Friday, March 15, 2013

Review of CPF valuation policy for home loan payments

The Straits Times  | 15 March 2013

The amount of Central Provident Fund savings that home buyers can use to pay their mortgage could change.

Acting Manpower Minister Tan Chuan-Jin said yesterday that the valuation limit policy, which caps the amount, is under review. But he did not give any details.

His remarks followed calls for an easing of the rules by at least five MPs. They had described the plight of CPF members left stranded by current rules, which allow them to use their Ordinary Account (OA) savings to pay their housing loans up to the valuation limit - the lower of the purchase price or market value of the property at the time of purchase.

Beyond the limit, they must set aside half of the Minimum Sum in their OA and Special Account if they want to withdraw more CPF savings to service the loan.

Mr Low Thia Khiang (Aljunied GRC) said CPF members who have enough in their OA to pay their mortgage may be prevented from doing so because of the Minimum Sum rule.

Mr Tan acknowledged that as a result, some CPF members may find it difficult to finance their homes.

The Government has allowed the drawing of CPF monies beyond the valuation limit on a case-by-case basis, he added.

But he rejected another proposal by Mr Low to adjust the Minimum Sum according to the core inflation rate rather than the headline Consumer Price Index.

Mr Low said the lower- and middle-income groups are anxious as the amount of CPF savings they can withdraw at age 55 will be pared down by the rise in the Minimum Sum they must retain in their CPF accounts.

Mr Tan said the Minimum Sum cannot be completely de-linked from inflation as that ensures each cohort's basic retirement needs can be met. Also, headline and core inflation rates have not differed significantly over the past decade, and core inflation has even outstripped headline inflation in some years.

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