By This year’s National Day Rally provided some interesting insights into how the Government is restructuring policies to cope with current hot topics. Dignity in old age. Provision for medical care. Flexibility for you to use your CPF monies to ‘do something [you] have long wanted to do’. More choices to monetise your assets in your golden years.
It could perhaps signal a shift in our government’s long-held hard-headed policies to ensure self-sufficiency in retirement. Has our Government become more receptive to the voices and concerns of ordinary folk? Or are we simply now enjoying the fruits of our forefathers’ decades of labour?
If your parents or loved ones are soon turning 65, take heart at the plethora of government initiatives to help them financially in their old age. These benefits spill over to their family, who need not feel so alone or burdened in providing for both old and young in the house.
However, that’s not to say that the announcements are without ambiguity. Here, we take a look at the 4 key points that were raised and raise some questions of our own:
1. Pioneer Generation Card
Touted by Prime Minister Lee himself as the king amongst cards in his National Day Rally, this is one handy card that will help defray the costs of medical and dental care at participating CHAS (Community Health Assist Scheme) clinics for life. This card will be mailed to all who meet the age and citizenship criteria regardless of income or housing type by September 2014 and can be used from 1 September 2014 onwards. It is so handy and useful that PM Lee suggested keeping this card together with one’s NRIC.
Besides direct subsidies for health and dental care, the Pioneer Generation package will include Medisave top-ups of $200-$800 each year, also for life. Those who are aged 80 and above this year will receive the maximum $800 top-up yearly, whereas those aged between 65-69 this year will receive $200 top-up yearly, which aids towards payments of Medishield Life premiums.
If your elderly loved ones need some help to understand the benefits of the Pioneer Generation Card, here’s a slightly lighter hearted video than what we’re normally used to explaining the benefits:
2. Lease Buyback Scheme to Extend to 4-Room Flats
Currently, if you live in a 3-room or smaller HDB flat, have a monthly household income of $3,000 or less and are at CPF drawdown age (63 or above), you have the option of monetising your HDB flat by selling part of your lease back to HDB after retaining a 30-year lease. This is intended to benefit low-income elderly households by using the proceeds to top-up their CPF Retirement Accounts to purchase a CPF Life Plan to provide for a monthly stream of income for life.
What the announcement at last night’s NDR essentially means is that the % of households who have the option to sell back the remaining lease of their 99-year HDB flats will more than double from 23% to 56% (based on data from 2012). HDB 4-room flats remained the most common type of dwelling among resident households in 2012, at 33%. Whilst 3-room HDB flats make up 19% of resident households and 1&2-room HDB flats constitute 5%.
The good news is that:
- One stands to receive a lump sum upfront and monthly retirement income, presumably paid through CPF life (the example that PM gave for a couple aged 65 who have bought their 4-room flat brand new from HDB 34 years ago stands to receive a lump sum of $27,500 and monthly income of $900).
- Additionally, one can go on further to rent out a room and receive $500-$700 additional monthly income.
- All while ageing-in-place.
However, what remains to be seen are the details which are crucial towards whether this may potentially be an attractive option for elderly households to unlock the equity in their HDB flats. Details like:
- Whether this scheme will be extended to households with an income above $3,000 per month (especially if the adult children are still living with their elderly parents)
- Whether part of the proceeds of this lease buyback will be in cash, or will all of it need to go back to one’s Retirement Accounts, subject to CPF withdrawal rules.
- At what price is HDB buying back the lease? Is it at the current market price?
After all, what these elderly households are really doing when they opt for this scheme is to forgo the option of bequeathing their HDB flat to their children. And incurring the opportunity cost of further appreciation in their HDB flats in the next 30 years.
3. Flexibility in CPF Withdrawals
This is perhaps the biggest and best piece of news to celebrate of all for many. And I love how the PM framed this announcement, acknowledging that the current scheme is ‘not quite flexible enough’ and conceding that after much deliberation and discussion, he has decided to ‘change his view’ and to ‘adjust the policy’. I respect him calling a spade a spade, a change of view a change of view, instead of couching it like the government has been planning it all along.
This policy shift opens up many possibilities to our elderly to use their hard-earning CPF savings to pursue a ‘lifetime ambition’ like going on a journey, going on the Haj or to contribute to a family emergency. Of course, subject to certain withdrawal limits, an example given was maybe 20% of total CPF savings, and only during retirement, i.e. above age 65.
However, this is significant news in that the government is willing to consider the situation of elderly Singaporeans to come to a middle ground that ensures they will still receive a steady stream of subsistence income in their golden years, but yet have the option of withdrawing part of it in a lump sum to pursue their dreams.
All in all, these initiatives and announcements bode well for our elderly, with their healthcare needs taken care of, more options to unlock equity from their HDB flats while ageing-in-place and the flexibility to use a portion their CPF savings according to their wishes.
This is perhaps the best balance yet between the trade-offs, which is absolutely necessary in setting us on the path towards first-world societal mindsets to complement our economy which has reached first-world status years ago.
