After downgrade HDB: No Silver Housing Bonus?

theonlinecitizen June 07, 2013

By Leong Sze Hian

Sometimes in life, life moves in strange ways (timing wise that is).

Mdm Con (not her real name) came for financial counseling on 6 Jun.

Low takeup for Silver Housing Bonus?

The next day, there was a news article “Elderly in S’pore not keen on using HDB flats to make money” (Today, Jun 7), which said “Besides the low interest in renting out their units, two schemes for elderly Singaporeans to monetise their flats have also met with low take-up rates.

Twenty-three applications have been made for the Silver Housing Bonus scheme, which allows eligible elderly to receive a cash bonus of up to S$20,000 per household if they choose to move into a smaller flat and top up their CPF Retirement Account. This scheme was implemented on Feb 1″.

Mdm Con, age 59, is a retiree with health problems staying by herself in her fully paid 3-room HDB flat.

Downgrade can get Silver Housing Bonus?

She heard about the Silver Housing Bonus Scheme which gives a Silver Housing Bonus to retirees who downgrade to a smaller HDB, and use some of the sales proceeds to top-up their CPF Retirement Account and then opt-in to the CPF Life Scheme.

She sold her 3-room flat for $345,000 and downgraded to a resale 2-room flat for $250,000 (the cheapest that she could find).

The other reasons for downgrading was that the S&CC is lower for a 2-room flat and there is no property tax.

She was also convinced that a smaller flat would be easier for her to upkeep in view of her health condition.

Moreover, she had the understanding and perception that any S&CC rebates, Government handouts may be higher for people who live in 2-room flats.

The worksheet shows that she would get a Silver Housing Bonus of $11,141.40.

Not enough balance sales proceeds to top-up CPF?

As it turned out, she is unable to get the Silver Bonus, because she has to use $33,424.19 from her flat sales proceeds to top-up her CPF.

But she had to spent about $10,000 plus on renovations and other expenses for her 2-room flat because the flat’s condition was very bad (to be expected since she bought the cheapest 2-room flat that she could find).

The end result was just about $25,000 sales proceeds balance left.

So, no Silver Housing Bonus for her!

Cannot cough up $33,424.19 to top-up her CPF means no Silver Housing Bonus! 

Moral of the story – cannot assume that when poor people downgrade – they don’t need to incur any other expenses (not in the worksheet?) like minimal renovations, repairs, moving expenses, debris removal, changing the locks, etc.

In this regard, the “Allowed Deductibles” (refer to the ancillary cost incurred for both housing transactions) of $15,000 in the worksheet, was insufficient – the real estate agents’ commissions and legal costs alone were already over $10,000.

Scheme “should be simple to understand”?

Perhaps Mdm Con’s case underscores the remarks – “We have to remember who these schemes are designed for,” said Professor Joseph Cherian from the National University of Singapore Business School. “It’s for the elderly and people probably in the middle and lower income group, so when you provide schemes to such people, it should be simple to understand, trustworthy and something they are willing to take on because they trust the counter party who is providing the schemes to them.”

Silver Housing Bonus (SHB) Scheme

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.