CENTRAL PROVIDENT FUND (AMENDMENT) BILL

CENTRAL PROVIDENT FUND (AMENDMENT) BILL: Order for Second Reading read.

The Minister for Manpower (Mr Gan Kim Yong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, this Amendment Bill will enable CPF Board to introduce CPF LIFE. It also amends existing provisions to be consistent with the Lease Buyback Scheme; further refines the Minimum Sum Topping-Up Scheme; aligns the CPF Act with the Mental Capacity Act; and

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enables streamlining in the administration of the CPF.

CPF LIFE

I will first explain the amendments relating to the introduction of the Scheme to facilitate Lifelong Income For the Elderly (CPF LIFE).

Members may recall that CPF LIFE was debated in this House in 2008. To empower the Board to administer the CPF LIFE scheme, a new Part IIIB of the Act will be created. I will briefly describe the main features of CPF LIFE.

Eligibility

The scheme will be introduced for CPF members turning 55 from 2013, ie, for those who are aged 51 or younger this year. Members who have at least $40,000 in their Retirement Account (RA) will be automatically included while members with lower cash balances will be allowed to opt in. For older members, ie, those who turn 55 before 2013, I had announced in February this year that starting September 2009, the Board will offer CPF LIFE to them on an opt-in basis when they reach 55.

Members with severely impaired life spans are currently exempted from the Minimum Sum Scheme. Section 27K of the new Part IIIB will allow them to be similarly exempted from CPF LIFE.

Participation in Lifelong Income Fund at age 55

Sections 27L and 27N of the new Part IIIB set out the funding mechanism of CPF LIFE. When a member reaches the age of 55, a portion of his Retirement Account savings will be used to participate in an annuity scheme. This annuity, together with the remaining cash in his Retirement Account, provides the member with a monthly account from his drawdown age

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for the rest of his life. The monies used to participate in the annuity will be held in a fund called the Lifelong Income Fund to be administered by the CPF Board. The proportion of RA savings to be used for the Fund will vary depending on the choice of the CPF LIFE Plans that they have chosen. Members only need to decide on the plan that suits his needs.

To recap, four CPF LIFE Plans will be offered to members. These four plans offer a range of trade-offs between the level of LIFE monthly income and the bequest amount. The default plan is the LIFE Balanced Plan. It will provide members with a balance between a reasonable level of retirement income, and some bequest amount if they pass away early.

LIFE premium and monthly income

Sir, the actual monthly income that members receive will depend on factors including interest rates and actual mortality experience, which will be reviewed from time to time. The Minister for Manpower will determine the monthly income based on these factors and as advised by the CPF Board to maintain the solvency of the Lifelong Income Fund.

Cessation of combined Minimum Sum Scheme

Sir, with the introduction of CPF LIFE, the Combined Minimum Sum Scheme (CMSS) is no longer relevant. Let me explain.

CMSS was a concession introduced together with the Minimum Sum Scheme in 1987. It allows couples aged 55 and above to jointly set aside only 1.5 times their Minimum Sum, and to withdraw the rest of their CPF savings. The rationale was that a couple living together would not require as much income as two single persons living alone. Should one of the members pass away, the surviving spouse

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would be able to continue to draw on the balance. The spouses are, therefore, required to nominate each other as the beneficiary and this nomination cannot be revoked as long as they remain married. However, unlike CMSS, CPF LIFE is an individualised scheme where a member's monthly income will cease upon his death, and the surviving spouse can only rely on his or her own CPF LIFE income. We will, therefore, terminate CMSS in 2013 when CPF LIFE is introduced. Those who are already in the CMSS may continue to remain in the Scheme.

Maintaining relevance of the Minimum Sum Scheme

Sir, even with the introduction of CPF LIFE, not all members will participate in the Scheme. Members with cash balances below $40,000 may decide not to opt in. They will remain on the Minimum Sum Scheme with a fixed drawdown period.

