CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Column: 241

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

3.21 pm

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

_Encouraging voluntary savings
_

Sir, as our population ages, we need to refine the CPF system to help Singaporeans prepare for a more secure retirement. Even as we help individual

Column: 242

CPF members to better grow their retirement nest eggs through higher CPF interest rate and to provide their lifelong income through CPF LIFE, we also recognise the important role of the family unit as a primary social support structure. For this reason, we have been progressively liberalising the rules for CPF Minimum Sum top-ups by family members. Last year, we increased the top-up limit to the prevailing Minimum Sum and expanded the list of recipients, including allowing top-ups to be made to spouses and siblings below the age of 55 using CPF or cash.

Earlier this year, the Government announced that the rules for CPF Minimum Sum top-ups would be further relaxed. Firstly, the annual cap of $26,393 which is imposed on all mandatory and voluntary contributions, will no longer apply on Minimum Sum cash top-ups for recipients below age 55. Minimum Sum cash top-ups would be allowed up to the prevailing Minimum Sum, like Minimum Sum CPF top-ups. Clause 4 of the Bill amends section 13B to effect this change. The clause also removes the need for CPF Board to refund top-ups in excess of the annual cap.

Secondly, CPF members will be allowed to receive cash top-ups to his Special or Retirement Account from all parties, including extended family members and employers. This will encourage family support and provide another route for employers to make voluntary contributions to employees' CPF. Clause 6 of the Bill amends section 18 to remove the restrictions on the recipient-member's age and the relationship with the giver for cash top-ups.

Sir, we would also like to re-align the treatment of top-ups when the recipient dies, or in the case of a non-citizen recipient, when he withdraws his CPF upon leaving Singapore permanently, so that cash top-ups would be treated as if

Column: 243

they were gifts to the recipient. Currently, top-ups via cash or CPF would be returned to the giver. However, cash top-ups made after the new rules take effect would no longer be returned to the giver. In the case of the recipient's death, the cash top-ups will be distributed by way of CPF nomination or intestacy laws. To effect these changes, clause 7 repeals and re-enacts sections 19 and 19A. Clause 3 and clause 5(a) of the Bill make consequential amendments to sections 13 and 15(2) respectively arising from this re-enactment.

The new Minimum Sum topping-up rules will take effect on 1st November 2008. This will allow time for givers to take advantage of the new tax exemption of up to $7,000 of top-up announced earlier at Budget when they make cash top-ups to other CPF members before the end of the year. This exemption will be in addition to the $7,000 exemption for making cash top-ups to their own CPF accounts.

_Prescribed age for Minimum Sum schemes
_

Sir, the Bill also seeks to clarify and refine certain existing policies.

Clause 2 amends section 2(1) to introduce a new definition of "prescribed age". The new definition replaces the phrase "age of 60 years or such other age as the Minister may prescribe". These amendments will enable the Minister to specify in the Regulations different ages for the purposes specified in sections 15(7), 15(7A) and 77(1)(o)(iii), and in respect of different classes of members. In addition, the age for the withdrawal of the Minimum Sum is currently specified using the CPF (Prescribed Age to Withdraw Minimum Sum) Notification. Following the amendment, this will be done by way of Regulations and the Notification will be cancelled.

Column: 244

_Clarifying the protection of CPFIS investments
_

Sir, let me now move on to the amendment relating to the protection of investments under the CPF Investment Scheme (CPFIS).

The CPFIS was introduced in 1986 to give CPF members more choices in investing and enhancing their savings. The intention of section 24(2) of the CPF Act has been to give members the assurance that their CPFIS investments would be protected from creditors so long as they remain within the CPFIS and are not withdrawn.

Section 24(2) was amended on 1st January 2004 to clarify that insurance policies and investment-linked insurance policies bought under the CPFIS would also be protected under the Act.

However, in making the amendment, a sub-clause which appeared in the earlier legislation was omitted unintentionally. This sub-clause qualified that only investments "which the member is obliged to repay into the Fund" are protected.

Sir, the policy with regard to the protection of CPFIS investments, namely, to protect only investments within the CPFIS, has not changed. Thus, section 24(2) should be restored.

Clause 9 of the Bill, therefore, adds the sub-clause "which the member is obliged to repay into the Fund" to sections 24(2) as well as 24(3). This amendment, together with supporting amendments to the CPFIS Regulations, will make it clear that the investments, proceeds or benefits thereof are protected from creditors, and from the Official Assignee on the member's bankruptcy, as long as the investments remain within the CPFIS, and the proceeds or benefits remain in the CPF Investment Account, Ordinary Account or Special Account,

Column: 245

even for members who have reached the age of 55.

