In the National Day Rally 2014, PM Lee announced that the Lease Buyback Scheme (LBS) will be extended to 4-room HDB flats. Other changes were announced yesterday. All changes will come into effect on 1 April 2015. See the info-graphic, provided by the Ministry of National Development, below.
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| Source: Ministry of National Development - dated 4 September 2014 |
Extended to 4-room HDB Flats with S$10,000 Cash Bonus
The LBS, as mentioned by PM Lee, will be extended to 4-room HDB flats. 4-room HDB flat owners will receive a S$10,000 cash bonus per household when they sell the tail-end lease of their flat to HDB. The cash bonus is on top of the proceeds they received. The cash bonus for 3-room HDB owners participating in the LBS remains at S$20,000.
To qualify for the full cash bonus, there is always a "However".
However, the household will only get the full S$20,000/S$10,000 cash bonus if the household's total CPF top-up is $60,000 or more from the LBS proceeds. If the total CPF top-up is less than S$60,000, the household gets a pro-rated cash bonus of S$1 for every S$3 CPF top-up.
Income Ceiling for participating in the LBS to be raised to S$10,000 per month
The income ceiling for participating in the LBS will be raised to S$10,000 from S$3,000 per month. This will make more seniors eligible for the scheme. I believe this is in line with the Government encouraging elderly to continue working, if possible, and still qualify for these monetisation options in this LBS. Please note that the income ceiling is based on the gross monthly household income.
Top up of CPF Retirement Account with the LBS proceeds will be relaxed
This is probably the most attractive change in the LBS. Instead of topping up to the full age-adjusted prevailing Minimum Sum to his/her CPF Retirement Account, each owner of the 3 or 4 room HDB flat will only be required to top up to half the age-adjusted prevailing Minimum Sum.
Owners will be able to retain more cash upfront from participating in the LBS. Alternatively, owners can also top up their own CPF Retirement Account beyond the minimum required up to the prevailing Minimum Sum to get a higher monthly payout under CPF Life.
Owners will be able to retain more cash upfront from participating in the LBS. Alternatively, owners can also top up their own CPF Retirement Account beyond the minimum required up to the prevailing Minimum Sum to get a higher monthly payout under CPF Life.
Please note there is a S$100,000 cap on the household's cash proceed. Owners are required to top up the excess of S$100,000 into their respective CPF Retirement Account.
Here are the age-adjusted Minimum Sum based on the prevailing Minimum Sum of S$155,000:
Flexibility in the Length of Lease to Retain
Instead of having the standard 30-year lease, owners will have the flexibility to choose the duration of lease to retain, subjected to a minimum lease based on the age of the youngest owner (See table below). Nevertheless, a household must have at least 20 years of lease to sell to HDB to be eligible for the LBS. Those that prefer a longer lease can choose to retain more than the minimum required for their age, in 5-year increments, up to a maximum of 35 years.
Eligibility Criteria - Most Important to Note
Age & Citizenship
- All owners at CPF Draw-Down Age (currently, the age is 63 years old) or older
- At least one owner is a Singapore Citizen
Income
- Gross monthly household income of S$10,000 or less. Please note it is the total household income.
Flat Type
- 4-room or smaller HDB flat (exclude HDB terrace houses)
- No concurrent ownership of second property
- All owners have lived in flat for at least 5 years
- Have at least 20 years of lease to sell for proceeds
How the LBS works - Putting everything together
The Straits Times graphic provides a good understanding of the LBS:
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| Source: Straits Times - dated 4 September 2014 |
The enhancement in the LBS definitely provides greater flexibility to suit different preferences in terms of the duration of lease and cash. I personally think that being able to retain more cash upfront from the LBS proceed is attractive. In the past, 3-room HDB owners that were complementing to participate in the LBS would be put off when they were required to top-up a large part of their LBS proceeds into their CPF Retirement Account to meet the Minimum Sum. With this relaxation, owners can choose to retain more cash or top-up their own CPF Retirement Account beyond the minimum required.
Monetizing your HDB flat is one way of supplementing your retirement income. The LBS may take away the option of bequest but I feel your retirement should be your main focus. If your monthly income (from all sources) is insufficient, LBS can be explored. I believe your children will be happier to know you are leading a good retirement.
For more information on the LBS, please call HDB Branch Service Line at 1800-225-5432 between 8 am and 5 pm from Mondays to Fridays.
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