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What If You Can’t Use CPF Savings to Buy a Home?


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When President Halimah called for bold changes to help push Singapore into its next phase of development, one of the suggested ideas was ending the use of the Central Provident Fund (CPF) savings to buy homes, so that they have more left for retirement. This suggestion came from Dr. Walter Theseira who’s a Senior Lecturer at the Singapore University of Social Sciences.

So, what if…

Let’s talk about the implications it might have for Singaporeans. With 37% of the wages of 55 years old and below going to CPF, how would one get to purchase a house if we aren’t allowed to use CPF for home purchases?

Using CPF Savings

In purchasing an HDB flat, you can either take an HDB Loan of up to 90% or up to 80% for Bank Loan. Which means that if you have enough amount in your CPF ordinary account, it can be used to pay the remaining 10-20%.

Without Using CPF Savings

If you take an HDB Loan for a resale flat worth $300,000 without using your CPF, you need $30,000 in cash to pay for the remaining 10%.

So, How Much Cash Do You Need to Buy a House?

You can buy a 2-bedroom 73 sqm HDB Resale Flat at Bukit Batok Area for $289,000. Let’s say you start working at 25 years old and plan to buy your own house at the age of 30, if you need to pay $28,900 in cash, you need to save $482 per month for the next five years.

Again, this is just a what if.

In Dr. Theseira’s personal Facebook post, he explicates his suggestion by saying that what he argues is that the CPF system could be redesigned so that people no longer need to pay for housing out of CPF, by cutting contribution rates to focus on retirement and health.

Furthermore, he said that a CPF system focused on retirement and health would require lower contribution rates and allow people more choices in using their higher take-home income on housing, investments, business, and family.

What If We Then Contribute Less to CPF?

Take for example if we only contribute 17% to CPF, which is currently the employer’s portion of the CPF. Someone with a $3000 salary would get to take home the full sum without deduction, that’s a 25% rise in take home income! Seems really fantastic but would we then spend it all or be conscious of using this amount wisely? Are we better off handling the money ourselves than having it held in our CPF accounts? Would we save enough to buy a home or used it to improve our quality of life?

For now, we don’t have the answers. But as Dr. Theseira concluded, “Finding workable solutions that promote the public interest is a lot harder, but more than ever, we need to work together to help improve policy in Singapore.”

Sources: Unscrambled, 2018 , CPF, Walter Theseira’s Facebook

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