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Sunday, April 16, 2017

HDB leases and what's in store for retirement as society ages

Ng Jun Sen
Apr 15, 2017

Experts weigh in on how HDB flat owners should prepare for the future as their home ages with them, and how other places have dealt with lease expiry.

National Development Minister Lawrence Wong's blog post of March 24, in which he cautioned buyers of older resale flats against paying high prices on the assumption that their flats would be "Sers-ed", has set some home owners thinking and counting down the remaining years on their HDB flat leases.

Mr Wong made clear that the Selective En bloc Redevelopment Scheme (Sers) - under which the HDB acquires ageing blocks for redevelopment, compensates residents at market rates for their old flats and lets them buy new units nearby at subsidised rates - was never intended for all flats.

Interviews with home owners in three mature estates of Toa Payoh, Queenstown and Geylang - where, from 2014 to last year, there were the most resale transactions of flats with less than 60 years left on their 99-year lease - found that many had indeed expected a windfall from Sers. Mr Wong's word of caution has left young home owners - like the one who gave his name only as Mr Lim, 30, who bought a Lorong 8 Toa Payoh flat two years ago - wondering whether he will still have a home when his lease expires in 57 years.

A Queenstown resident, who owns a three-room Mei Ling Street flat that has 51 years of lease remaining, remains hopeful that he will be among the lucky minority to be picked. "They Sers-ed the Tanglin Halt area nearby. Shouldn't the Government pick us too?"

Then there is IT engineer Andy Zhang, 40, who broke the record last year for spending the most on a standard, non-terraced flat that is more than 40 years old. He paid $950,000 because the flat's location in Bukit Timah shortens his commute to his job in the city and means his seven-year-old daughter can walk to her primary school nearby. Still, he could not hide his look of concern when told the million-dollar flat will turn to zero value in 57 years' time, and the Government will have the right to retake his flat with no compensation.
A chart by Drea, which provides market analysis, showed that in Geylang, Toa Payoh and Queenstown, the average price of a low-floor unit is about the same for a 30-year-old flat as for a 50-year-old one. That suggests home buyers are currently insensitive towards the lease issue.

On Wednesday, Mr Wong once again addressed the issue of HDB leases, but, this time, he assured home owners that HDB flats can still be seen as retirement nest eggs as they "provide a good store of asset value, so long as you plan ahead and make prudent housing decisions".


There are historical reasons for why HDB flat owners expect the value of their home to keep rising. In the 1990s, when asset enhancement was a key goal of the Government, then Prime Minister Goh Chok Tong said in a 1992 speech: "It is in your interest to ensure that the value of your flats continues to rise." That was his argument for why flat owners should support the Government's upgrading programme.

In 1994, then Senior Minister Lee Kuan Yew also spoke of HDB flats as investments: "I would start off with a five-room or an HDB executive... quickly, before my income ceiling takes me beyond that. You buy a flat in Bishan, it's going today for half a million. So I would get there first, stay five years, seven years, and then move out."

For years, HDB prices rose steadily. It was only when recessions hit Singapore around the turn of the century that resale prices went on a roller-coaster ride. By 2013, then National Development Minister Khaw Boon Wan signalled a need to relook the HDB flat's role as an asset. "Looking ahead, as we may no longer get the same kind of returns from reselling an HDB flat as in the past, how will its role as an asset be affected?"

So what does that mean for home owners who need to rely on their HDB flats as a source of retirement income? They should not assume that the price of their flat will go up, says OCBC Bank's vice-president and senior investment strategist Vasu Menon. "Hoping for an HDB flat to appreciate in price by the time you retire, so that you can unlock value by selling the flat, is not a sound strategy."

His advice to HDB dwellers is to have other sources of retirement income, such as investments in stocks, bonds and unit trusts. Then, if the value of their flat appreciates by the time they retire, it will be a "bonus".

Mr Vinod Nair, chief executive of, warns against treating property as "a silver bullet" that will give home owners enough money for retirement. Even before the recent discussion on Sers, it was "fast becoming clear that buying Singapore property for investment was no longer going to be as lucrative as 10 years ago", he adds.

Monetisation schemes are available to HDB owners, and that was a point Minister Wong was at pains to put across in his latest post.

Three options are available.

The Lease Buyback Scheme, launched in 2009, allows owners of four-room flats or smaller to sell the remaining years of the lease back to the HDB. The proceeds go to the Central Provident Fund (CPF) Life national annuity scheme in the flat owner's name, which gives him a lifelong cash payout.