Refinements to CPF Education Scheme

Sir, the last set of changes in the Bill deals with the use of CPF savings for tertiary education. The CPF Education Scheme was introduced in 1989 as a concession to allow members to use their Ordinary Account savings to pay for their children's or their own education. However, we need to balance the use of CPF savings for education with the need to ensure the retirement adequacy of members. For this reason, the scheme currently restricts the use of CPF savings to full-time courses where the degrees and diplomas are conferred by an "approved tertiary institution". These approved tertiary institutions consist of publicly-funded local universities and polytechnics which offer courses that are heavily subsidised by the Government. This restriction ensures that CPF savings are used prudently and for courses where quality is assured.

Sir, as part of the Government's effort to widen the opportunities for Singaporeans to upgrade themselves, there are now Government-subsidised degree and diploma courses offered by local institutions where the qualification is conferred by a reputable foreign institution. These include degree courses under the Polytechnic-Foreign Specialised Institution (Poly-FSI) framework and ITE's Technical Engineering Diploma (TED) courses.

We have decided to allow CPF savings to be used for such courses as they are similar to those offered by the approved local tertiary institutions except that the qualifications are conferred by foreign institutions.

Clause 8(a) of the Bill amends section 22 to allow CPF monies to be used for

Column: 246

courses conducted at an "approved educational institution" in Singapore. The approved educational institution need not be a tertiary institution, and the course of study conducted may lead to a degree or diploma conferred by another educational institution (including a foreign educational institution).

The other sub-clauses in clause 8 amend the Act to facilitate administration of the scheme. Clause 8(b) allows for the recovery of sums not returned to the member by the student or guarantor to benefit from the Government Proceedings Act (section 65). Clause 8(c) inserts new sections 22(5A) and (5B) to enable the CPF Board to recover monies paid to an educational institution in error, and where the educational institution had caused or contributed to the error, to be reimbursed for reasonable expenses incurred in rectifying the error, and to be indemnified against

any liability incurred. It also allows CPF Board to refuse permission for withdrawal unless the approved educational institution complies with reasonable informational, administrative or operational requirements.

Sir, I beg to move.

Question proposed.

3.31 pm

Dr Muhammad Faishal Ibrahim: Mr Speaker, Sir, I would like to begin my speech by stating that the Government's proposal to amend sections of the CPF Act, as stated in the Bill, is a timely effort to meet the needs of the ever changing and ever evolving Singapore society as it forges ahead to become a First World economy. The changes would also prepare us for the challenges of the 21st century and also the ageing issues that Singapore will face soon.

Sir, the CPF is a traditional bedrock of our savings structure and should be

Column: 247

continuously reviewed to meet the needs of Singaporeans. This is so as the fund is connected to the people's housing, medical and retirement needs and with it, lay the aspirations of the people, a whole generation now and a whole generation in the years to come.

However, as our nation evolves and globalisation continues to impact us further, challenges to the system would become a common denominator. During my meet-the-people sessions and block visits, I have had many requests from my residents to appeal to the Government to provide further refinements to the CPF system on the way they could spend their CPF savings. I am also aware that there are people who would like to contribute to the well-being of others through the CPF. This, we must encourage and facilitate, wherever necessary and possible. As such, this is even more imperative as we need to tweak the structures to enable others to support the less well-off and, most importantly, in my view, the elderly.

Sir, I am pleased to note the amendments made to section 22 to refine the CPF Education Scheme. The amendments seem to admit more courses on the CPF Education Scheme, such as degree and diploma programmes under the polytechnic-ITE foreign specialised institutional framework. The proposed amendments make the CPF Education Scheme more relevant as there are now diploma and degree courses subsidised by the Government and offered by local institutions, which include the polytechnics and ITE, where the qualification is conferred by a reputable foreign institution.

Sir, I have received many calls from my constituents and Singaporeans who sincerely wish that they could use the CPF to finance courses at other institutions besides those offered under

Column: 248

the newly defined "approved educational institution" in Singapore. With the Lifelong Learning agenda seeping through the minds of many Singaporeans, many still hope to be able to use their CPF savings to realise their aspirations, as well as their children, to have higher qualifications and upgrade their skills in this ever changing global economic environment. This is even so as Singapore aims to be the Education Hub of the World and Singaporeans would never want to be left behind just because of the lack of financial resources. They hope that the CPF Education Scheme could be further refined to include more educational institutions in Singapore and overseas to help them achieve their aspirations in their pursuit for higher qualifications and skills.

