Why do I have to return money to CPF when I sell my property?

By June 18, 2018Current

TL;DR – Just in case you waste all your money at once.

There was this going around Whatsapp and Facebook:

Angry complaint about having to return money to CPF

This 66-year-old man (I’m going to assume that this person is a man) used his CPF money to buy a property. When he sold his property, he had to refund what he took from the proceeds of the sale of his property to his CPF. And he’s upset that he had to refund money to CPF.

Some have used this person’s experience as “proof” that CPF is one big scam.

No. It’s not.

You refund the money into YOUR CPF account

If you have used your CPF money to purchase your property, this is what happens when you sell that property. You and any property co-owners would use the sales proceeds to refund the principal amount (P) used and the accrued interest (I) into your respective Ordinary Accounts. That is a rule that is well-stated and not hidden anywhere. Do a simple Google search and you will find many websites (e.g. this and this) and even a Facebook post from CPF explaining the details.

Yes, it looks like even CPF has noticed the post going around and has taken to their Facebook page to clarify on the matter. Worth a read, so read.

Also, you can view the amount that is refundable to your CPF account in your property statement at www.cpf.gov.sg by using your SingPass. So it’s strange that that person thinks that the rule is “hidden”.

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Some of us may be wondering, why should we refund anything to CPF when we sell the property? Haven’t we always been told that CPF is our money? And why should I refund the interest too?!

They are YOUR money to be drawn upon during your retirement till you die

It is.

But CPF savings are important not just for our housing needs, but also our retirement.

To ensure that you have enough retirement savings when you sell your property, the amount that you would have accumulated in your CPF if you had not withdrawn it for housing will have to be refunded. And that’s why you need to refund the interest as well.

And, CPF might not even keep everything that you refunded to them. If you are above 55, the CPF refund into the Ordinary Account will be used to top up your Retirement Account up to your Minimum Sum and your Medisave Account up to the latest Medisave Minimum Sum. Any excess CPF refund will be paid to you within 5 working days from the crediting of the refund to your CPF account.

If you think about it, this is really the whole idea of CPF. It’s to ensure that you at least have some money for as long as possible (if possible, until you die).

Imagine if CPF didn’t get you to refund the proceeds from the sale of your property. Then along comes a pretty young thing. And in your rush to relive your younger days, you splurge all your money on her. Off she goes – running away with your money. You are still in your 60s and you still have a long time to go. What will you do without money? Go collect cardboard boxes? Then it’s the government’s fault again…

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If not enough, you don’t need to top up

But what if the proceeds of your sale of your property after paying off any outstanding mortgage are lower than the sum of principal amount you took from your CPF and accrued interest?

Do not panic. You will not be required to top up the shortfall as long as the property is sold at or above current market value. Besides, if you had played your cards right, and not waited till the tail end of the tenure of the lease, then there should have been significant capital appreciation for the property that would result in a profit with sizeable cash proceeds for you.

Information can be easily found

The above information provided above wasn’t just taken from government sources. It was cross-referenced from multiple sources. Truth be told, there’s tons of information available online if people would just bother to look.

Also, my own parents went through a similar experience.

They bought a property, which was financed mainly through CPF money. They sold it for a tidy profit. They returned the necessary amount to CPF and still managed to pocket some cash proceeds. CPF then subsequently paid them back some more money because they have some excess after meeting their minimum sum and Medisave Minimum Sum. Now they are happily retired, living off their steady stream of “income” from their CPF money.

So, looking at my parents, I can truly say that CPF is indeed our money. Just that we will have to wait till we are old to enjoy that money. And I think that wait is well worth it.

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Jake Koh

Author Jake Koh

Recovering sushi addict, I'm a man of mystery and power, whose power is exceeded only by his mystery.

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