When the Minimum Sum Scheme was introduced in 1987, the payout duration then was set at 20 years. This is because the average life expectancy at the drawdown age, which was 60 then, was 19 years. We have announced that the drawdown age will progressively be raised to 65 by 2013. One in two residents at age 65 today can expect to live beyond 20 years. Life expectancy is expected to increase even further by 2013. If left unchanged, the 20-year drawdown period in the Minimum Sum Scheme will become inadequate by 2013. There will, therefore, be a need to review the duration of the drawdown period to keep pace with the increasing life expectancy.

Administration of Lease BuyBack Scheme

Let me now move to the other changes in this Bill.

To help low-income elderly households living in smaller flats to unlock their

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housing wealth, the Ministry of National Development launched the Lease Buyback Scheme (LBS) in March this year. Under LBS, HDB will buy back the tail-end of the lease of the flat, leaving the members with a shorter 30-year lease. Part of the proceeds is then used to participate in CPF LIFE. This ensures that the member continues to enjoy a roof over their heads as well as financial security in old age.

To facilitate the use of the proceeds of a LBS transaction to participate in CPF LIFE directly, we are amending section 15 of the Act.

Allow top-ups to parents and grand-parents below 55

The third area of change is in the CPF Topping-Up rules. Sir, many Members in this House have spoken of the need to encourage family support in addressing the challenges of Singapore's ageing population and in securing the retirement adequacy of CPF members. My Ministry has been liberalising the rules of the Minimum Sum Topping-Up Scheme since 2005. We are amending section 18 of the Act to give effect to the announcement I had made in February this year. This will allow members to use their CPF savings to top up the CPF accounts of their parents and grandparents who are below 55 years old. With this amendment, CPF Board will be able to offer this additional facility from August 2009.

Align treatment of mentally incapacitated members in the CPF Act with that in the Mental Capacity Act 2008

The fourth area of change concerns CPF members who are mentally incapacitated. Sir, in 2008, the Mental Capacity Act (MCA) was passed. The Mental Capacity Act allows the court to make, amend or revoke wills on behalf of a mentally incapacitated person based on the principle that the court's decision shall

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be made in the person's best interests. However, the court cannot, at present, affect a CPF nomination. Section 77 of the CPF Act will be amended to align the position of CPF nominations to that of wills under the MCA. The MCA will be amended to allow the court to make or revoke CPF nominations of mentally incapacitated persons. Correspondingly, the rules dealing with CPF nominations will also be amended to allow the courts to do this. We believe that the "best interest" principle embedded in the MCA will facilitate the appropriate distribution of a mentally incapacitated Member's CPF monies upon his death.

Streamlining the administration of the CPF Act

Finally, this Bill clarifies and streamlines the administration of the CPF Act in a few areas.

First, to allow CPF Board to make payment without the need for a Court order for small balances. Currently, when a nominee passes away before receiving the CPF monies which are due to him, CPF Board pays out the monies to the person authorised by the court to administer his estate according to a Court order. Section 25 will be amended to give CPF Board the discretion to make payment to a proper claimant of a deceased nominee without the need for a Court order when balances are small. This figure will be set at $9,000 initially. This minimises inconveniences, expedites payments and saves legal costs for the nominee's beneficiaries in claiming CPF monies.

Second, to clarify the extent of the Board's responsibility in cases where the Board is unaware that a nomination is no longer valid because of a subsequent marriage. Today, upon a member's death, CPF Board will conduct checks with the Registry of Marriages and the Registry of

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Muslim Marriages to validate members' nominations before acting on the nomination. However, despite reasonable efforts to verify that the nomination is still valid, there remains a possibility that there exists a marriage that has the effect of revoking the nomination. For example, a member could be legally married outside Singapore or had a customary marriage before the enactment of the Women's Charter in 1961. The Board will not be aware of such a marriage if it has not been duly informed. Hence, we will amend section 25 of the Act to clarify that where the Board has exercised due diligence, but the deceased's CPF savings were wrongly paid under an invalidated nomination, the Board is discharged of any liability. However, this amendment does not prevent an interested party to recover the deceased's CPF savings from the nominee who received the money as a result of the error.

