirement Account (RA) for your future retirement expenses. After setting aside the Minimum Sum (MS) in your RA (currently $155,000 for members turning 55 from 1 July 2014 to 30 June 2015) and the Medisave Minimum Sum (currently $43,500) in your Medisave Account, you can withdraw the excess savings. If your savings fall short of the MS: -> You can still withdraw up to the first $5,000. -> If you have used your CPF savings to pay for your property, your property will be automatically pledged to make up part of the MS. QUESTION 2. [Can I pledge my property to withdraw cash from my RA? How much am I allowed to pledge?] ANSWER: If you did not use your CPF savings to pay for your property, you can still apply to make a property pledge as long as you have set aside half of the MS in cash. This would allow you to withdraw up to any remaining cash balance in your RA (excluding the interest earned). The amount you can pledge will depend on a few conditions including the Minimum Sum applicable to you, the current value of the property, the outstanding loan(s) on the property, and the owner(s)’ share in the property. QUESTION 3. [Do I need to apply? Can you explain the process in detail?] ANSWER: If you did not use your CPF savings to pay for your property, you can still apply to make a property pledge as long as you have set aside half of the MS in cash. This would allow you to withdraw up to any remaining cash balance in your RA (excluding the interest earned). The amount you can pledge will depend on a few conditions including the Minimum Sum applicable to you, the current value of the property, the outstanding loan(s) on the property, and the owner(s)’ share in the property. QUESTION 4. [Does that mean my property will belong to CPF Board?] ANSWER: -> No, you will retain ownership of the property. -> Whether you can set aside the MS or fall short of it, you do not need to sell your property to top up your Retirement Account. -> If a CPF member with a pledged property passes away, ownership of the property will remain with his or her estate/co-owner(s). You’ve made a property pledge but eventually decided to sell your property. So, What’s next? You need to refund the principal CPF amount used for the property plus accrued interest (where applicable) in addition to the pledged amount. This is to restore your retirement payouts. QUESTION 5. [Sounds great! I can now withdraw more cash to meet my immediate needs.] ANSWER: Yes, but keep in mind that pledging your property to make up your MS means you will have less cash available for your retirement needs. For example, setting aside the full MS of $155,000 from your CPF savings would give you about $1,200 per month for life when you retire. Pledging your property for half of the MS (currently $77,500) would reduce the cash savings in your RA to $77,500, leaving you with only less than $700 per month. Your needs today are important, but so is building a solid foundation for your retirement years!
Posted on: Sat, 29 Nov 2014 06:10:43 +0000
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