New series on how the Budget helped Singaporeans?
I refer to the article “$ The Budget and me: Silver Housing Bonus for her greying years” (Straits Times, Feb 14).
Silver Housing Bonus?
It states that “Downgrading is sometimes a painful affair, but retired nurse Choy Mui Leng reaped a $20,000 bonus when she switched from a four-room fat in Sengkang to a three-roomer in Punggol last May”.
No financial details?
What stuck me when I read this story, was that there were hardly any details about how she qualified for the $20,000 Silver Housing Bonus?
Much of the article was about how the Silver Housing Bonus scheme has been enhanced – such as “The average person need only put in $60,000, down from the possible maximum of $278,000 previously”.
After all, this series is about the Budget has helped Singaporeans, particularly the lower-income – so, why is the story so scant on the financials of the transaction to qualify for the $20,000 bonus?
How the financials may have looked like?
So, I shall try to piece together the financials of the transaction from what little information was available in the subject article.
Let’s assume that they sold their 4-room Sengkang HDB flat for $500,000, and the net sales proceeds was $300,000, after deducting the price of the 3-room Punggol BTO flat, resale levy and ancillary costs.
$200,000 CPF top-up to get $20,000 bonus?
Under the Silver Housing Bonus rules, they will have to top-up $200,000 ($60,000 + Further top-up (Net sale proceeds – $60,000 – $100,000) to their CPF accounts, and opt-in to CPF Life, in order to get the $20,000 bonus.
This leaves them with net cash sales proceeds of $100,000 (they decided to use their $20,000 cash bonus to top-up their Medisave accounts).
Live beyond 93?
Since the husband is 78 and the wife is 66, their CPF Life monthly annuity payout is $744 to $778 for the husband. If he dies 7 years later at age 85, the bequest to his beneficiary is only $44,716 to $47,125, after collecting just $63,924 ($761 x 84 months) from the original CPF top-up of $100,000 plus interest.
At 5% for the first $60,000 and 4% for the rest in the Retirement Account (RA) – withdrawing $761 a month will leave an approximate balance of about $62,368 after 7 years at age 85.
If he dies after 17 years at age 95, the bequest is 0.
Similarly, withdrawing $761 a month for more than 15 years until over age 93 will deplete the RA.
So, the question is what is the probability that one will live beyond 93 years old?
And is it advisable for a 78 year old to opt-in to CPF Life by topping-up with $200,000 of one’s sales proceeds, to get the $20,000 Silver Housing Bonus?
For the wife who is 66, the CPF Life annuity payout is $522 to $553. If she dies after 9 years at age 75, the bequest is only $47,458 to $50,407.
Similarly, withdrawing $537.50 a month will leave an approximate balance of about $79,147 at age 75.
If she dies after 19 years at age 85, the bequest is 0.
In contrast, withdrawing $537.50 a month for 19 years will leave an approximate balance of $43,250.
To deplete the RA, it would take about 27 years of withdrawals of $537.50 monthly, i.e. until age 93.
Annuity will be eroded by inflation?
As the CPF Life annuity is a fixed amount that is not adjusted for inflation like the pensions in most developed countries, can she survive into the future, as the real purchasing power of her $537.50 declines as she gets older?
There is also no mention as to the health status of the couple.
How many? How much?
How many people and what percentage of people who downgrade and meet the eligibility criteria, have actually opted-in in order to receive the Silver Housing Bonus?
Dropped to 150th Press Freedom ranking?
If this is the best kind of example that we can come up with, to promulgate the propaganda that we are helping Singaporeans in a big way – is it any wonder that our Press Freedom ranking has just dropped another notch to 150th?
Leong Sze Hian