Third, to clarify the agency service role of the CPF Board. Sir, CPF Board has been involved in the administration of several national schemes including the disbursement of monies under the GST Offset Package and computation of employer subsidies under the Jobs Credit Scheme. As these agency projects are not directly related to the CPF, we are amending section 76(1) of the Act to make it clear that the Board may engage in such activities if it is in the public interest to do so.

Lastly, the Bill also makes a few clarifications and refinements to the CPF Act to avoid ambiguity and to align with current practices.

Sir, CPF LIFE and Lease Buyback are two major innovations that the Government has introduced to prepare Singaporeans for an ageing population. These schemes will help enable Singaporeans to look forward to and celebrate the prospect of greater longevity. The amendments in the Bill will,

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among others, allow the introduction of these schemes.

Sir, I beg to move.

Question proposed.

3.12 pm

Mdm Halimah Yacob: Mr Speaker, Sir, I rise in support of this Bill. A key amendment is the introduction of the CPF LIFE which will help to strengthen our social safety net as we can now look forward to an income for the rest of our lives instead of only for 20 years after retirement that is under the current regime. Condensing the scheme from 12 to four options is certainly a vast improvement as people were really confused on the options, but even with these four schemes, not everyone understands. There is still a significant number that we need to reach out to and I do urge the Ministry to continue with its outreach and education efforts.

I also support the Lease Buyback Scheme and also urge the Ministry to step up on its outreach efforts, so that elderly low-income Singaporeans can truly benefit from this Scheme.

Sir, I have a number of points which I wish to raise on this Bill. First, the impact of inflation on the CPF LIFE. Sir, a key concern over CPF LIFE is that the payments are fixed whereas the retirees' purchasing power is affected by the cost of living and inflation. This is a genuine concern, as although our inflation rate has been historically low, in 2008, it shot up to 6.5%. We are an open economy and import most of our products and, therefore, cannot be expected to insulate ourselves from the vagaries of price changes affecting food and other basic commodities here. But if CPF LIFE does not factor in inflation, then, over time, it

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will become a less effective and meaningful scheme as purchasing power will be so badly eroded that the payment will not be sufficient to provide for a retiree’s basic needs. I would, therefore, like to ask the Minister how the Ministry intends to address this issue, if not in the short term, at least in the long term.

My next point, Sir, on CPF LIFE is on those excluded from the Scheme. CPF LIFE does not cover those who have less than $40,000 in their accounts. I would like to ask the Minister how many would fall under this category and how will they be assisted in planning for their retirement needs. This is indeed a major concern as based on the Low Wage Workers’ Report, the number of Singaporeans who are now working part-time or on contract work have increased, and this global trend will continue. With the economic cycles of boom and bust becoming shorter, companies will continue to look at ways of making their labour force very flexible by minimising their permanent liabilities. We have seen the income of those at the lowest 20th percentile stagnating and has even declined for some occupations.

As our low wage workers are the ones who need such a scheme the most as they are not likely to have discretionary savings or other assets, I would like to ask the Minister to study this issue carefully so that we can have a truly inclusive CPF LIFE scheme.

My next point, Sir, is on premiums. Under new section 27L of the Bill, the Minister is given the power to determine the amount of premiums to be imposed under the CPF LIFE scheme. As this is almost a compulsory scheme and we really want all Singaporeans to stay on the scheme, it is important that we keep the premiums affordable. Section 27N provides that any costs and expenses incurred by the Board in establishing and maintaining CPF LIFE would be deducted from the premiums. Hence, for premiums to remain affordable, it is imperative that

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the Board keeps a tight lid on the costs of administering the scheme so that the bulk of the premiums will be used to provide a retirement income to Singaporeans. I would like to ask the Minister what safeguards are in place to ensure that premiums remain affordable. I would also like to suggest that, like the MediShield scheme where public consultations are conducted before any increase in premiums, the Ministry should also consult the public before contemplating any increase in the CPF LIFE premiums.