The elderly can also downgrade to smaller flats or HDB studio apartments and benefit from the Silver Housing Bonus scheme, under which the Government gives them a cash bonus of up to $20,000. The proceeds from the sale of their larger flat will go to topping up their CPF Retirement Account. There is also the option of subletting a room for rental income.

But these monetisation schemes depend on prevailing market conditions and come with eligibility criteria. To qualify for the Lease Buyback Scheme, a flat must have at least 20 years of lease left. Five-room and larger flats are excluded.

Home owners who plan to monetise their flats also need to take into account the age of their flats. Those who wish to downgrade and benefit from the Silver Housing Bonus need to be aware that would-be buyers are subject to CPF loan restrictions if a flat has less than 60 years remaining on its lease. The problem is compounded when one considers Singapore's rapidly ageing population. According to the Population White Paper of 2013, the number of those aged 65 and above will hit 900,000 by 2030, when for every one elderly person, there will be only two working adults. That means the older generation will be seeking to downsize their ageing flats, selling to a shrinking pool of younger buyers.

That is why R'ST director Ong Kah Seng believes that "beyond the next 10 years, this (current) set of flat-monetisation options for the elderly may be insufficient as we are entering an ageing society".


Since no HDB flat has yet hit 99 years, no one really knows what will happen when a flat's lease expires. Of the total stock of about one million HDB flats, 70,000, or 7 per cent, are more than 40 years old. About 280,000 units are between 30 and 40 years old.

With about a third of all HDB flats today older than 30, that means that in about 60 years, some 350,000 flats will be seeing the end of their leases if nothing is done about them.

Mr Nair thinks that the Lease Buyback Scheme could be enhanced. Or the Government might come up with a new scheme to help owners of very old HDB flats who wish to live in their flats a while longer.

In Britain, the law states that leases are tenancies, and the leaseholder is essentially a tenant. Unless the tenant or the landlord decides to end the tenancy, it will continue on the same terms after the lease runs out.

This is essentially an automatic renewal of lease, and British law also allows eligible residential owners to extend the lease - by 90 years for a flat and by 50 for a landed house - at a cost pegged to market rates.

In China, Premier Li Keqiang said last month that lawmakers are drafting a real estate provision that would allow property under a 70-year lease to be renewed unconditionally, though details are still not clear. Hong Kong is an interesting case due to its varied history under different rules. Back in 1898, the Chinese government leased the islands surrounding Hong Kong, known as the New Territories, to Britain for 99 years under the Second Convention of Peking. The Special Administrative Region met its own leasehold cliff in 1997, the same year Hong Kong was returned to China. This was dealt with at the stroke of a pen to extend the leases for 50 years without payment of additional premium, but subject to an annual rent of 3 per cent of the property value.

Lease extension and renewal seem to be the textbook solution. But these options will be problematic in high-rise Singapore, where efficient use of land is also a priority. If only a handful of households in a block choose to extend their leases, it would leave them as the only residents in a mostly empty building.

It must also be noted that lease renewal and extensions are not permanent solutions. They merely delay the inevitable, that the lease will eventually come to an end again and create more uncertainties, now that the home is older than before, says Mr Ku Swee Yong, chief executive of International Property Advisor.

Could the solution be an alternative to Sers, such as an en bloc scheme to allow the Government to reacquire sites with less redevelopment potential before lease expiry, but at a lower cost? This "Sers-lite" scheme could work, says Mr Ku. The Government becomes the willing buyer and it can choose to redevelop the site at any time, with less urgency as with Sers. And since there is no need to tear the blocks down right away, the units can still be rented out to the previous home owners, who would be able to pay for it since they would have proceeds from the reacquisition.

The benefits to home owners will not be at the same level as those under Sers, but they would not leave elderly Singaporeans twisting in the wind when their flats reach the end of the road.

But with another 43 years to go before the oldest HDB flats - which are located in Stirling Road - turn 99, there is no need to rush a policy that will have a major impact on Singapore's successful public housing story.

Some may also question whether the Government of today has the mandate to decide the fate of something so far down the line.

By the time Mr Zhang's flat reaches the end of its lease in 2073, he will be 97 years old. His two daughters, now seven and four, will be 64 and 61 respectively. He says with a laugh that, by then, the world will be a very different place.

