You might have probably heard of CPF Minimum Sum but when would one actually need to set aside this amount in their CPF when dealing with Singapore properties?

1. You will need to aside the Minimum Sum when you reach 55 ensures that you have some regular income from age 65 to live on in your retirement.

When you reach age 55, a portion of your OA and SA savings will be transferred to your RA to meet the MS. If there is a still a MS shortfall in your Retirement Account, a portion of the new inflows like contributions, voluntary contributions, government top-ups and/or other refunds received after 55 will be used to make up the shortfall upon your subsequent CPF withdrawals. In lay man terms, it means that one will not be able to utilize his/her CPF contributions to offset loan installments until they meet their MS. You may pledge your property for up to 50% of the MS after you have obtained the consent from all other co-owners to do so. Based on current policy, when the property is sold or otherwise disposed of, you need to refund the MS deficiency, or the principal CPF withdrawn for the property plus the accrued interest, whichever is lower. The MS deficiency is the CPF MS applicable to you when you turn 55 less the balance in your Retirement Account (excluding the interest earned).

The amount that you can pledge depends on

  • HDB’s quarterly average median resale prices for HDB flats or valuation price for private properties;
  • Outstanding housing loan amount (including non-housing loan for private properties);
  • Co-owner’s CPF usage (for joint-ownership cases); and
  • Your share of the property.

Examples illustrating the amounts that can be pledged:

EXAMPLE 1

Where the co-owner’s CPF usage is less than 50% of the residual value of the property
HDB’s average valuation price :$300,000
Less outstanding HDB loan :$150,000
Residual value : :$150,000
Co-owner’s CPF usage : :$ 40,000
Member’s share : :$ 75,000
In example 1 above, as the co-owner’s CPF usage is less than 50% of the residual value, the member’s share of the property would be based on 50% (assuming that the property has only two owners with 50% share each) of the residual value. He can pledge the property up to the maximum limit of $80,500 if the Minimum Sum applicable to him is $161,000 (As of 1 Jul 2015). 
EXAMPLE 2
Where the co-owner’s CPF usage is more than 50% of the residual value of the property
HDB’s average valuation price :$300,000
Less outstanding HDB loan :$200,000
Residual value : :$100,000
Co-owner’s CPF usage : :$ 80,000
Member’s share : :$ 20,000
In example 2 above, as the co-owner’s CPF usage is greater than 50% of the residual value, the member’s share of the property would be the residual value less the co-owner’s CPF usage. The member can only pledge an amount of $20,000(i.e. $100,000 less $80,000).
EXAMPLE 3
Where the co-owner did not use his CPF for the property and has 50% share ownership
HDB’s average valuation price :$300,000
Less outstanding HDB loan :$250,000
Residual value : :$ 50,000
Co-owner’s CPF usage : :$         0
Member’s share : :$ 25,000
In example 3 above, as the co-owner did not use his CPF for the property and the member has 50% share of the property, the amount that the member can pledge is $25,000 only.

In the scenarios quoted above, you will be required to set aside MS of ($161,000 – pledge amount from 1st Jul 2015 onwards) before you can utilize any further CPF on your property.

2. When you use your CPF to purchase more than one property.

If you already own a property (HDB flat or private property) bought with your CPF savings and wish to buy another property with CPF savings after 1 July 2006, you must set aside half of the prevailing Minimum Sum before you can use the excess savings in your Ordinary Account for the second/subsequent property. Savings in the Special Account (including the amount used for investments) and Ordinary Account can be used to meet this required amount. A side note here is that if your Special Account funds is already adequate to fufil hlaf the prevailing Min Sum, then you will be free to fully utilize your Ordinary Account.

Please note that as the Minimum Sum will be raised in July each year, the amount you need to set aside will be adjusted accordingly. 

If you currently own more than one property bought with CPF savings before 1 July 2006, you need not set aside half of the prevailing Minimum Sum unless you subsequently buy another property using your CPF savings on or after 1 July 2006.

Please note that this is not applicable if you are applying to use your CPF to purchase a second or subsequent property with non-related singles.  Non-related singles can only jointly use their CPF to purchase one property (HDB flat or private property).

 

3. When you hit your CPF Withdrawal Limit.

The Withdrawal Limit (WL) is the maximum amount of CPF beyond the Valuation Limit (VL) (the lower of the purchase price of property or valuation of preoperty at time of purchase) that you and your co-owner(s) can use for the property. Once the WL is reached, no further withdrawal of CPF by any owner will be allowed. If the housing loan is still outstanding, you and your co-owner(s) will have to service it fully with cash unless you have the Available Housing Withdrawal Limit (AHWL). Use this CPF calculator to estimate your CPF Withdrawal Limit and Valuation Limit.

Avaliable Housing Withdrawal Limit (AHWL)

For those below 55, the AHWL is the balance available after setting aside the Minimum Sum component. Savings in the OA, SA and amounts withdrawn for investment can be used to meet the prevailing Minimum Sum cash component.

CPF has a calculator that helps you estimate your AHWL.

The WL is not applicable to new or resale HDB flats financed with HDB concessionary loan. The WL is determined by the date of purchase or refinancing of loan as follows:

Date of Purchase (i.e. Sales & Purchase agreement) / Refinancing of Housing Loan Withdrawal Limit
1 Jan 2006 – 31 Dec 2006 132% of VL
1 Jan 2007 – 31 Dec 2007 126% of VL
1 Jan 2008 onwards 120% of VL
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