My next point on CPF LIFE, Sir, is on the issue of solvency. New section 27N(7) of the Bill provides that the CPF Board shall not make any payment under CPF LIFE unless the Lifelong Income Fund is solvent. Sir, while I can understand the legal basis for this provision, I find it quite disturbing to have it reflected in the Bill. My understanding is that even for commercial insurance companies, there are stringent MAS rules to ensure that insured funds are not jeopardised. And even in the worse case scenario when that happens, I suppose Singaporeans who are affected, while they may feel aggrieved, may still grudgingly accept it as these are commercial transactions. The relationship between the CPF Board and the CPF members, however, is not just a legal contract but, more significantly, it is a social contract as the Board has a social responsibility to manage CPF funds prudently in order to help Singaporeans meet their retirement needs. I have every confidence that this Government has every intention to fulfil its obligations no matter what it takes but one cannot be certain what will happen years down the road if we have a different government in power and how it will treat its obligations to Singaporeans. So, this clause is a cause for concern as it allows the Government to get out of its obligations and I would, therefore, like to ask the Minister what safeguards are in place to protect CPF members from the

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risk of insolvency of the Lifelong Income Fund.

Sir, my next point on the CPF LIFE is on the amendment to allow CPF members to use their CPF savings to top up the accounts of their parents and grandparents who are below 55 years of age. This is a good amendment as it will make it easier for younger Singaporeans to provide for the retirement needs of their parents and grandparents but it applies only to those who already have the minimum sum in their savings. I would, therefore, like to ask the Minister how many CPF members will qualify to make such top–ups for their family members.

I now move on to new section 25(6) of the CPF (Amendment) Bill. Under section 25(6), Sir, it provides that if a member’s nomination is revoked by marriage, and the Board, in ignorance of the marriage, purports to pay any amount out of the Fund on the death of the member in accordance with the revoked nomination, the Board will nevertheless be discharged from all liability for making the payment. The purpose of the existing provision is very clear. It is meant to protect the spouse and children of CPF members who forgot to change their nominations after their marriage from hardship. The new section 25(6), in my view, will weaken that protection. The spouse and children of a deceased CPF member should not be made to suffer for the mistake made by the Board.

I have heard the Minister's explanation. The Minister's explanation is that there is in existence a process where the Board communicates with the Registry of Marriages (ROM) and/or the Registry of Muslim Marriages (ROMM) but there could be other cases that fall outside the ambit of the ROM and ROMM. I would like to ask the Minister what are these cases. Have there been any cases where through ignorance, monies have been paid to persons other than the spouses, family members and children of the deceased

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CPF member? And I would like to ask the Minister to clearly look at this provision because the concern is that it is a very broad clause which exonerates the Board from ignorance in the event that it pays to a nominee of the deceased member if the Board is ignorant of the fact that the CPF member is married. It is such a very broad provision. If the intention is to cover only a few cases, as in the majority of cases people would be married under the ROM or ROMM, then the question is whether we really need such a provision. The concern is that the Board should also exercise due diligence, not just in cases where marriages are registered under the ROM but also the ROMM. Could there be some mechanisms developed by the Board to ascertain whether the marriages are registered before making payments to the nominees of the deceased member whose nomination has been revoked because of his marriage?

So I would like to ask the Minister to really examine this provision closely because the concern is that it will deprive the spouses and children of the deceased member as a result of this amendment and certainly we do not want the spouses and children of the deceased member to suffer because of the ignorance of the Board of the marriage.

Sir, let me just say a few words in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, I rise in support of the Central Provident Fund (Amendment) Bill. The key amendment is the introduction of the CPF LIFE scheme that will help build up the retirement income of Singaporeans. Under CPF LIFE, we can receive income from the age of 65 years for as long as we live.

Another key amendment is the Lease Buyback Scheme that will help elderly

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Singaporeans who live in 2-room and 3-room flats to unlock the value of their flats and use it for their retirement needs.

There are three points I would like to touch on regarding the amendments.