Sir, allow me to continue the rest of my speech in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Sir, the proposed amendments are a timely effort to meet the needs of an ever changing and ever evolving Singapore society as it forges ahead to become a First World economy. I am heartened to note that the amendment to the Act is heeding calls for a greater refinement of the CPF system which will ensure that the CPF stays relevant to our current context. These changes would prepare us for the challenges of the 21st Century and also the issues of ageing that Singapore will be facing soon. It is imperative to develop and maximise the potential of our people to meet these challenges.

The proposed amendments will provide the statutory framework to allow those not related to the CPF member to top up the member's CPF savings with voluntary contributions for retirement needs. This will be useful to the elderly, especially those with no families, and will enable other good Singaporean Samaritans to also contribute to the less well-off.

Column: 249

The changes may also provide a boost for a more philanthropic culture to develop in Singapore. During the Global UBS Philanthropy Forum, via a video link, MM Lee called for the promotion of philanthropy in Asia. He said that the successful ones must care for the less well-off to ensure a cohesive society. As we extend the avenues for people to contribute voluntarily to CPF accounts, either their own or others, I believe it is important that we also extend the incentives for them to do so. I believe this will certainly provide a boost to such an important effort.

I would like to suggest that the Ministry further increase the tax incentive in order to encourage more people to participate. While I agree that this act should come from the heart, sometimes, any incentive will certainly help develop this noble culture.

Mr Speaker, Sir, my key concern is the elderly who constitute a large and significant part of my constituents. Are we doing enough to meet the retirement needs of Singaporeans and encourage as well as facilitate Singaporeans to prepare for their retirement?

In a recent survey by the Tsao Foundation which polled 300 Singaporeans aged from 21 to 55 years old, it was found that only about 58% felt confident and were prepared for their old age. As such, these changes are a timely reminder for us of the ever changing needs of our society. We need to continue to encourage Singaporeans to prepare for old age and be confident about it. I believe the CPF system plays an important role in this effort.

In addition, we should see that every effort we take as part of the holistic process involving all Singaporeans and our nation's resources. The CPF changes should not be seen as a lone effort but as a package along with the other schemes

Column: 250

that promote a secure retirement for all Singaporeans. The challenge is to align these changes with the current initiatives as a whole package to address the needs of Singaporeans, especially the elderly in the long run, without leaving anyone behind. Publicising the current schemes and changes, by communicating messages such as "Start Early, Think Early For Your Future" that could be cultivated as a habit, will keep Singaporeans away from a welfare dependency attitude.

Sir, the amendments to the CPF Act are necessary and timely, as they send a key message to the people that the Government will ensure that the mission of the CPF, which is to enable Singaporeans save for a secure retirement, is realised.

Mr Speaker, Sir, I would like to state again my support so that we could continue to provide for our future generation and make Singapore the best place to live in.

On that note, I support the Bill.

*Cols. 299-302.

3.40 pm

Ms Ellen Lee (Sembawang): Mr Speaker, Sir, before I begin my speech, may I take this opportunity, on behalf of the House, to wish Minister Mentor Happy Birthday and Good Health. [ Applause .]

Mr Speaker, Sir, the CPF (Amendment) Bill aims to address several fundamental policy issues which, amongst others, include ensuring that the elderly stay physically healthy and financially better off and able. In this regard, I am particularly concerned about two groups of people:

(i) The elderly females; and

(ii) The stay-at-home mums, also commonly called "housewives" or "homemakers".

Column: 251

As we are facing a rapidly ageing population, there is a greater need to provide support for the elderly to meet the rising costs of living and the increasing demand for healthcare brought about by old age. This problem is particularly acute with the female populace as the life expectancy of women is much higher than that of men. While older men and women generally need support from their families, older women in particular, who live longer, possibly endure more years of widowhood and perhaps disability, with little or no income will undoubtedly have to depend more heavily on their children for their livelihood and healthcare.

In Singapore, with more men and women staying single or if married but not having children or having fewer children, the problem of support in old age will be further exacerbated. In the same vein, there are also women who have to leave the workforce early in their lives or choose to stay at home because they are married, have children or need to look after their aged or disabled parents or parents-in-law. These housewives are a group of people which warrants our attention as they may face similar challenges in their old age.

With these two groups of vulnerable people, there is now an even greater need to reach out to them to ensure that they stay financially and physically able through the CPF retirement account monies, CPF LIFE, Medisave and MediShield. It is an economic and social imperative to provide this basic social safety net for them to ensure their financial independence and sustainability for the long term.

