CPF minimum sum to be raised to $139,000

lzydata

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How is it enough? His yearly total CPFcontribution increased by $1,404 while min sums increased by $11k

Yeah I see I misunderstood. Paiseh. Have to redo all the calculations with his total income.

But you are not correct either. He will have an additional $1,404 contribution every year for at least 10 years. The total will exceed $11k even before accounting for interest.
 

lzydata

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I am not faulting his explanation on the increase in MS or the benefits. But he mentioned that "there is no plan to increase the MS every year indefinitely. It will stop in 2015. So why apply a compound rate like that when it doesn't work like that? Why imagine things and stress yourself out, when there are so many other things you can worry about?"

How could there be no plan to increase? "It will stop in 2015" You believe that? The other writer pointed out it has been increasing every year since 1987.

"Why apply a compound rate like that when it doesn't work like that?" Who cares how it works. Based on historical numbers, the other writer has shown that the MS has increased from $30k to $148k and the compound rate is 6.1% based on nominal amount.

The other writer is not imagining things. It was a fact that MS has been increasing for 26 years and it's only fair to say that it will continue to increase at "some" compound rate than to imagine that "it will stop in2015".

lzydata responded with "So will you be happier with a MS of $30k, or even $80k in today's dollars? Do you think that will benefit you financially in your older years? Maybe you've forgotten the point of having a MS. Believe it or not, it is not to torture you. It is to finance your pension at age 65 and after"

That's where I can't see the points.

I am pointing out that the current round of increases is slated to end in 2015. This is a fact. Just because the MS has increased nearly every year does not mean there is a plan to do so at 5% pa or whatever you think. I hope you can understand the difference, but if you insist on believing in a conspiracy, I can't stop you.

What happens after 2015 will depend on whether there is a funding shortfall and whether people will demand higher payouts than what a MS of up to $160,000 can support. Maybe with medical advances people will live even longer and spend even more on health care than we currently expect, so we need to save more. Or - I hope not - we could have a massive epidemic and people die off faster. Then we can save less.

In fact, in the short term, the politics of it are bad. It is likely that the government will hold off on any MS hike after 2015 because it will be election time again. There is already the other thorny matter of what to do with the SMRA rate. In the longer term the MS has to grow to keep pace with inflation as well as people's rising demands. Let's not forget people's wages are rising too. But $160,000 should be enough for at least the next few years, as we see how the CPF LIFE claims experience goes.

An alternative is to do what many pension funds do, which is to end up with massive funding shortfalls because they have taken in too little, promised to pay out too much, and assumed too optimistic returns. We can choose not to have a shortfall in the first place, or depend on the future generation of taxpayers to make up for it.

I see you and lots of people have this simple notion that a rising MS is a bad thing, so logically you mean that you prefer it to stay the same or go down. There are implications to having the MS be, say, only $80,000 in today's dollars. Maybe you have other means to fall back on and so you don't mind a lower payout, but others don't and they will mind.
 

Petrelli_83

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haha. Excellent policy sia.

Salaries don't adjust for inflation, but CPF do. This is just brilliant.
 

callalily

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I target to have 250k in SA when I reach 60 years old.

Standard of living & inflation is really high these days.
 

lzydata

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I've said this before but it bears reminding: half of the MS can be in the form of pledged property. A couple who owns a 3-room flat with no mortgage, or a couple who owns a 4-room flat with 50% mortgage can already put up enough equity to meet this pledge. So for property owners - who are the vast majority in Singapore - your MS is effectively halved. (3-room: ~$300k, each person $150k. 4-room half mortgaged: ~$200k, each person $100k.)

I believe that by being engaged in your finances, most people here must be doing quite well relative to the general population, so you will not have problems reaching the MS even without a property pledge. You will at least be able to achieve a substantial part of it. Put another way, the people who are most worried about the MS are not those who will have the most trouble meeting it.

The question is your mindset, your attitude. If you see the MS as a burden imposed by others, that is your choice. But I choose to see it as a challenge that I should be able to meet. Ultimately, the more you put in, the more you will get in annuity payments, so if you choose to have a loser mentality, then you will just end up with less.
 

henrylbh

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CPF min sum over the years -

01-Jan-87 30,000
01-Dec-88 30,000
01-Apr-89 30,900
01-Apr-90 31,600
01-Apr-91 32,700
01-Apr-92 33,800
01-Apr-93 34,600
01-Apr-94 35,400
01-Jul-95 40,000
01-Jul-96 45,000
01-Jul-97 50,000
01-Jul-98 55,000
01-Jul-99 60,000
01-Jul-00 65,000
01-Jul-01 70,000
01-Jul-02 75,000
01-Jul-03 80,000
01-Jul-04 84,500
01-Jul-05 90,000
01-Jul-06 94,600
01-Jul-07 99,600
01-Jul-08 106,000
01-Jul-09 117,000
01-Jul-10 123,000
01-Jul-11 131,000
01-Jul-12 139,000
01-Jul-13 148,000

Besides the minimum sum, a member is also required to set aside a Medisave Required Amount, currently $38,500, before he can withdraw his excess at age 55.

If these minimum sums keep increasing EVERY year (as history has shown), those starting work even at $5k per month is never going to catch up!!!
 

lzydata

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If these minimum sums keep increasing EVERY year (as history has shown), those starting work even at $5k per month is never going to catch up!!!

If you are so upset about the rising MS, why did you make a voluntary CPF contribution of as much as $27k at the end of last year? And $20k of that not even tax-deductible!