Firstly, in order to have a good retirement income, we must have a job and receive a stable income so that we can continue saving money in our CPF accounts. Without a stable income, we will not be able to save sufficiently to meet our needs when we are old, because CPF members must have $40,000 in their CPF savings in order to be included into CPF LIFE. For some who are facing the current crisis, they will face difficulties as they may have lost their jobs or face pay cuts. Even so, we have until 2013 to save up for the scheme and we must take advantage of this. If we lost our jobs, get help quickly, undergo re-training and do not be too choosy when looking for work, so that we do not stay unemployed too long. The longer we are unemployed, the more difficult it will be for us to get jobs. For those working on a contract or part-time basis, they will be drawn to ask or agree with the company’s suggestion to increase the take-home pay but without any CPF contribution. We must reject all these. We must all make it a habit to set aside part of our income each month for our retirement needs. Our low-income workers can also make use of the Workfare Income Supplement Scheme which will provide an additional source of income that will mostly be placed into their CPF accounts.

Secondly, this Bill stresses on the importance of financial planning. Financial planning not only refers to the act of saving money, but also on managing spending and planning our short term and long term needs. It requires us to differentiate between "needs" and "wants". "Needs" refers to things that are essential to have, while "wants" refers to a desire that will never be satiated and

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will never end. The more we control our "wants", the more savings we will have for our children’s education, old age, medical needs and other unexpected things. For example, before we decide to allocate 50% of our income for the next 20 years to buy a house, we must ask ourselves how changes like job loss, having more children, children’s higher education or serious illnesses can affect our capacity to pay off any debts. We have begun a programme called "Smart Spending" under the Community Leaders’ Forum, which is a good starting point. But even so, it is all about our own prudence and discipline.

Thirdly, our community must know and understand well the aims and meaning of the Lease Buyback Scheme so that we can make use of it. It aims to help elderly Singaporeans fulfil their retirement needs because part of the amount is set aside for the CPF LIFE Scheme. I feel that many people in the Malay community are still unaware of this scheme. Some are also worried that if anything happens to them within the period of 30 years, the balance amount will not go to their children. More efforts must be made to increase our community’s awareness and understanding towards this scheme, so that our elderly can reap the benefits from CPF LIFE and have a more stable retirement income.

With this, Mr Speaker, I support the Amendment Bill.

*Cols. 915-918.

Mdm Ho Geok Choo: Sir, the recently introduced CPF (Amendment) Bill shows a lot of effort and thought put into it. Kudos to the Minister and his team who never fail to give up trying to make life better for all Singaporeans.

I would like to commend the changes to the CPF (Amendment) Bill that allow members to top up their parents’ or grandparents’ CPF special accounts even

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if the parent or grandparent has not yet attained the age of 55. The CPF Act has seen many changes over the years to allow for top-ups by family members, starting by gradually increasing the scope of the types of family members who are qualified to top up relatives’ accounts, and then now by removing the age requirement for the recipients. This is the right direction to go. With the introduction of the Lifelong Income Scheme, it would be prudent for family members to help senior members of the family to accumulate sufficient funds in their accounts to ensure a secure retirement through the purchase of adequate annuity plans provided under the Lifelong Income Scheme.

Sir, this move to allow members to top up the CPF accounts of their family members shows that our efforts to boost a sound family structure, coupled with traditional Asian values, have paid off. Also with family size getting smaller, there is an increased need to encourage family members to support each other in times of hardship.

Our CPF safety net is the way to go. The Straits Times headlined a story, "Basic care in Britain to cost retirees $48,000." Britain is trying to do what we embarked upon long ago. The Green Paper outlining the British government’s proposals may or may not see fruition but this shows that the Singapore Government was far ahead of its time and bold enough to take the right path.

Sir, with all due respect, I do have a few queries with respect to the Lifelong Income Scheme. The queries, I hope, will only help make the scheme better.

First, the Amendment Bill appears to enable the Minister wide discretionary powers to decide the premium payable by members under the Lifelong Income Scheme, as well as the monthly payouts under the Scheme. I believe that the

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reasons for doing so include the need to specify the plans accordingly for different types of members. This discretion can be delegated to the CPF Board for it to manage the various plans under the Lifelong Income Scheme. Sir, I worry that the public may perceive this wide discretion as a licence for the Ministry or CPF Board to change premiums and payouts at will.

Sir, may I suggest that before the plans roll out, a more thorough review be done to see if changes to the premiums and payouts are really necessary? This will help reassure the public that the Government is not trying to siphon off their CPF monies, but rather trying to provide them with a lifelong monthly income.

