Current housing refund policy for CPF fund refined

SINGAPORE - Acting Manpower Minister Tan Chuan-Jin today announced the refinement of the current housing refund policy for CPF funds.

In moving the second reading of changes to the CPF Act, Minister Tan said that the new policy will ensure that CPF housing refunds are consistent with the amounts contributed by each co-owner to the property.

At the same time, it will not require older members to retain in their CPF more refunds than necessary.

Currently, members who sell their property before age 55 are required to refund into their CPF account the principal amount that they withdrew for the property, including the prevailing Ordinary Account (OA) interest that would have accrued on this amount, or P+I in short.

At age 55, a member is required to set aside the Minimum Sum (MS) from his existing CPF balances, and he may withdraw his CPF savings in excess of the MS after having also set aside the required amount in his Medisave Account for his healthcare needs.

So when a member sells his property after age 55, only the amount needed to bring the member up to his MS must be refunded.

"In other words, for a member who sells his property after age 55, he will refund his MS shortfall or his P+I, whichever is lower. Remaining proceeds from the sale of his property is received in cash," outlined Minister Tan.

He pointed out that while the current refund rules for members over 55 avoid collection of housing refunds in excess of MS, there may be certain scenarios involving more than one co-owner, where the refunds required of the co-owners may not match the amount of CPF each co-owner used to pay for that property.

When this arises, co-owners can decide to distribute the cash proceeds among themselves such that the total of the cash proceeds and CPF refunds for each co-owner matches the amount that each co-owner had contributed towards payment of the property.

"However, where the co-owners are no longer on good terms, the distribution of cash proceeds becomes more contentious and the co-owners may not always be willing to consider the amount that the other party has contributed towards the property," he said.

He added that in cases where the property is sold at a loss and there may not be any cash proceeds for distribution, the current housing refund requirements may create some unhappiness among members.

In addressing this issue, all members, regardless of their age, will be required to refund their P+I. This refinement will ensure co-owners receive CPF refunds that are commensurate with their usage of CPF savings for the property.

Where the P+I refund exceeds the MS shortfall for members aged 55 and above, the refunded amount will first be used to set aside their cohort Minimum Sum in their RA and the required Medisave amount in their MA, while the excess can be withdrawn.

"This is no different from the existing requirement that applies to all members past age 55 who wish to withdraw their OA and SA savings in excess of the MS," he said.

The change will take effect from January 1, 2013.

dassa@sph.com.sg