In view of this, I therefore urge the Government to consider the following in rolling out the new Bill and its policy execution:

Column: 252

(1) To have a concrete and sustained 'national' campaign to educate Singaporeans, PRs and their family members, who still do not have a CPF account or MediShield coverage, the advantage of possessing either of these and how to go about doing so;

(2) To further motivate and incentivise, the Government should seriously consider allowing even more generous tax reliefs for members for topping up the CPF accounts of non-earning/non-working family members (ie, the spouse, parents, grandparents, older siblings or immediate relatives) and with the maximum limit further increased;

(3) Besides cash contributions which can be tax deductible, the Government should also consider further easing contribution through a CPF mechanism that allows deduction from CPF accounts to top up family members' MediShield and CPF accounts and grant consequential incentives for doing so. There should be greater impetus to encourage active CPF members to enroll their medically uncovered older family members in MediShield in order to provide medical insurance for their acute care needs;

(4) Currently, the minimum age for the recipient of CPF top-ups is set at 55 years old. If this can be lowered to, say, 40 years old, it would allow the build-up of a more significant nest egg for the non-earning spouse or parent;

(5) CPF members making cash top-ups to relatives under the CPF Minimum Sum Topping-Up Scheme at present, will enjoy tax relief of up to $7,000 per calendar year. This $7,000 ceiling can be raised further as an incentive to encourage such contributions. In order for the contributor to qualify for tax relief for cash top-ups to their family members, recipients must earn $2,000 or less in the preceding year. This criterion should be reviewed as it does not incentivise members to top-up

Column: 253

accounts for relatives who have some income; and

(6) Last, but not least and most importantly, the law must also ensure that the CPF savings and the MediShield coverage – once contributed – should belong solely to the recipient member and not form part of the matrimonial assets that can be ordered for division between spouses upon divorce.

Sir, with that, I support the Bill.

Mr Gan Kim Yong: Mr Speaker, Sir, first, I would like to thank Dr Faishal and Ms Ellen Lee for their support of the Bill. I will now try to address some of the issues raised by both Members.

Sir, Dr Faishal suggested expanding the CPF Education Scheme to include more educational institutions in Singapore and overseas. I understand the desire of Singaporeans to pursue higher education, both locally as well as overseas. However, we need to bear in mind the primary objective of the CPF, which is to help members save for their retirement, housing and healthcare needs. In contrast with heavily subsidised local courses, overseas education and private education are generally more costly. It is also not easy to ascertain the quality of many of these programmes. CPF members should also consider other avenues, such as scholarships and loans, to finance their education as well as the education of their children. Therefore, we should always be careful and cautious in considering expanding the CPF Education Scheme further.

Sir, I agree with Ms Ellen Lee that we should continue to support the broad objectives regarding the promotion of family support. The family unit should remain the primary social support structure. The CPF Board can incorporate the message through existing campaigns

Column: 254

that there are now a number of pathways that Singaporeans can help their family members through the CPF.

Sir, both Dr Faishal and Ms Lee have asked for more tax reliefs and incentives for top-ups. To encourage top-ups, members are aware that givers will from this year receive up to $7,000 of tax relief on cash top-ups to their own CPF account and an addition of $7,000 tax relief for cash top-ups to family members. This effectively doubles the tax relief for Minimum Sum top-ups. This is a new incentive which we have just introduced. So, let us give it a bit more time to take effect and monitor the outcome before we finetune it further.

On MediShield, CPF members can already use their Medisave to pay for MediShield premiums of their immediate family members. Alternatively, members can also make voluntary contributions to their family members' Medisave accounts to support their payment of MediShield premiums.

Ms Lee also asked if the minimum age for CPF top-ups could be reduced. Sir, there is no minimum age for a recipient to receive CPF top-ups from siblings or spouses. If the recipient is below 55 years, the top-up goes into his Special Account. If the recipient is 55 years and above, the top-up goes into his Retirement Account.

Finally, I would like to clarify that there is no issue of MediShield coverage being divided between a member and his or her spouse or ex-spouse after divorce because MediShield is an insurance policy and cannot be transferred to another individual. However, on the other hand, a recipient's top-up amounts can be subjected to division under a Court order. This is because this forms part of the recipient's CPF savings and I think it is best left to the Court to decide what is fair for a divorcing couple.

Column: 255

Question put, and agreed to.

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.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.20 pm.

Sitting accordingly suspended at

3.51 pm until 4.20 pm.

Sitting resumed at 4.20 pm

Column: 255

[Mr Speaker in the Chair]: