cpf Special account shielding

[Ghostrider]

The same happened to my parent. After a few days, the amount was no longer reserved to transfer to RA and remained in OA and is available for withdrawal. So I think it's just a system to autolock the funds while verifying that the FRS has been met. So do wait for a few days.

You are right. After 3 hrs, the system updated. No more marked as "reserved to transfer to RA and remained in OA". Now withdrawal amount is updated. Thanks for info.

 

[Ghostrider]

Question of housing refund.
After 55 with FRS and SA shielded. Can u withdraw 200K from OA and then repay back to the housing refund 300K using the cash?
Then repeat the process again to settle the remain 50K housing refund amount?

 

[BBCWatcher]

Question of housing refund.
After 55 with FRS and SA shielded. Can u withdraw 200K from OA and then repay back to the housing refund 300K using the cash?
Then repeat the process again to settle the remain 50K housing refund amount?

Evidently you can.

Possible advantage: When you sell your home there's no refund back to your CPF Ordinary Account. You retain more of the home sale proceeds in cash, and you don't have to withdraw any Special Account dollars to tap that OA cash.(*)

Disadvantage: You wipe out/destroy your ability to deposit any more cash into your CPF Ordinary Account where it would earn 2.5% interest, a much more attractive interest rate than what every bank currently offers on ordinary savings and current accounts.

(*) But there are already a couple alternative ways to "liberate" OA dollars without touching SA dollars:

1. You may be able to transfer OA dollars to an elder family member's Retirement Account. If the elder has named you as his/her CPF nominee then you inherit any residual dollars.

2. For OA dollars above $20,000 you can use the CPF Investment Scheme (OA), buy a security (like a T-Bill), transfer the security to your CDP account (and close your CPF Investment Account), then sell the security (or wait for it to mature).

 

[Ghostrider]

Evidently you can.

Possible advantage: When you sell your home there's no refund back to your CPF Ordinary Account. You retain more of the home sale proceeds in cash, and you don't have to withdraw any Special Account dollars to tap that OA cash.(*)

Disadvantage: You wipe out/destroy your ability to deposit any more cash into your CPF Ordinary Account where it would earn 2.5% interest, a much more attractive interest rate than what every bank currently offers on ordinary savings and current accounts.

(*) But there are already a couple alternative ways to "liberate" OA dollars without touching SA dollars:

1. You may be able to transfer OA dollars to an elder family member's Retirement Account. If the elder has named you as his/her CPF nominee then you inherit any residual dollars.

2. For OA dollars above $20,000 you can use the CPF Investment Scheme (OA), buy a security (like a T-Bill), transfer the security to your CDP account (and close your CPF Investment Account), then sell the security (or wait for it to mature).

On the disadvantage part, toying with the idea to overcome the ability to earn 2.5% interest after completed housing refund. Plan to withdrawal 200K OA sum first and purchase some SSB thru several issue month since the SSB average 10 years is 2.53% which is more than OA's 2.5%.

Only can hold a maximum of S$200,000 of SSB, summing across SSB purchased using cash and SRS funds. May need several month to fulfill $200K allocation of the SSB

 

[BBCWatcher]

On the disadvantage part, toying with the idea to overcome the ability to earn 2.5% interest after completed housing refund. Plan to withdrawal 200K OA sum first and purchase some SSB thru several issue month since the SSB average 10 years is 2.53% which is more than OA's 2.5%.

Doesn't really work. OA's 2.5% interest rate is the floor rate, and it's a statutory rate. Granted, Parliament could hypothetically amend the law, but the 2.5% rate has been robust in practice for MANY years.

SSBs only run for 10 year terms, maximum, and the interest is "backloaded." What happens when SSB interest rates are back to 1.3% for 10 year holds, for example? When market interest rates are low again the 2.5% rate will be that much more attractive again.

I don't think you should torch any of your OA repayment options unless you have a very good reason to do so. Preserving the ability to deposit dollars into a liquid (age 55+) 2.5% interest bearing government guaranteed (and well protected against creditors and courts) account, even if gated by SA dollars, is worth something. Be sure you're getting something valuable enough (or more) in return if you're going to destroy any of your OA repayment options.

Only can hold a maximum of S$200,000 of SSB, summing across SSB purchased using cash and SRS funds. May need several month to fulfill $200K allocation of the SSB

Yes, that's another problem: the SSB offer is finite ($200K max).

 

[Ghostrider]

don't think you should torch any of your OA repayment options unless you have a very good reason to do so. Preserving the ability to deposit dollars into a liquid (age 55+) 2.5% interest bearing government guaranteed (and well protected against creditors and courts) account, even if gated by SA dollars, is worth something. Be sure you're getting something valuable enough (or more) in return if you're going to destroy any of your OA repayment options.

My understanding from your reply,
Should not torch any of my OA repayment options means NOT to do housing refund at all and use this revenue to deposit dollar to OA?

And without making any withdraw from OA and leave the OA dollars to generate 2,5% interest.

 

[BBCWatcher]

My understanding from your reply,
Should not torch any of my OA repayment options means NOT to do housing refund at all and use this revenue to deposit dollar to OA?
And without making any withdraw from OA and leave the OA dollars to generate 2,5% interest.

Well, I think you proposed repaying OA used for housing then withdrawing it. Or withdrawing from OA then repaying OA used for housing (to "put it back"), which amounts to the same thing. Either way, you're reducing the number of dollars that you can deposit in OA in the future if you should ever wish to do so. You're taking away an option, an option that has some value since interest rates on bank deposits, SSBs, and T-Bills (as notable examples) can be/usually are quite a bit lower than OA's 2.5% floor rate.

So, why would you take away this option? You should only take away a potentially attractive option when you're getting something valuable enough in return.

 

[Ghostrider]

Well, I think you proposed repaying OA used for housing then withdrawing it. Or withdrawing from OA then repaying OA used for housing (to "put it back"), which amounts to the same thing. Either way, you're reducing the number of dollars that you can deposit in OA in the future if you should ever wish to do so. You're taking away an option, an option that has some value since interest rates on bank deposits, SSBs, and T-Bills (as notable examples) can be/usually are quite a bit lower than OA's 2.5% floor rate.

So, why would you take away this option? You should only take away a potentially attractive option when you're getting something valuable enough in return.

The proposed idea was thinking along the line that if we sell the house years later, we will have more cash from the sale without refunding to CPF.

 

[dork32]

To me there is no right or wrong answer, whether to clear cpf home withdrawal and accrued interest.

If you clear it, you are depriving yourself to deposit at 2.5%.

if you dont clear, when you sell your home., your oa will be stuck behind the sa. you may have to do another shielding to get the money out, which is costly.

 

[BBCWatcher]

The proposed idea was thinking along the line that if we sell the house years later, we will have more cash from the sale without refunding to CPF.

Yes, so is this potential advantage (more home sale proceeds in cash instead of deposited back into OA where the dollars are liquid from age 55 but "gated" behind SA) enough to offset the disadvantage: burning OA deposit "quota" (reducing or zeroing out the number of dollars you can put in a 2.5% interest bearing account if you wish)?

To Dork32's point, there are a couple ways to get OA dollars out of CPF ahead of SA dollars. SA "(re)shielding" is only one of the ways. I listed them upthread.

Note also that many people who sell houses in Singapore turn right around and buy another one in Singapore. OA dollars (from the first home's sale) still work for buying the replacement home in Singapore, so that's another way to get them back out again. Also, if the owner of the home dies then upon the home's sale then there's no refund back to the deceased homeowner's OA.

 

[rrr2015]

The proposed idea was thinking along the line that if we sell the house years later, we will have more cash from the sale without refunding to CPF.

no difference if above 55 & FRS already met. they will be refunded back.

CPF Refund after selling property

 

[BBCWatcher]

no difference if above 55 & FRS already met. they will be refunded back.

