Query on property pledge for Min Sum

[fat al]

Didn't see any mention of own cpf used to pay for the property in the cpf board's examples for property pledge. Residual value seems to be valuation minus loan only. So is it actually unrelated to own cpf usage for the property?

See link:

http://mycpf.cpf.gov.sg/NR/rdonlyres/1CD...pledge.pdf

Note the distinction of CPF usage by Co-owner and CPF member.
Only cpf usage by Co-owner is relevant. I suppose the logic is that cpf usage by CPF member goes back to ordinary account when property is sold, thereby meeting the pledged amount, so no deduction required in computing value for pledging minimum sum.

[aspeed]

Note the distinction of CPF usage by Co-owner and CPF member.
Only cpf usage by Co-owner is relevant. I suppose the logic is that cpf usage by CPF member goes back to ordinary account when property is sold, thereby meeting the pledged amount, so no deduction required in computing value for pledging minimum sum.

Thanks for pointing out. I miss the differentiation between owner and co-owner. Was wondering why pledge value minus off the CPF used as it go back to CPF anyway, now it make sense as it go back to the co-owner's cpf as well.

[WolfT]

Note that the pledge cannot be more then what u paid using OA for your property.

I'm afraid this is not correct, but its the opposite. How much that can be pledge depends on "residual" value of the house. Generally, residual value is market price less outstanding loan and less what has been paid using CPF. Or simply how much cash you will get after you sell the house. This is because when house is sold, it need pay back outstanding bank loan and top back any amount used from CPF (including interest).

So the lesser you have used CPF to pay loan, the more you can use to pledge (limit to $77.5k). But if house has very residual value, then no need to bother.

Residual value is only valuation less loan only...
Pls chk again, all the example in CPF showed that residual value is valuation less loan.

The MORE you use the CPF to pay off your loan, the MORE you can pledge(limit to half MS). I assume that half of residual amt will always be more than half of MS and no cash topup to service your loan.

[specuvestor]

I believe CPF is ours and (under limited constraints) we should be able to do what we want with it. Thanks.

^^ sounds right because the original intent of this pledging is to let folks take out money even when their money is tied up with properties, mitigating the asset rich cash poor situation

In the first place i dont agree to CPF being used to fund properties... It defeats the purpose of a retirement fund and it makes as much sense as the policy of extending car loan tenor so to make it more "affordable"

The right but difficult policy is to slowly remove CPF from the property equation and hence scrap this pledging thingy. Obviously not going to be a welcome move but like LKY said, it's much easier to give than to take back.

Let me know if are able to find a pension scheme elsewhere where you can buy property and without a tax on the withdrawal.

CPF is ours is correct but "should be able to do what we want with it" defeats the purpose of a retirement fund

Once we understand it is a pension, we will understand why CPF schemes are structured this way, including this pledging scheme. Whatever u took out from the retirement fund will be the amount that u can pledge up to the limit. If the member passes away, the purpose of retirement does not exist anymore and the property is transferred to beneficiaries.

But if one doesnt understand the purpose of a retirement fund, then all these schemes from SRS to minimum sum makes no sense in the arguments

[aspeed]

Residual value is only valuation less loan only...
Pls chk again, all the example in CPF showed that residual value is valuation less loan.

The MORE you use the CPF to pay off your loan, the MORE you can pledge(limit to half MS). I assume that half of residual amt will always be more than half of MS and no cash topup to service your loan.

Yes correct as Fat al has pointed out. However also note that there is no requirement to used cpf for the house beforehand in order to pledge.

[piggo]

Think CY09 phrased his question wrongly.

There are 2 schemes available upon reaching drawdown age (or funky acronym DDA), the CPFLife and the Minimum Sum Scheme.

CPFLife is for lifetime payouts, with the amount depending on their mood and the amount of money in your RA. There is an estimator for us to estimate the payout (with a lot of assumptions) we'll get assuming we opt for CPFLife

Alternatively there's the Minimum Sum scheme, which pays out a fixed about every month until the money runs out. Assuming S$155k @ 4% p.a, a 1.2k monthly payout will last 14+ years. Pledging of property is to make up the minimum sum (not to pay the CPFLife premiums)

So the question should be, if I pledge my property to withdraw an additional S$77.5k from my RA and live till my RA runs out, how much will CPF claim from my beneficiary when he sells the property?

[WolfT]

Hi Piggo
RA don run out ...they be transfer to buy CPF life.
Then CPF life pays u forever till u die.
If u die early then Cpf pays u back whatever is left WiTHOUT interest ...if u outlive your total amt( means nothing left to deduct then 0 when u died.)
The property pledge is just an artifically figure to top up part of the MS. If u or your beneficiary are alive when you choose to sell the hse then need to top up whatever u pledge.
When u die your benficiary gets back everything u have in CASH.
I hope my layman english helps.

[smallcaps]

Hi Piggo
RA don run out ...they be transfer to buy CPF life.
Then CPF life pays u forever till u die.
If u die early then Cpf pays u back whatever is left WiTHOUT interest ...if u outlive your total amt( means nothing left to deduct then 0 when u died.)
The property pledge is just an artifically figure to top up part of the MS. If u or your beneficiary are alive when you choose to sell the hse then need to top up whatever u pledge.
When u die your benficiary gets back everything u have in CASH.
I hope my layman english helps.

Different schemes, i think. If already on CPF Life but after that make top up to RA, then might become mixed...

http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/SubPage.htm

Minimum Sum Scheme

CPF LIFE will give you a monthly payout starting from your drawdown age, for life. It improves upon the Minimum Sum Scheme where payouts last about 20 years.

If you remain on the Minimum Sum Scheme, you may apply to receive monthly payouts from your drawdown age until your Minimum Sum is exhausted. Alternatively, to allow your payments to last longer, you may wish to start your monthly payments later.

[Ray168]

A very good short summary of min. sum and CPF Life.

Check it out http://CPF and You education SeriesCPF and You education Series

Hi Piggo
RA don run out ...they be transfer to buy CPF life.
Then CPF life pays u forever till u die.
If u die early then Cpf pays u back whatever is left WiTHOUT interest ...if u outlive your total amt( means nothing left to deduct then 0 when u died.)
The property pledge is just an artifically figure to top up part of the MS. If u or your beneficiary are alive when you choose to sell the hse then need to top up whatever u pledge.
When u die your benficiary gets back everything u have in CASH.
I hope my layman english helps.

Different schemes, i think. If already on CPF Life but after that make top up to RA, then might become mixed...

http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/SubPage.htm

Minimum Sum Scheme

CPF LIFE will give you a monthly payout starting from your drawdown age, for life. It improves upon the Minimum Sum Scheme where payouts last about 20 years.

If you remain on the Minimum Sum Scheme, you may apply to receive monthly payouts from your drawdown age until your Minimum Sum is exhausted. Alternatively, to allow your payments to last longer, you may wish to start your monthly payments later.

[CityFarmer]

CPF is definitely overly complex, due to whatever valid reason(s).

We can't blame the ignorance of general public on CPF policies, because even more financial-literate group, e.g. VB buddies (including myself) are struggling to understand a relatively simpler policy of CPF Life and MSS, vs the recent Medishield Life