Medisave Contribution Ceilings and Retaining Overflows for Medical Expenses

Mr Baey Yam Keng asked the Minister for Health (a) what is the current number and percentage of CPF members who have reached their Medisave contribution ceiling; and (b) whether the Ministry can allow CPF members, upon reaching their Medisave contribution ceilings, to keep the overflows to pay for medical expenses instead of channelling the overflows to their Special, Retirement or Ordinary Accounts.

The Parliamentary Secretary to the Minister for Health (Assoc Prof Dr Muhammad Faishal Ibrahim) (for the Minister for Health): Madam, the Medisave Contribution Ceiling (MCC) is the maximum amount that a CPF member can set aside in his Medisave account, currently set at $48,500. From 1 January 2016, MCC will be replaced by the Basic Healthcare Sum (BHS).

For the cohort who turned 55 in 2014, 21% of them had their Medisave account balance at MCC. Medisave contributions above MCC will flow to a member's Special or Retirement Account to help improve his retirement adequacy. This will help to increase the monthly cash payouts from CPF LIFE, which can be used to supplement his Medisave monies for his healthcare needs if necessary. Members can also approach CPF Board to apply for reversal of Medisave overflows if they have exceptional circumstances and we will consider such applications on a case-by-case basis.

Mr Baey Yam Keng (Tampines): Thank you, Madam. I would like to ask the Parliamentary Secretary if he could elaborate on how the CPF LIFE contribute towards Medisave and how will members benefit from that? And whether the Ministry will consider allowing members to continue putting money into the Medisave account beyond the new BHS, and then also to allow greater flexibility for these excess savings to be used by members for their own needs or for their families' healthcare needs.

Assoc Prof Dr Muhammad Faishal Ibrahim: Madam, I thank the Member for the supplementary questions. Essentially, when the member receives the CPF LIFE amount, that additional money can be used for the healthcare needs as well. This is separate from the Medisave amount. With regards to the BHS, it has a longer run compared to what we have today, so it is a refinement of the MCC. This is in view of the current process where people are working longer. As such, this will provide more adequacy for Singaporeans.

The Member gave a suggestion relating to the issue of overflows. This is something that we find that we have to take into account the retirement adequacy of Singaporeans, which is important. One thing we can assure is that, in exceptional cases, if there are Singaporeans who need help, as I had mentioned earlier about reversal of Medisave, we will consider that and we will do it on a case-by-case basis.

Er Dr Lee Bee Wah (Nee Soon): Thank you, Madam. I have a resident who is 35 years old, self-employed, and his Medisave has reached the ceiling. He is appealing to have overflow of Medisave into his Ordinary Account, so that he can use it to buy his first flat. However, the appeal has been turned down. I would like to urge the Parliamentary Secretary or the Ministry to consider, for those who have not bought any HDB flat, perhaps the overflow savings, allow for them to be flowed into the Ordinary Accounts, so that they can use it to buy the flat. Thank you.

Assoc Prof Dr Muhammad Faishal Ibrahim: Madam, I thank the Member for the suggestion. As we move along our journey in developing Singapore, we always look at how we can refine the process and help each Singaporean to see how they can facilitate the process of buying a house, and not forgetting, looking at how retirement adequacy will be enhanced over the years. However, if Members have any residents who have issues that they strongly feel that we can help and we can make exceptional cases, I urge them to write to the CPF Board or the Ministry concerned.

The Minister for Manpower (Mr Lim Swee Say): Thank you, Mdm Speaker. The question raised by the Member actually concerns the MOM, so I thought I should stand up to clarify our position. Any person who is working, basically we want them to save for their medical, housing and retirement. In the case of the self-employed, right now, they are required to save for their medical. However, they do not save for their OA, they do not save for their retirement. Therefore, whenever there is any overflow, we channel that overflow to their Special Accounts (SA), which are then set aside for his retirement. In other words, for those who are self-employed, we feel that they are already not saving enough for their retirement and, therefore, any overflow, the SA should take precedent over OA. I hope that explains our position.

Er Dr Lee Bee Wah: I agree with the Minister that saving for retirement is important but for this case, he has not even managed to buy a house. For those who have not managed to buy a house, perhaps let them buy a house first rather than save for retirement. Thank you.

Mr Lim Swee Say: Mdm Speaker, if I were to follow the Member's logic, we should actually not require any working person to contribute to SA only until after they have finished their housing loan. Because right now, for any working person, his CPF contribution goes into the three accounts - MA, SA and OA. So, if the Member said that the housing should take precedence over retirement, then logically speaking, we should amend our law, so that all working people should have their CPF contributions go into MA and OA only. Only after they have finished their housing loan, then they start to save for their SA. I do not think that is wise.