CPF & Medisave minimum sums, Medisave contribution ceiling to be raised

[AlphaQuant]

CPF members who turn 55 between 1 July 2013 and 30 June 2014 will need to set aside a minimum sum of S$148,000 in their Retirement Account.

I find this rather interesting (scary?) - the original MS intention was
"The CPF Minimum Sum will be raised gradually from $80,000 to $120,000 in 2015 (in 2003 dollars) to help CPF" - this implies an inflation of 3.4% p.a.

with 148k (2014) versus 80k(2003) - this implies an inflation rate of 5.75% p.a. So despite core inflation measured at ard 2.5-3.5%, the inflation number that working people need to be concerned abt should be more like 6% (i.e. healthcare on top of core-inflation), not to mention housing.

rather scary if u project the 6% number into the future - a 25y.o. currently needing 148k in the MS will need in 30years time ... 148k*1.0575^30= 792k ??

[HitandRun]

Bro

I think your time frame should be taken in context.

I refer to the following document:

MSS History

In particular the following statement:

In addition, with increased life expectancy, members need to setaside enough savings for a longer period of retirement. Hence, the CPF Minimum Sum will beraised gradually until it reaches $120,000 (in 2003 dollars) in 2013, with the amount thereafter adjusted yearly for inflation.

In other words, the intention of the original increase from 80k to 120k was to take into consideration higher longevity.

If you are interested in computing the annualised rate of inflation, you should compare 148k (current) Vs 115k (in 2003 dollars).

2003 Equivalent Dollars

[pubster]

If you look at the CPF website, it indicated that the Minimum Sum was set at $80,000 in 2003 and will be raised gradually until it reaches $120,000 (in 2003 dollars) in 2015.

http://mycpf.cpf.gov.sg/CPF/my-cpf/reach...ch55-2.htm

Looking at the table provided over there, during 1st July 2012, the minimum sum target to be hit is $113,000 (in 2003 dollars). After accounting the inflation, it is $139,000 (in 2012 dollars). If you calculate the compounded interest for the nine years (2003-2012), it will be 2.33%. As such, we can say the average inflation over the 9 years is 2.33%.

If we use this interest of 2.33% to calculate, at 2015, $120,000 in 2003 dollars will be $158,000 in 2015 dollars. So we can estimate the minimum sum will most likely be raised to $158,000 by 2015.

But if one look closer, the inflation rate used each year is different. What worse is there is a trend of using higher inflation each year. At 2011, the average inflation rate was 1.97%. At 2008, 1.17% was used. So taking into account of higher inflation these 2 years, the government might used a higher inflation rate.

As such, if 3.5% is to be used, $120,000 in 2003 dollars will be $181,000 in 2015. Hopefully it will not come up to this figure...


P.S. I suspect my method of calculation might be wrong so please correct them if it is so.

[Greenrookie]

Bro

I think your time frame should be taken in context.

I refer to the following document:

MSS History

In particular the following statement:

In addition, with increased life expectancy, members need to setaside enough savings for a longer period of retirement. Hence, the CPF Minimum Sum will beraised gradually until it reaches $120,000 (in 2003 dollars) in 2013, with the amount thereafter adjusted yearly for inflation.

What is the implication when property is pledge to make up the shortfall in cash?? When we sell the house the proceed need to be offset against the amount??

In other words, the intention of the original increase from 80k to 120k was to take into consideration higher longevity.

If you are interested in computing the annualised rate of inflation, you should compare 148k (current) Vs 115k (in 2003 dollars).

2003 Equivalent Dollars

What is the implication when property is pledge to make up the shortfall in cash?? When we sell the house the proceed need to be offset against the amount??

[HitandRun]

Greenrookie

AFAIK, as long as you own a residential property, it can be used as a pledge. Should you decide to become "propertyless" post 55 year old, then you will have to top up the remaining 50%.

[Temperament]

If you don't like what's happening to your CPF money especially the MSS and Medisave, can you do anything? Actually i have higher vested interest in CPF operation now after joining CPF LIFE. So status quo is the best situation for me. I don't like but still join because of higher payout for whole life. Though the bequest is so much lower. In fact it is ZERO after age of 75. Of course for in exchange of protecting my income for life. In a way i am protecting my son also.--That is if i live more than 85 years. So actually only after 85 i started to benefit from CPF life. To tell the truth the only reason that attracts me to join is the 11% higher payout immediately > if i would have to use my MS to self insured till 85. God bless all those who lives to 99.
Shalom.

[sgd]

what to do? you must play in their court by their rules whether it pop white paper or new cpf ms you happy or not happy once it goes thru parliament and approved by vote it is legal they can ignore any and all criticisms.

All these problems are within our grasps to find solutions. We don't need PAP to go away, some people are afraid. All we need is for voters to put 30 more opposition MP's in parliament and they can tai chi this kind of thing.

[john-chin]

What is the implication when property is pledge to make up the shortfall in cash?? When we sell the house the proceed need to be offset against the amount??

That is mentioned in the CPF website here

You may pledge your property up to 50% of the Minimum Sum. In the event that the property is sold or otherwise disposed of, you are required to refund the pledged amount plus accrued interest to your Retirement Account.

Now the next obvious question is: What happens to my pledged property, if I die without ever selling/disposing the property?

[smallcaps]

What is the implication when property is pledge to make up the shortfall in cash?? When we sell the house the proceed need to be offset against the amount??

That is mentioned in the CPF website here

You may pledge your property up to 50% of the Minimum Sum. In the event that the property is sold or otherwise disposed of, you are required to refund the pledged amount plus accrued interest to your Retirement Account.

Now the next obvious question is: What happens to my pledged property, if I die without ever selling/disposing the property?

Should form part of your estate loh, governed by will if any, otherwise by intestate rules. No need to refund cpf thus nothing to do with cpf nomination, i guess.

[specuvestor]

^^^ depends how the ownership of the property is structured. If HDB joint tenancy it will pass to the surviving joint tenant(s).