Second, I question the need for discretion for the Minister to prescribe the age at which the Scheme applies. There should not be frequent changes to the age at which the Scheme comes into force. Because retirement planning has to take place far ahead of the retirement age, it would be helpful to members if there is an element of certainty in knowing the age at which the Scheme kicks in. It will definitely help to make an educated choice and make the necessary preparations for their own secure retirement, in conjunction with the Lifelong Income Scheme, and not over- or under-prepare the money that they may require for a happy retirement. These people who helped make Singapore what it is today, surely deserve that consideration.

Third, I note that the Lifelong Income Fund must be solvent before monthly income can be paid out. On the words of the proposed sections, it appears that payouts are thus not guaranteed. This is against the whole purpose of having a Lifelong Income Scheme, which aims to

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provide the elderly poor with a secure retirement income for life! Where is the security when payouts are not guaranteed? I urge the Minister to explain the reasons for enacting such a clause.

Still, in relation to the Lifelong Income Fund, clause 14 and new sections 27K and 27L state the amount to be paid out to relevant members, with the requirement that the Lifelong Income Fund be solvent before payouts can be made, and the discretion granted to the Minister or the CPF Board to determine the amount payable to relevant members. It appears that payouts may vary over time. Perhaps this will depend on how well the Lifelong Income Fund is invested as well as the state of the markets at any point in time. Can the Minister please explain whether this will be the case in practice and, if so, will payouts be reduced when the Fund is not doing well due to economic downturns or poor investment decisions?

On this note, I support the Bill.

Assoc. Prof. Paulin Tay Straughan (Nominated Member): Mr Speaker, Sir, thank you for allowing me to participate in this discussion. I wish to raise two suggestions with regard to this amendment that is tabled.

I am pleased to note that we are actively looking at means to sustain post-retirement financing for an ageing population. The proposed CPF Lifelong Income Scheme seeks to address an important gap in many Singaporeans’ retirement plans. As we continue to leverage on the CPF Scheme to provide for the post-retirement needs of our ageing population, we must be cognisant of the group amongst us that continues to be excluded from the Scheme. I would like to ask the Minister if there are provisions to systematically include full-time homemakers and supplementary wage workers into the CPF Scheme.

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I applaud the amendments introduced on 1st November 2008, which liberalised three important aspects of the CPF that allow cash top-ups from an expanded pool of eligible contributors and allow top-ups for recipients who are now below 55 years old, and the removal of an annual cap in the amount contributed. May I suggest that we consider moving one step further – to allow regularised contributions to the CPF accounts of homemakers, either by the spouse or by adult children. I am referring to a GIRO system where standing orders can be issued to facilitate monthly top-up to the CPF account.

There are two advantages to this proposal. First, it will allow the homemakers’ CPF accounts to grow gradually over their life course, as they make irreplaceable and invaluable contributions to the family. It is much easier to achieve savings by accumulating smaller amounts over a longer period of time than it is for family members to provide a lump-sum top-up at a critical point to meet the annuity premium demands. Second, in recognition that social relationships even in marriages are not always sustained throughout the life course, regular contributions will not disadvantage the homemaker should the marital union dissolve. Just as those of us who are in the workforce expect to receive regular contributions to our CPF fund from our employers for services rendered, it is only fair that homemakers can also receive regular contributions from their spouses or children for their critical domestic role. The amounts contributed will remain in the homemaker’s account, as recognition of his or her important work rendered to the family.

Homemakers – be it wives or husbands – play critical roles in our society. Their domestic work, because of its altruistic nature, is often rendered invisible because they do not receive tangible financial rewards. But it is real

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work, and it is important work that weaves together the public and private spheres of our society. As we continue to leverage on and enhance the CPF Scheme to meet the financial and health care needs of our population, it is timely that we work conscientiously to include all segments of our community in this important Scheme.

