Is HDB’s Silver Housing Bonus scheme worth considering?

As our population ages, more and more Singaporeans are approaching their golden years. By helping them leverage the value of their existing property through schemes like Silver Housing Bonus (SHB) and Lease Buyback Scheme (LBS), the government aims to help our seniors supplement their retirement income.

But is the Silver Housing Bonus scheme worth considering? Or are there better alternatives out there?

What is the Silver Housing Bonus scheme?

Introduced in 2013, the Silver Housing Bonus (SHB) uses a cash bonus incentive to encourage senior households to downsize their existing property to a lower value 3-room or smaller HDB flat while putting a specified sum of their cash proceeds from the sale of their existing flat into their CPF Retirement Account (CPF-RA).

To qualify for the SHB, the senior households must also participate/be participating in CPF Life – a life annuity scheme using CPF-RA money for monthly payouts. All monies in the CPF-RA will be used for CPF Life, which will give seniors a monthly retirement income for life.

The incentive for participating in the SHB is a cash bonus up to S$30,000.

How is the CPF-RA top-up amount and cash bonus calculated?

The top-up amount is capped at S$60,000 of cash proceeds from the sale of your existing flat. (The cash proceeds from selling your existing property is the selling price of the property, minus any outstanding loan, the purchase price of the next flat and any resale levy payable.)

The maximum amount in cash bonus a senior household is eligible for is S$30,000, if S$60,000 in cash proceeds are used to top-up the CPF-RA.

As long as your cash proceeds from the sale of your existing property is above S$60,000, you’ll have to top-up your CPF-RA with S$60,000. An exception is made when you’ve met the prevailing Full Retirement Sum (FRS), in which case you’ll keep the excess cash proceeds.

If the cash proceeds is lower than S$60,000, your top-up amount is also lower, and the cash bonus will be pro-rated to 50% of cash proceeds contributed to CPF-RA. For example, a couple with S$40,000 cash proceeds will get a S$20,000 cash bonus.

Here are more examples below:

Who is eligible for the Silver Housing Bonus scheme?

There are several eligibility criteria to fulfil in order to qualify for the SHB:

• At least one owner is a Singapore Citizen aged 55 or above
• Gross monthly household income is within S$14,000
• No second property ownership

The existing property to be sold must meet the following criteria:

• For HDB flats: Must have fulfilled the Minimum Occupation Period (MOP)
• For private property: Annual value of property must be S$13,000 or lower

The HDB flat you intend to buy must meet the following criteria:

• Flat type: 3-room (excluding 3-room terrace) or smaller flat purchased from HDB (e.g. BTO) or the resale market
• Timeframe: Flat can be either bought before sale of existing property, or within 12 months of completing sale of existing property
• The purchase price of the flat must not exceed the selling price of the existing property

Note that when selling your existing property, beware of making a negative sale.

When do I apply for the Silver Housing Bonus?

Seniors may do so after they complete the transaction for their new flat, and they have a one year window to do so. The one-year period starts on the date of key collection or completion of sale, whichever is later.

What’s the difference between this and the Lease Buyback Scheme?

While both are ways to monetise a HDB flat, LBS is for seniors who prefer to live in their existing flat, while SHB is for those who want to sell their existing property and buy a 3-room or smaller flat. The SHB also includes private housing with an annual value of S$13,000 or less.

Seniors may only choose one out of the two schemes.

Is the Silver Housing Bonus suitable for me?

There are many options to supplement your retirement income, and the Silver Housing Bonus is just one of them.

Of course, seniors can still downsize without taking up this scheme, if the perceived benefits to keeping the full cash proceeds outweigh that of a ‘cash bonus + having to put money in CPF Life’.

We feel that, while the SHB may be suitable for seniors who are also empty-nesters (i.e. those living in large homes whose children have moved out) and wish to downsize to something more manageable or cost-effective, the most important thing is not to wait until 55 to plan for retirement and the supplementary income you will receive.

That’s because once you hit 55, your CPF Ordinary Account (CPF-OA) savings will be fully transferred to the CPF-RA, along with savings in the CPF Special Account (CPF-SA).

Before you reach age 55, you’ll have greater more freedom of choice with savings in your CPF-OA, which can be used to pay an existing home loan, for instance.

If you are 54 years old, you may apply to CPF to reserve the savings in your CPF-OA so that the amount will not be transferred to your CPF-RA when you turn 55.

You may apply to reserve your CPF-OA savings for the following purposes:

• Repayment of the existing housing loan; and/or
• Finance the payment of the purchase of your next property.

If you wish to downsize before you turn 55, you can use your CPF Ordinary Account (CPF-OA) savings towards buying a second property after setting aside the BRS (which includes savings in your CPF-SA). (See CPF’s Terms and Conditions.)

If buying a second property is within your financial ability, you may be able to unlock a steady stream of income (from either your existing or newly purchased property) that could exceed/complement what CPF Life can offer, while also enjoying the capital appreciation that private residential property can bring.

Also, remember that the earlier you plan for your and purchase your second property, the greater the home loan you can obtain, because bank home loan tenures are capped at a maximum age of 65.

Another alternative for supplementary income is to rent out the unoccupied rooms in your existing property (e.g. to student tenants) or to rent out the entire place while living with your children.

If you do decide that the Silver Housing Bonus is the best option moving forward, it’s also important to consider carefully what subsequent property to downsize to. Will a new BTO flat be the best option, or a ready-to-move-in resale flat in a central location with all amenities within easy reach?

A financial advisor or a financially-qualified real estate agent will help you make the right decision for a comfortable retirement, and allow you to enjoy your golden years to the maximum.

What are your views on HDB’s Silver Housing Bonus? Share them in our comments section below.

If you found this article helpful, 99.co recommends Why the Lease Buyback Scheme (LBS) Still Isn’t Attractive to Many and How a deep recession could impact the property market in Singapore

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