Property assets make up 80% of Singaporeans’ wealth

Property assets make up 80 per cent of the total wealth of an average Singaporean, according to financial advisory firm Financial Alliance.

And with Central Provident Fund (CPF) money being used for property purchases, savings meant for retirement are being locked up in real estate.

Amid this backdrop, the Ministry of Manpower has said it will “review and make improvements” to the CPF system.

This follows President Tony Tan Keng Yam’s address in Parliament last Friday.

The CPF Minimum Sum is the amount of money that one needs to set aside in the CPF account on reaching the age of 55.

And if there are insufficient funds, individuals will not be able to withdraw any cash at all although they will receive monthly payouts.

Financial advisors say less than half of Singapore’s working population have enough to meet the minimum sum, which is currently S$155,000.

Tan Siak Lim, financial advisory director at Financial Alliance, said: “So today, I think that’s the challenge. And I guess the reason why we are in the current situation is because of appreciating assets in the property (market).”

With property prices rising steadily over the past decade, more CPF money meant for retirement has been committed to mortgages.

For a middle income earner in his forties with multiple dependants, in order to retire comfortably Financial Alliance says he will need to save about a third of his monthly salary.

Mr Tan said: “There’re already plenty of private sector investment products, retirement products for the consumer to choose (from). So that is not the problem.

“The problem is — ‘where is the money to invest in these products?'”

He said for an average, middle to low-income earner, there is not a lot of surplus cash beyond just meeting one’s monthly living expenses.

To ensure retirement adequacy, the government is looking at options such as reverse mortgage schemes to help retiring or retired Singaporeans unlock the value of their homes.

Under a reverse mortgage, the owner retains the full lease of his flat but takes a loan against it as collateral.

The owner then repays the loan with accumulated interest upon termination, or death, usually with the sales proceeds from the flat.

Source : Channel NewsAsia – 20 May 2014

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