Aside from homemakers, there is another group that requires our intervention. This is the group of low-income families who may not have sufficient monies amassed in their CPF accounts to qualify for the proposed CPF Lifelong Income Scheme. To help this group of vulnerable poor, may I suggest that the Minister for Community Development, Youth and Sports design innovative help programmes that facilitate these families' membership in the CPF Lifelong Income Scheme. For example, instead of providing directly financial handouts, the MCYS can leverage on the CPF Lifelong Scheme and offer help to the poor through meeting annuity premiums. As we move towards a more comprehensive system of coverage for Singapore, it is even more critical for us to ensure that no group is omitted from the Lifelong Income Fund. If we fail to do so, we may inadvertently entrench social inequality.

Sir, these comments aside, I support the Bill.

Mr Gan Kim Yong: Mr Speaker, Sir, I thank Mdm Ho, Mdm Halimah and Assoc. Prof. Straughan for their support. Let me clarify some of the concerns that they raised. Mdm Ho Geok Choo said that the age at which the Scheme applies should not be frequently changed. First, let me assure Members that all CPF members born in 1958 or later, will be automatically included in CPF LIFE if they have at least $40,000 cash in their retirement account when they turned 55. As I have explained earlier, a portion of the members' retirement account savings will

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be used to participate in an annuity scheme. It is the age at which this annuity kicks in that will be prescribed by the Minister. This age defines the four CPF LIFE plans offered to the members. However, in making their choices, members only need to consider the level of monthly income and bequest amount. The age at which the annuity kicks in is secondary. All CPF LIFE plans will provide members with a monthly income starting from the drawdown age for as long as they live.

Mdm Halimah Yacob and Mdm Ho suggested that the payments of CPF LIFE monthly income should be guaranteed. Mdm Ho also sought clarifications on the variability of the LIFE premium and monthly income and whether the monthly income would depend on investment performance. Let me reiterate that CPF LIFE should be self-funded and sustainable. Therefore, guaranteeing the level of monthly income is not feasible. Rather, CPF LIFE monthly income will be adjusted regularly, taking into account interest rates and mortality experience, to ensure the solvency of the Lifelong Income Fund. In other words, the Minister cannot make changes at will but must base his decisions on sound actuarial principles to ensure that fund solvency will not be compromised. CPF LIFE members can rest assured that they will receive payouts for as long as they live.

Mdm Halimah raised concerns regarding the affordability of CPF LIFE premiums. Let me clarify that Life premiums do not affect affordability. LIFE premiums refer to the portion of the members' retirement account savings that will be used for the annuity component of CPF LIFE for the plan that they chose. In determining the LIFE premiums, the Minister is, in effect, determining the proportion of retirement account savings that will be used to participate in the

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annuity. How much a member receives as a monthly income depends on the member's total retirement account savings. I would also like to assure Members that we will keep the cost of administration low, which is one reason why CPF Board will be the single administrator of the Scheme. This is a key principle in designing CPF LIFE, as recommended by the National Longevity Insurance Committee (NLIC).

Mdm Halimah and Assoc. Prof. Straughan asked how we are helping CPF members who do not have sufficient savings to participate in CPF LIFE. We estimate that around 70% of the active CPF members turning age 55 in 2013, will have at least $40,000 in retirement account savings. About 84% will have at least $20,000. However, let me clarify that there is no minimum balance required to participate in CPF LIFE. All members, regardless of their CPF balances, can opt in to the scheme. CPF LIFE is meant to address the retirement needs of most members. However, members with very low balances may not be in a position to maximise their benefits from CPF LIFE.

There are various schemes to help these members. Through Workfare, for example, the Government provides an income supplement to older low-wage workers of which a portion is credited into the recipient's CPF to shore up retirement savings. We are also encouraging workers to continue working past the age of 55, to build up their savings. Workfare gives older low-wage workers an added incentive to do so. For members with low CPF savings, who want to participate in the LIFE scheme, the Government will help them to do so. Members with less than $20,000 in their retirement accounts will receive a pro-rated L-Bonus upon opting in to the scheme. They will enjoy the full L-Bonus if they top up their retirement account savings to at least $20,000.

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Family members and even friends and employers can also help as we have liberalised the Minimum Sum topping up scheme. About 17,000 top-ups were made in 2008. Since 1st April 2009, a CPF member below age 55 can now also make top-ups using his CPF savings as long as he has net balances in excess of the prevailing Minimum Sum. From 1st August 2009, we will also remove the age restriction where CPF top-ups to parents and grandparents can only be made to those aged 55 and above. We estimate that the number of additional potential givers who can make top-ups under this new rule is around 18,000.

