CPF changes from 1 July 06 to improve members' retirement adequacy
	News Release by: Central Provident Fund Board 13 June 2006 --
	The Board would like to remind CPF members of the following changes to the CPF schemes which will take effect from 1 July 06:- i. Transfer excess Medisave Account (MA) contributions to Special or Retirement Account (SA, RA) instead of the Ordinary Account (OA) ii. Restrictions on use of CPF savings for multiple property purchases iii. Phasing Out of Non-Residential Properties Scheme (NRPS) iv. Increase in CPF Minimum Sum (MS), Medisave Minimum Sum (MMS) and Medisave Contribution Ceiling (MCC) The changes (i-iii) were first announced by the Government last year on 19 July 05. They are implemented to improve members’ retirement adequacy and help members build up their retirement nest egg. (iv) was first announced by the Government in ‘03.
	i. Transfer excess Medisave Account (MA) contributions to Special or Retirement Account (SA, RA) instead of the Ordinary Account (OA)
	Currently, contributions to the Medisave Account (MA) which are in excess of the Medisave Contribution Ceiling, or known as “MA overflows”, are automatically transferred to members’ Ordinary Accounts (OA). From 1 July 06, MA overflows will be transferred into members’ Special Account (SA) or Retirement Account (RA)1, depending on their age. This will improve the retirement adequacy of members. Members will benefit from this as they will enjoy a higher interest on their MA overflows. Currently, savings in the SA and RA earn an interest rate of 4%. For members below age 55, MA overflows will be transferred to their Special Account (SA). Once the SA balance (inclusive of amounts withdrawn under CPFIS-SA) has reached the prevailing Minimum Sum (MS), excess MA overflows would then go into their Ordinary Account (OA). For members aged 55 and above, MA overflows will be transferred to their RA to top up any shortfall. Once the RA has been topped up to cover any MS shortfall, MA overflows would go into their OA. As savings in the SA and RA cannot be used for property purchases, some members who currently rely on their MA overflows to finance their property mortgages may be affected. CPF members who are using MA overflows to service housing mortgages may appeal to the Board to continue to use the overflowed amount to SA to service their loans, if their OA is depleted. They can use their SA savings to the extent that their mortgage payments are affected by this policy change. If the MA overflow is to the RA, members will still be able to use the monies if they have met the MS cash component ($47,300 from 1 July 06).
	1 When a member turns 55, he has a new account called Retirement Account (RA) for him to set aside his Minimum Sum.
	ii. Restrictions on use of CPF savings for multiple property purchases
	Currently, CPF members can use their CPF savings to purchase more than one property. Members who already own a property bought with their CPF savings and wish to buy another property with CPF from 1 July 06 will only be able to do so after setting aside the prevailing Minimum Sum cash component ($47,300 from 1 July 06) in their Ordinary and Special Accounts. This revised policy supports the objective of retirement adequacy. Members who own multiple properties bought with CPF savings before 1 July 06 will not be affected by the policy change unless they subsequently buy another property using their CPF savings. However, the Board will still allow a member, from 1 July 06, to use his CPF savings to buy a second property without first setting aside the prevailing Minimum Sum cash component provided he indicates his intention to sell the existing property within a grace period, as follows: i. For completed properties – 6 months from the completion of purchase of the second property ii. For uncompleted properties – Up to Temporary Occupation Permit (TOP) + 6 months Once the grace period is up, they should either own only one property or satisfy the MS cash requirement if they own more than one property. If the MS cash requirement is not met, the Board will stop CPF withdrawals for the new property.