While the million-dollar flat may no longer be worth anything, the money would have paid for a comfortable and convenient nest for his young family, a place for his daughters to grow, he hopes, to independence.

Monday, April 10, 2017

CPF Life and Medisave

Lorna Tan
Apr 9, 2017

The Sunday Times outlines the CPF Life scheme and the Medisave Account.


Life is a national annuity scheme that provides monthly payouts for as long as you live. This gives you greater peace of mind in retirement as you do not have to worry about outliving your savings. This is especially important as Singaporeans are living longer.

About half of Singaporeans who are 65 today are expected to live beyond the age of 85 and a third of them will live beyond 90. Having an income that will last you for as long as you live is more vital than ever.

You will be placed on CPF Life if you are a Singapore citizen or permanent resident born in 1958 or after, and have $60,000 or more in your Retirement Account (RA) when you turn 65.

If you are not placed on CPF Life, you can apply to join the scheme any time from age 65 to before you turn 80. Alternatively, you can remain on the Retirement Sum Scheme (formerly known as the Minimum Sum Scheme), where you will receive a monthly payout until your RA balance runs out.

The CPF Board will write to you again nearer to your 65th birthday to explain the decisions you need to make.

While you do not need to make any decision or take any action now, it is good to understand what CPF Life plans are available. There are three plans under CPF Life, known as Standard, Basic and Escalating plans.

Each CPF Life plan provides a different combination of trade-offs between the amount of monthly payouts you will receive and the bequest you will leave for your beneficiaries.


Your Medisave contributions will go into your Medisave Account (MA) until the balance reaches the Basic Healthcare Sum (BHS) for that year.

Amounts above this sum will be transferred to your RA or Ordinary Account (OA) to boost your monthly payouts in retirement.

The BHS is the estimated savings you need for your basic subsidised healthcare needs in old age. It will be adjusted annually, in January, to keep pace with the growth in Medisave use by the elderly. The BHS for this year is $52,000.

Once you reach age 65, your BHS will be fixed at that year's BHS for the rest of your life.


If you have not met your BHS, you may apply to transfer the savings in your Special Account (SA) and/or OA to your MA, up to your BHS.

To do so, you have to be aged 55 and above and have the Full Retirement Sum or Basic Retirement Sum with sufficient property charge/ pledge in your RA.

You may also apply to transfer the savings in your SA and/or OA to the MA of your loved ones aged 55 and above, up to their BHS. Loved ones refer to spouses, siblings, parents, parents-in-law, grandparents and grandparents-in-law.

The savings which you transfer to your loved ones' MA can be used to pay for their own and their immediate family members' medical expenses, as well as the premiums of approved medical insurance schemes such as MediShield Life.


CPF series: Something to plan for when you're 54

Using CPF to pay for housing and insurance after age 55

Where to get CPF information

Monday, April 3, 2017

CPF: How you can benefit from enhancements to the system

Lorna Tan
Apr 2, 2017

The Sunday Times focuses on how you can help your loved ones via the Central Provident Fund Topping-Up Scheme.

Many Central Provident Fund (CPF) members have benefited from the recent enhancements to the CPF system.

The improvements include a raised CPF salary ceiling of $6,000 from $5,000, and an increase in contribution rates for those aged 50 and above.

According to the CPF Board, more members are topping up to their own and their family members' accounts via the Retirement Sum Topping-Up Scheme. Last year, 49,000 members - up 27 per cent from 2015 - received cash top-ups of $860 million in total.


In a nutshell, this scheme allows you to build your retirement savings by topping up your own CPF accounts or those of your loved ones, or anyone else. You can opt to top up your own or your loved ones' Special Accounts (below age 55) or Retirement Accounts (RA) for those aged 55 and above.


Many ways to do it

Q How can I do a top-up?

A By any of the following:

•Log on to the CPF website using your SingPass under My Requests.

•Through the e-cashier facility on the CPF website.

•At any AXS station.

•Download and complete the Retirement Sum Topping-up (RSTU) form on the CPF website; mail the completed form and cheque to CPF Board.

•Monthly/yearly Giro deductions

Q When should I top up?

A You are encouraged to make top-ups early in the year to facilitate timely processing.

If you are topping up with a cheque, your application must reach the board by Dec 31 at 10am, to enjoy tax relief for the following year's tax assessment.

