On Thursday, the Ministry of National Development (MND) announced some “enhancements” to the Silver Housing Bonus and Lease Buyback Scheme. Essentially, these two schemes enable elderly Singaporeans to monetise their HDB flats so that they have more cash to live through their retirement.
The Silver Housing Bonus is intended to provide an incentive for lower-income elderly couples to downgrade to a smaller flat and use the net proceeds for their retirement. In its press release, MND said that “The Government has made the SHB more attractive, by lowering the top-up requirement to $60,000 per household (subject to a $100,000 cap on cash proceeds for those who have not achieved the prevailing Minimum Sum). Furthermore, the $20,000 bonus will now be given fully in cash.”
I am glad to hear this. After the Silver Housing Bonus was announced by the Finance Minister in his Budget speech in February, I had voiced concern in my response in Parliament on 29 February that the scheme would be unattractive to the elderly as too much of the net proceeds from the sale of their flats would end up being locked up in their CPF accounts. Here is what I said:
The Silver Housing Bonus is a good attempt to help increase the retirement incomes of the elderly. However, I believe the Bonus would be more attractive if the elderly received a greater portion of the proceeds from the sale of their previous flat in cash, rather than having most of it returned to their CPF accounts.
In the example that the Finance Minister gave in his speech, the elderly couple receives only $23,000 in cash, or about 9% of their net proceeds from the sale of their flat, even after the Silver Housing Bonus.
This is because to benefit from the Silver Housing Bonus, flat owners must use the cash proceeds from the sale of their previous flat to top up their CPF Retirement Accounts to the Minimum Sum. I propose that they be allowed to pledge the value of their new studio apartment towards meeting up to half of the Minimum Sum. This will allow them to get more cash after the sale of their previous flat.
Since they will still be meeting their Minimum Sum, there is no need to apportion $5,000 from the Silver Housing Bonus to their CPF Retirement Accounts. The full $20,000 Silver Housing Bonus could be given to them in cash.
While a larger Retirement Account may get them more per month in CPF LIFE annuity pay outs, many senior citizens may have more immediate needs for cash, for example, to pay their medical bills. Why not give them this option to have more cash on hand? If they want higher annuity pay outs, they can always voluntarily top up their CPF Retirement Accounts.
The Lease Buyback Scheme allows lower-income elderly to sell the tail-end lease of their HDB flat to the government. This scheme has been around since 2009, but to date only 466 households have taken it up. Part of the reason for the low take-up rate could be the restrictive eligibility criteria. For example, only elderly folks living in 3-room or smaller HDB flats are eligible. In my Budget debate speech, I said:
…most elderly folks prefer to remain in their current homes, rather than get displaced to unfamiliar surroundings in their old age.
To give the elderly more choice, the Lease Buyback Scheme should be extended to owners of 4-room or larger flats, just like the Silver Housing Bonus. Currently only owners of 3-room or smaller flats are eligible. This could be a reason for the low take up rate.
An enhanced Lease Buyback Scheme will enable more of our elderly to age in place, and to live their golden years in familiar surroundings, without having to worry too much about finances.
In yesterday’s announcement, sellers still need to top up their CPF Retirement Accounts to the prevailing Minimum Sum if they are 70 years or younger. The top up threshold is reduced slightly for those older than 70 or 80. However, the 3-room or smaller rule still remains. With such restrictions still in place, it remains to be seen if the take up rate will increase by much.
Given a choice, I believe most senior citizens prefer to remain in their current homes, rather than move to unfamiliar surroundings in their old age. The government must therefore look into ways to increase the benefits of the Lease Buyback Scheme.
The potential beneficiaries of these two schemes belong to the generation of Singaporeans who built our nation to where it is today. They are the pioneer generation. It is appalling that despite their contributions, many find themselves living in poverty during their silver years. Our nation owes them a huge debt. We must repay them before we miss our chance.