	iii. Phasing Out of Non-Residential Properties Scheme (NRPS)
	Currently, CPF savings can be used to buy non-residential properties up to the purchase price or 70% of the value of the property, whichever is lower. These include office premises, shop units, factories and warehouses. From 1 July 06, the Board will no longer approve any NRPS applications, as members can now invest in property funds under CPF Investment Scheme, which serves the same aim of helping members enhance the returns on their CPF savings. In addition, the take-up rate of NRPS has been low and the number of new NRPS applications has also declined over the years. Members who are using CPF to service their non-residential properties before 1 July 06 will not be affected by the policy change. For members who purchase shop-houses with leases/titles which can be sub-divided into residential and commercial components, approval may be given to use CPF savings to buy the residential component of such shop-houses. Members will need to sub-divide the lease/title into the residential and commercial components before they can apply to use CPF savings for the residential component.
	iv. Increase in CPF Minimum Sum (MS), Medisave Minimum Sum (MMS) and Medisave Contribution Ceiling (MCC)
	CPF Minimum Sum (MS) From 1 July 06, the CPF MS will be increased from $90,000 to $94,600. The new amount will apply to CPF members who turn 55 from 1 July 06 to 30 June 07. CPF members who set aside the $94,600 fully in cash will receive a monthly payout of $750 from age 62 for about 20 years. This increase is in line with the announcements made in August ‘03 that the CPF MS will be raised gradually to reach $120,000 (in ‘03 dollars) in 2013. The increase in MS, which includes an adjustment for inflation, is to ensure that Singaporeans set aside sufficient savings for their retirement. Medisave Minimum Sum (MMS) and Medisave Contribution Ceiling (MCC) From 1 July 06, the MMS will be increased from $27,500 to $28,000. This amount will apply to members who withdraw their CPF at or after 55 years old. The MCC will be also raised from $32,500 to $33,000. This amount is the maximum balance each member may have in his Medisave Account.2 The revision to MMS and MCC is to ensure that Singaporeans have sufficient savings to meet their hospitalisation expenses, and have been adjusted for inflation. For a summary of the changes, please refer to Annex A
	2 Any Medisave contribution in excess of the prevailing MCC will be transferred to the member’s Special or Retirement Account, depending on his age. Please refer to paras 4 and 5 for details. PUBLIC ENQUIRIES Members with enquiries can call the Board at 1800-2271188 or log on to www.cpf.gov.sg for more information.
	Annex A
	I. Transfer excess Medisave Account (MA) contributions Contributions to Medisave Account (MA) in excess of Medisave Contribution Ceiling are automatically transferred to : Current Members Ordinary Accounts (OA). From 1st July 2006 Members Age below 55 Special Account (SA). If SA balance (inclusive of amounts withdrawn under CPFIS-SA) has reached the prevailing Minimum Sum, excess MA would go into their Ordinary Account (OA). Members aged 55 and above Retirement Account (RA) If RA has been topped up to cover any Minimum Sum shortfall, MA would go into their OA.   II. Restrictions on use of CPF savings for multiple property purchases Current Members can use CPF savings to purchase more than one property. From 1st July 2006 Members can only use their CPF savings for the purchase of their second and subsequent properties provided they are able to set aside the Minimum Sum cash component. This policy is applicable to members who already own a property bought with their CPF savings and wish to buy another property with CPF from 1 July 06. Members who own multiple properties bought with CPF savings before 1 July 2006 will not be affected by the policy change unless they subsequently buy another property using their CPF savings.   III. Phasing Out of Non-Residential Properties Scheme (NRPS) Current CPF savings can be used to buy non-residential properties. From 1st July 2006 The Board will no longer approve any NRPS applications.     IV. Increase in CPF Minimum Sum, Medisave Minimum Sum and Medisave Contribution Ceiling CPF Minimum Sum   Medisave Minimum Sum Medisave Contribution From 1st July 2006 Increased from $90,000 to $94,600. The new amount will apply to CPF members who turn 55 from 1 July 2006 to 30 June 2007. Increased from $27,500 to $28,000. This amount will apply to members who withdraw their CPF at or after 55 years old. Raised from $32,500 to $33,000. This amount is the maximum balance each member may have in his Medisave Account.