Lease Buyback Scheme: Talking to Your Parents about Flat Monetisation

By Low Hee Ann

/ MyNiceHome |

December 31, 2019 3:00 PM SGT

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Did you know that a 2018 study found that only 1 in 5 youths in Singapore believed their parents have enough savings to finance their retirement? An even smaller figure, 15 percent, believed that their parents have planned for retirement!

The study, commissioned by insurance cooperative NTUC Income and released in August 2018, also found that two thirds of parents surveyed expected to outlive their savings during their retirement years.

These findings might have set you thinking, especially if your parents are approaching or already in their retirement years.

It may be uncomfortable, or even a taboo to some, to talk to your parents about retirement as well as the health and financial concerns that come with old age. However, the sooner you start the conversation, the more time your parents will have to prepare and plan for their golden years.

So How Can You Help Your Parents Plan For Retirement?

You can start by finding out what they would like to do in their retirement. For instance, their preferred lifestyles. They would have to be realistic and consider their expenditures, such as daily expenses, recurring bills, outstanding loans, passive investment income, not forgetting costs for travel and healthcare, and even factor in the rate of inflation.

Planning Ahead – Options to Increase Retirement Income

You may have heard of HDB monetisation schemes that can help seniors unlock the value of their HDB flats to support their retirement. One option is the Lease Buyback Scheme, which offers elderly home owners a lifelong income even as they continue living in the same flat.

Explaining the Lease Buyback Scheme (LBS) to your parents

Under this scheme, elderly HDB home owners can receive a stream of income by selling a portion of their flat’s lease to HDB (for example 20 years), while making sure that the remaining lease can last them till they are at least 95 years old.

Proceeds from selling the flat’s lease will be used to top up the owners’ CPF Retirement Accounts, which will provide them a monthly income for life under CPF LIFE. This top-up made to the owners’ CPF Account will enable them to meet future healthcare and retirement needs. Depending on the flat type, the elderly home owners will also receive an LBS cash bonus ranging from $5,000 to $20,000. They can then receive the remaining proceeds in cash.

Getting More Information on LBS

You can check out the eligibility criteria below and find out more on HDB InfoWEB.

If you or your parents are interested in the Lease Buyback Scheme or other monetisation options, you can make an e-appointment with your HDB Branch for a preliminary financial counselling session. The session with an HDB Financial Counsellor will give an overview of all monetisation options, including the LBS.

If you are keen to proceed with the LBS, an estimated financial plan will be shared with you, before a second financial counselling session is scheduled. During the second session, the HDB Financial Counsellor will go through with you and your witnesses the valuation of the flat, computation of the actual cash proceeds, and the monthly payouts under CPF LIFE. You may attend these sessions with your parents.

At the end of day, your elderly parents would need to look at their own needs, preferences, and family circumstances before deciding if LBS is a suitable option for them.

You can get more information on the various monetisation options at www.hdb.gov.sg/retirement.

This article first appeared on MyNiceHome, HDB’s official website for all things related to home buying and renovation in Singapore.

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