I urge members to top up their family members' CPF accounts, whether it is using CPF or cash. Top-ups can help CPF members receive a higher monthly income, enjoy the L-Bonus, the 1% extra interest for the first $60,000 balance and possibly higher D-Bonus and V-Bonuses as well.

Assoc. Prof. Straughan also suggested a voluntary scheme that allows regular top-ups from a member's spouse or children via the GIRO system. To clarify, members can already make lump-sum voluntary contributions to their family members' CPF accounts or apply to make regular voluntary contributions through GIRO. We will continue to explore other ways to facilitate top-ups.

Eligible members can also choose to monetise their flats under the Lease Buyback Scheme, in order to participate in CPF LIFE. Mdm Halimah asked for some figures. About 25,000 elderly households could potentially qualify for the Lease Buyback Scheme. Since the launch of the scheme in March this year, HDB has received more than 300 applications. Many who qualify may have adequate financial means and so do not need to tap on the scheme. But, nonetheless, access to such a scheme would give them peace of mind.

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Mdm Halimah was also concerned about the impact of inflation on members' retirement adequacy. The NLIC discussed the indexation of LIFE monthly income to inflation but did not recommend it. We have also debated this during the Committee of Supply debate in 2008 and decided against it. As the CPF LIFE is a self-funding scheme, inflation indexation will mean higher premiums or significantly lower incomes in the initial period to provide for higher incomes in future.

Nevertheless, the impact of inflation on members will be mitigated to some extent, given that the long-term return of the fund should reflect inflation trends. In addition, a member's property is another very important part of his retirement savings. About 85% of active CPF members turning 55 own homes and 70% of CPF members pledge their property as part of the minimum sum. With inflation, the value of their homes is likely to go up, both in selling price as well as rental value, thus helping to mitigate the effects of inflation on members.

I agree with Mdm Halimah that we need to step up our efforts on outreach and member education. It is important to help CPF members make informed decisions on the choice of plans and whether to opt in. Beginning September, there will be a media campaign to publicise that CPF LIFE will now be available for opt-in. Individualised mail packages with CPF LIFE brochures will be sent to every eligible Singaporean. There will also be a series of roadshows in collaboration with grassroots organisations, in addition to the monthly talks on CPF for members reaching the age of 55. More information on CPF LIFE can be found on CPF Board's website.

Finally, Mdm Halimah asked about clause 11 (c) which discharges CPF Board of liabilities where it pays monies to a nominee without being aware of a subsequent valid marriage which has the

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effect of revoking the nomination. I would like to assure Members that the CPF Board conducts rigorous checks and investigations, where practicable, before making payment. For every case, the Board checks with the Registry of Marriages or Registry of Muslim Marriages, but the Board will not be able to uncover marriages outside Singapore or customary marriages in Singapore, prior to the enactment of the Women's Charter in 1961.

The Board also checks with the deceased family for marriage information where possible. In addition, each nominee is required to declare in its application to the Board that the deceased did not contract a marriage after the nomination date. These checks and safeguards are in place to minimise the risks of wrongful payment. In the unlikely event of a wrong payment, it shall not affect any recourse the rightful claimant may have against the recipient to recover the monies paid by the Board. This is provided for by clause 11 (c) of the Bill. To date, there has not been any complaint from members on the wrongful payment as a result of undiscovered subsequent marriages. However, it is important to clarify the Board's liabilities in this regard. This amendment aims to do so.

Mr Speaker, Sir, CPF helps our people save for their old age. Over the years, our CPF policies have evolved to better address our changing needs and they will continue to evolve. CPF LIFE is our unique response to address the challenges of our ageing population. It marks an important milestone in the evolution of the CPF and I thank this House for giving its support for the Bill.

Sir, I beg to move.

Question put, and agreed to.

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Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Gan Kim Yong].

Bill considered in Committee; reported without amendment; read a Third time and passed.