Yes, if OA dollars (plus accrued interest) haven't already been repaid. Ghostrider's proposition is whether it makes sense to do this (for example):

1. Just before your 55th birthday, "shield" SA.

2. Fund your Retirement Account to the Full Retirement Sum (or beyond) on your 55th birthday using OA dollars and/or cash.

3. While SA is still shielded, withdraw remaining OA dollars.

4. While SA is still shielded, repay OA dollars used for housing (plus accrued interest).

5. While SA is still shielded, withdraw the OA dollars.

6. Release the SA shield.

And yes, it appears that you can do all that per today's CPF rules. If you do that then when you sell your home there won't be any OA dollars that are repaid because you've already paid them back. You get all the net sales proceeds from your home in cash. But the disadvantage is that you've destroyed your ability to repay OA, so you no longer have the option to inject dollars in that particular way into CPF where they can earn at least 2.5% interest.

Of course you could do something anywhere in between. If for example you owe $250K to your OA and want to repay $125K to yourself (to your OA), you can.

 

[rrr2015]

Housing refund before 1 jan 2013
if i understand correctly, once set aside FRS you won't be unable to do housing refund if you still own the property. but CPF made exception for those before 1 jan 2013

 

[BBCWatcher]

Housing refund before 1 jan 2013
if i understand correctly, once set aside FRS you won't be unable to do housing refund if you still own the property. but CPF made exception for those before 1 jan 2013

Hmmm, don't think so. Check this FAQ. I don't think there's any barrier to making a voluntary housing refund (if otherwise eligible) when you're age 55+ and have set aside the FRS (or more).

 

[rrr2015]

Hmmm, don't think so. Check this FAQ. I don't think there's any barrier to making a voluntary housing refund (if otherwise eligible) when you're age 55+ and have set aside the FRS (or more).

that's if you haven't met FRS. so refund goes to topup FRS first before returning the balance.

anyway better to write to CPF for further clarification

 

[BBCWatcher]

Actually, this information is quite interesting:

If you’re 55 years old and above, the amount refunded to your CPF savings will be used to meet your Full Retirement Sum in your Retirement Account. Any balance amount will be paid to you in cash within a week after refunds are credited into your CPF account.

You can choose to retain the balance in your CPF account by writing to us two weeks before the completion of the sale of your property.

Please note that the withdrawal rules for members who are 55 years old and above will apply subsequently should you want to withdraw the balance.

OK then! So there's really not much point at all voluntarily repaying OA (plus accrued interest) unless that's the only remaining way to deposit dollars into CPF and you actually want to keep dollars there. As long as you've funded your Retirement Account "decently" (Full Retirement Sum or more), you can get all of your home sale's proceeds as cash. Or you can tell the CPF Board to keep the OA dollars you used (plus accrued interest) in your OA as long as you give them a heads up. (There you go, Ghostrider! You could do what you suggest, but there'd be no point since you can already get every penny of your home sale proceeds as cash as long as your RA is funded to the FRS or higher.)

Surely this means voluntary OA refunds are allowed, because you can also volunteer to refund OA dollars when you sell your home? I don't see anything in the voluntary housing refund eligibility information that blocks you from doing refunds from age 55+.

 

[Ghostrider]

Housing refund before 1 jan 2013
if i understand correctly, once set aside FRS you won't be unable to do housing refund if you still own the property. but CPF made exception for those before 1 jan 2013

It is possible , my FRS was set aside recently. I try to do a partial housing refund . It worked.

Like what @BCCWatcher pointed out, I will not do a full housing refund that will destroy the ability to repay OA, I will still have the option to inject dollars via this channel into CPF where they can earn at least 2.5% interest.

 

[Nofear40]

If we do a housing refund and pay for housing from there, will the payment be subject to accrued interest?

 

[reddevil0728]

If we do a housing refund and pay for housing from there, will the payment be subject to accrued interest?

What payment?

 

[Nofear40]

What payment?

Mortgage payment from cpf account using cpf housing refund