Some people don't even have $27k in their RA after working all their lives, but you can fork it out in just one without any incentive. Then you come here and complain and despair as if you are some low-income earner. Very puzzling.
 

henrylbh

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When was I upset? But many are and the system in my opinion is very high handed and callous.

Anyway where did you get info that I contributed $27k into my CPF accounts. I top up 7k to increase my min sum and another 5k to my medisave to claim tax deductions.

I wanted to contribute 7k to my father's RA and claim tax but since the contribution will not be returned to me if he leave the world, I decided against the contribution. Previously, the top-up will be returned to the contributor when the recipient pass away.
 

lzydata

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When was I upset? But many are and the system in my opinion is very high handed and callous.

Anyway where did you get info that I contributed $27k into my CPF accounts. I top up 7k to increase my min sum and another 5k to my medisave to claim tax deductions.

I wanted to contribute 7k to my father's RA and claim tax but since the contribution will not be returned to me if he leave the world, I decided against the contribution. Previously, the top-up will be returned to the contributor when the recipient pass away.

26-12-2012, 11:10 PM

Just dropped envelope into CPF branch containing 20k VC to OA, SA and MA, 7k to SA/RA (tax deductible)and 5k to MA (tax deductible). Decided to give SRS a miss.

Alright, whether it is $7k, $12k, $27k or $32k doesn't matter. The fact is you did make a voluntary contribution, and a substantial one too. It's good you confirm that.

You are kindly helping anonymous "many" people voice out how callous and high-handed the system is. And meanwhile you take your own cash to put into the same system that you call callous and high-handed.

Unless you enjoy seeing your cash go up in smoke, clearly you feel that the CPF Board is a good place to put your money. But when it comes to other people, suddenly the system is no good for them.

You say one thing and do another.

Let me put it another way. You seem to think a rising MS is a bad thing. But then you go and voluntarily contribute more than is required by the law. In effect, you are raising your own personal MS.

Other people's MS: too high!
My MS: too low!
 
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henrylbh

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Can I say what's good for me (for the moment) is not good for others?
 

viv4080

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Why is the MS being adjusted upwards yearly and when it will stop? Here's a short version of the story.

In 2003 the MS was $80,000. The government decided that because people were living longer, this amount needed to rise to $120,000 in real terms. Then they decided they would adjust it upwards year by year so that by 2013 it will reach $120,000 in 2003 dollars. Due to the high inflation rate in recent years, they extended the deadline to 2015.

I agree the calculations are unnecessarily complicated, but the concept is simple. As the analysts in a Business Times article say, by 2015 the MS should be about $160,000 and this 10+-year adjustment will cease. Of course this doesn't mean there will never be any more increases, but after 2015, it will depend on the actuaries. We just need enough to sustain a healthy real payout for CPF LIFE members.

Here's an important point from the article, by economist and Singapore Management University adjunct faculty member Larry Haverkam:

"The biggest tip would be to consider pledging property, which can bring the minimum sum down to as low as $0 for a couple with at least $148,000 of equity in their home."

Up to 50% of the MS can be in the form of pledged property. For example, a few years down the road, there is a couple whose MSes are $160,000. They own a 3-room flat worth $320,000 and they have fully paid off the mortgage. They do not have plans to sell their property. Then they can pledge up to 50% x $160k = $80,000 as their MS, which they can easily do since their equity is each double that.

Therefore, although their MS is $160,000, they only need to have "cash" of $80,000 in their SA to meet the MS. At 4% interest, this would be equal to a monthly SA contribution of $218 over 20 years, or $115 over 30 years. The contribution rates and ratios change depending on age, but this is achievable for someone earning roughly $3,000 per month for 20 years, or $1,600 per month for 30 years.

CPF Minimum Sum at $148,000 from July
CPF Board - How Much Is The Minimum Sum? - my CPF 2

Property pledge (up to 50% MSS) is only allowed when the combined balance in your OA and SA account is less than the MSS. You cannot use property pledge to reduce the MSS if your combined OA and SA account is more than the MSS.

Example : If MSS is $160k, and your total in OA and SA is $170k when you reach 55. You can only withdraw $10k. Property pledge will not come into play since you have enough in the OA and SA account to meet the MS.

Of course, if you sell the property, you do not need to return any money back to CPF since there is no property pledge for the MSS.
 

teerance85

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And to add on, propety pledge is only applicable after you turn 55, and you pledge in lieu of your own minimum sum. So as long as you are below 55, please don't ever think anything about pledging.
 

kenlatio

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Property pledge (up to 50% MSS) is only allowed when the combined balance in your OA and SA account is less than the MSS. You cannot use property pledge to reduce the MSS if your combined OA and SA account is more than the MSS.

Example : If MSS is $160k, and your total in OA and SA is $170k when you reach 55. You can only withdraw $10k. Property pledge will not come into play since you have enough in the OA and SA account to meet the MS.

Of course, if you sell the property, you do not need to return any money back to CPF since there is no property pledge for the MSS.

I just call CPF and was told that you can pledge your property even though you have more than the minimum sum in your OA and SA. Taking your example, you can pledge anytime after 55 but the moment you pledge your property then the 50% minimum sum have to be withdraw out. Using your example again, I may not want to withdraw the money at 55 so I leave it there to collect interest but 3 years later I need the money and pledge my property then I must withdraw $72K (50% minimum sum) at that time.

Hope this help to clear some doubt.
 
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