Of home prices and nest eggs

Of home prices and nest eggs
Deputy Prime Minister & Minister for Finance Mr Tharman Shanmugaratnam speaking at the forum on CPF and Retirement Adequacy at Island Ballroom, Shangri-La Hotel on July 22 2014.

SINGAPORE - While the property market goes through cycles, the Government will strive to ensure that housing prices do not spiral upwards and become "out of sync" with incomes in the long term, said Deputy Prime Minister Tharman Shanmugaratnam yesterday.

This is so that Singaporeans do not take too much money out of their Central Provident Fund (CPF) to buy their homes.

Otherwise, they may not have enough left for their retirement needs.

Mr Tharman was speaking at a forum on CPF and retirement adequacy organised by the Institute of Policy Studies.

The issue regarding the dominant use of CPF funds in housing was raised by several participants.

Mr Tharman, who is also Finance Minister, said in its initial phase, the CPF worked in substance as a saving scheme for home ownership rather than a scheme for retirement. This allowed over 90 per cent of elderly Singaporeans to own their homes, he said.

Unlike other countries, ordinary workers including lower-income Singaporeans can benefit from owning a housing asset, without having to use retirement savings to pay rentals.

However, Mr Tharman noted that many Singaporeans in the older generation are "asset rich and cash poor", and that the Government is studying ways to help them get cash out of their homes.

Starting around the mid-1990s, improvements were made to the CPF system to boost cash savings for retirement, through the inclusion of the Special, Medisave and Retirement Accounts (SMRA), he said.

Still, the CPF "retains a significant and unique feature", to enable home ownership for most Singaporeans, he said. With increasing housing grants, the lower and middle-income groups are able to own homes.

Together with schemes such as Workfare, Medisave top-ups for the Pioneer Generation and subsidies for MediShield premiums for lower and middle-income groups, the CPF provides a "solid foundation", he said.

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