If Dec 31 falls on a weekend, your application should reach the CPF on the last working Friday of the year at 10am. This is to allow sufficient time for the cheque to be cleared.

Topping up early will help you earn more interest throughout the year.

Note that all top-ups under the RSTU are irreversible. This means that the savings transferred to your/your loved ones' accounts cannot be transferred back to your originating CPF account.

Lorna Tan


You can make a cash top-up for anyone but it may not result in a tax relief as certain conditions have to be met. In total, you may enjoy tax relief of up to $14,000 per calendar year if you make cash top-ups for:

•Your parents, parents-in-law, grandparents, grandparents- in-law, spouse or siblings. To qualify, your spouse/siblings must either be handicapped or have income that did not exceed $4,000 in the preceding year.

•Yourself (or your employer makes a cash top-up for you). Note that you can enjoy tax relief for cash top-ups to your own or your recipient's RA only up to the current Full Retirement Sum (FRS) which is $166,000 for those who turned 55 from Jan 1. Cash top-ups beyond the current FRS will not be eligible for tax relief. Your employer will receive an equal amount of tax deduction.


You can top up your RA or your parents' RA to enjoy higher monthly payouts. This can be done via regular monthly and/or yearly top-ups to your own or loved ones' CPF accounts through Giro, which can be monthly and/or yearly arrangements.

This makes it convenient for members to do top-ups on a regular basis to benefit from the Retirement Sum Topping-Up Scheme, without the hassle of having to complete forms or make cheque payments. You can earn more interest by topping up earlier in the year. So don't wait till the end of the year to do a top-up.


Introduced in January last year, the ERS is an additional retirement sum option aimed at boosting our nest egg so we can enjoy more retirement income in our golden years.

Recipients aged 55 and above can receive cash top-ups or CPF transfers to their RA up to the current ERS, which is three times the Basic Retirement Sum (BRS) of $83,000. The prevailing ERS is $249,000.

Of the 49,000 that received cash top-ups last year, 9,000 members exercised the ERS option. Those with ERS at age 55 will receive about $1,900 per month for life when they reach the Payout Eligibility Age (PEA) of 65.

Mr Teh Ah Hock performed top-ups to his wife Julia's CPF Retirement Account in 2015 and last year from his CPF savings. He has also topped up his own Retirement Account. The couple want to achieve a financially secure future by ensuring higher monthl


Members on the national annuity scheme CPF Life can use the top-up monies to buy an extra CPF Life annuity by writing to the CPF Board. Most people would rather leave the money in their RA and earn the interest. During the yearly review of your monthly payout in July, the top-up monies will be disbursed to you as an additional monthly payout. For members on the Retirement Sum Scheme (formerly Minimum Sum Scheme):

•If you receive top-ups below the FRS applicable to the cohort: The top-ups will go towards increasing the payouts, which will be adjusted automatically and capped at the full payout for the cohort.

•If you receive top-ups beyond the FRS in cash applicable to the cohort: The top-ups will go towards extending the payout duration. However, the recipient may apply to the CPF Board for an increased payout level, computed to last for 20 years from the recipient's PEA or five more years from application date, whichever ends later.


Will they be refunded? Cash top-ups made on/after Nov 1, 2008 will be treated as cash gifts to the recipient. Any remaining cash top-ups will be paid to the recipient's nominees based on his CPF nomination or will be transferred to the Public Trustee for distribution according to the intestacy laws if there is no nomination.

For CPF top-ups made on/after Nov 1, 2008, any remaining top-up monies will be returned to the giver's CPF account, capped at the principal top-up amount, that is, minus earned interest.

For cash and CPF top-ups made before Nov 1, 2008, the remaining top-up monies will be returned to the giver's Ordinary Account (OA), capped at the principal top-up amount. If the giver dies before the recipient, then upon the death of the recipient, the topped-up monies returned to the giver's CPF accounts will be paid to the giver's appointed nominees.


It is important to review our parents' healthcare insurance policies and ensure they are adequately covered. You may wish to consider a personal accident policy for your parents, which covers outpatient charges in case of a fall as well.

Hold conversations with your parents on estate planning which includes matters like wills, and the Lasting Power of Attorney as well as the Advanced Medical Directive.

If they want to distribute their CPF savings according to their wishes, help them to arrange an appointment with CPF Board to make a CPF nomination.

Encourage your parents to stay healthy by staying active and keeping a healthy diet.

A head start in retirement planning