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CPF savings are for your retirement needs

  • Lianhe Wanbao (2 January 2014): CPF savings are for your retirement needs
  • Lianhe Wanbao (19 December 2013):  Let housing loans be cleared early

CPF savings are for your retirement needs 
- Lianhe Wanbao, 2 January 2014

  1. We refer to Ms Zhou Xiaohui’s letter (“Let housing loans be cleared early”, 19 December).
  2. Ms Zhou has suggested allowing CPF members who are in financial difficulty to deplete their CPF savings so as to pay off their housing loans early. She feels that this will be to the benefit of CPF members, as they can avoid paying the interest on their loan instalments.
  3. This may not be the best decision, as CPF savings in the Retirement Account accumulates interest at 4% per annum and an extra 1% is paid on the first $60,000 of CPF balances. This is higher than the interest rate on an HDB loan, so members would be better off leaving their monies in their CPF accounts rather than using up their CPF to fully pay off their housing loans.
  4. Nonetheless, we recognise Ms Zhou’s point that some members may face financial difficulty with their housing instalments. In such cases, we do exercise flexibility in allowing the use of CPF savings beyond the usual limits. Ultimately, we advise CPF members to be prudent in their housing choices, and ensure that they can continue to service their loan instalments till the end of the loan term without having to rely on their Special or Retirement Accounts which are meant to meet their basic needs in old age.
  5. Ms Zhou also suggested that the Home Protection Scheme (HPS) and Dependants’ Protection Scheme (DPS) widen the payout beyond death and permanent incapacity of the policy holder. We would like to clarify that under both insurance schemes, the beneficiary would be able to claim for the benefits regardless of whether the policyholder is physically or mentally incapacitated and unable to work permanently. The coverage of the HPS and DPS is kept basic to keep premiums affordable for the wide majority of members. Members who prefer enhanced coverage may wish to supplement these schemes with their own private insurance plans.

Let housing loans be cleared early
- Lianhe Wanbao, 19 December 2013

CPFB and HDB said they would exercise flexibility to help those who have problems repaying their mortgage loans and allow the elderly to use their RA savings on a case-by-case basis.

While such flexibility is still subject to certain conditions, when one encounters financial difficulties, such as an illness or old age and is unable to service his HDB loan, there are limitations to how HDB can help. If CPFB allows the use of RA savings, but it is inadequate and there is a limit on the use of SA savings, then it would be a problem.

I think housing loans should be cleared as soon as possible. CPF and HDB should allow members above 55, or those in financial difficulty, to use all their CPF savings to clear their housing loans as soon as possible. This would allow members to save on the housing loan interest, to enable members to pay the premiums of DPS or HPS, to give peace of mind.

I think the inability of members to use available CPF funds for housing, meant they could not solve immediate problems, which are more urgent than future ones.

In addition, HPS and DPS have very strict clauses. Besides physical disability, terminal illness, or death, if you were not able to work due to mental or psychological illness, you would not be able to claim from it. But there are members who face such circumstances. Many insurance coverage have widened their scope of coverage, so shouldn’t these two insurance be widened, similar to Medisave and MediShield, to meet members’ needs?