CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Sitting resumed at 4.40 pm

[Mr Speaker in the Chair]:

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

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the Bill before this House seeks to amend the CPF Act. There are four large groupings. Let me take the House through each of these broad categories.

Firstly, amendments are introduced to strengthen the administration of the Act to clarify certain existing policies, basically, housekeeping and tidying up various aspects.

Secondly, the Bill expands the CPF Minimum Sum Topping-Up Scheme. This will provide more ways for family members to support one another financially.

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Thirdly, the amendments will facilitate a smooth and equitable distribution of CPF monies pursuant to a Court Order division of matrimonial assets in a divorce.

Finally, amendments are introduced to deter manipulative transactions under the CPF Investment Scheme.

Measures to strengthen the administration of the Act and to clarify certain existing policies

Clause 3 extends the powers of CPF inspectors to inspect and to take possession of documents in all mediums, including digital and electronic forms.

Clause 4 gives the Board the exclusive right to use any symbol or representation device by the Board and makes it an offence for any person to use the symbol or representation that resembles the CPF symbol or representation in a manner that is likely to be deceptive or cause confusion. It provides for a fine not exceeding $10,000 or to imprisonment for a term not exceeding six months, or to both.

Clause 5 makes clear that transfers from a member's savings in the Ordinary Account (OA) and Savings Account (SA) to the Medisave account, and deductions for Home Protection Scheme (HPS) premiums are permitted withdrawals.

Clause 7(c)(d) and (e) extends the pledging of HDB flats in lieu of retaining the full Minimum Sum to properties sold by approved developers which include Design, Build and Sell Scheme flats.

Clause 10 makes clear that the amount of Ordinary Account savings that a member can transfer to his Special Account is the difference between the prescribed amount and the sum of the cash amount in his Special Account and any amount he may have withdrawn under the CPF Investment Scheme - SA.

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Clause 17 empowers the Board to make rules regarding nominations.

Expansion of Minimum Sum Topping-Up Scheme

Sir, as our Prime Minister has said, our population is fast ageing. The proportion of Singaporeans aged 65 and above is expected to grow from 8% in 2005 to 19% in 2030. Correspondingly, retirement and healthcare needs will also increase. As the family unit remains the primary social support structure for Singaporeans, the amendments to expand the Minimum Sum Topping-Up Scheme will provide more ways for family members to take care of and help one another financially.

To facilitate this, firstly, we will increase the top-up limit to the prevailing Minimum Sum. At present, under the current Act, top-ups are limited to the Minimum Sum specific to the cohort of the recipient. For example, if the member had turned 55 in 1987, this would only be $30,000. If someone wanted to top up his account, he could only top up to $30,000. What we are doing now is to change that so that the top-up can be to the prevailing Minimum Sum which is $99,600 today. Thus, members can increase top-ups to recipients so that their family members will receive a regular income over a longer period.

Secondly, we will expand the list of recipients. Currently, members can only top up their grandparents' Retirement Accounts using cash but not CPF funds. We will now allow grandchildren to transfer funds from their CPF Ordinary Account to their grandparents' Retirement Accounts, subject to both meeting the top-up criteria. There are instances, because people are growing older, where the grandchildren are financially well-off and they can help support their grandparents.

To help those who are single and who do not have children to build up their

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retirement savings, we will also now allow, as a new initiative, members to top up their siblings' Retirement Accounts with savings from their own CPF accounts, or in cash. As announced by the Ministry of Finance previously, a tax relief for cash top-ups of up to $7,000 a year will be given if the sibling receiving the top-up earns not more than $2,000 a year and is 55 years old or above.

In addition, we will allow top-ups to spouses and siblings below the age of 55 using CPF or cash. Previously, it was only above 55. We are now allowing below the age of 55. The top-ups can be made into members' Special Accounts (SA). In keeping with the intent of the scheme to build up the CPF of recipients for long term needs, the top-up monies can only be used to provide a steady income stream during the recipients' retirement, and cannot be withdrawn as a lump sum. In other words, since we allow them to top-up below 55, at 55, they may be able to withdraw some. But because this is meant to provide a steady stream of income, you cannot remove it or take it out at age 55 as a lump sum. In the event of the recipient's demise, any remaining balance from the top-up sum will revert to the donor. This is an existing clause and I am just reiterating it as an existing practice so that it actually goes back to the donor rather than to the estate.

Clause 8 in the Bill will enable the topping-up for grandparents using CPF funds as well as the expansion of the list of recipients to siblings above and below age 55, and spouses below age 55. The increase in the top-up limit from the cohort Minimum Sum to the prevailing Minimum Sum will be done by way of an amendment to the CPF regulations.

Clauses 6, 7, 9, 11 and 12 make consequential amendments to the Act

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arising from this policy. Clause 6 of the Bill sets the limit of cash top-ups to a recipient's SA at the recipient's Voluntary Contribution (VC) limit. Consistent with top-up limits for family members, clause 9 makes it possible to allow members to top up their own Retirement Account with their Ordinary Account or Special Account monies up to the prevailing Minimum Sum. As in the current Act, clauses 7, 11 and 12 enable the transfer of the balance of any unused top-up monies to the donor's CPF account on the death of the recipient.

Other related amendments are clauses 2, 5 and 25. Clause 2 makes technical amendments to the definitions of "minimum sum" and "retirement account", while clause 5 facilitates the transfer of top-ups received before age 55 from the recipient's Special Account to his Retirement Account when he reaches 55. Clause 25 of the Bill enables the making of Regulations for top-ups to the SA for siblings and spouses who are below the age of 55.

The changes to the top-up scheme will take effect from 1st October 2007, except for top-ups to members below the age of 55, which will take effect from 1st January 2008. These are just some technical adjustments and software changes that we have to make.

Smooth and equitable division of CPF monies in matrimonial proceedings

Sir, this set of amendments is intended to help divorcing couples achieve a smooth and equitable division of CPF assets acquired during a marriage. Subsequent changes that I have described will be effected in terms of a male CPF member and a female ex-spouse. But the law is quite gender-neutral and the laws also equally apply to a female CPF member and if the male was an ex-spouse.

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CPF savings form part of matrimonial assets that are governed by the Women's Charter which provides powers to the courts to divide matrimonial assets. But under the existing laws, the current CPF Act, a court order to divide a member's CPF money between him and his ex-spouse is enforced only when the member is eligible to withdraw his CPF and has set aside his Minimum Sum (MS) and Medisave Minimum Sum (MMS). So there are two conditions under the current Act. You can only withdraw when you are allowed to withdraw and only after you have set aside the Minimum Sum and Medisave Minimum Sum.

The Minister for Manpower (Dr Ng Eng Hen): 4.55 pm

The current practice may be inequitable to the ex-spouse for two reasons.

Firstly, the ex-spouse's access to these monies is delayed till the member is eligible to withdraw his CPF. In other words, even if the court makes a division and the member is, say, 40 years old, the ex-spouse can only take the money when that member reaches 55.

Secondly, the member's retirement needs take priority over that of the ex-spouse, as only the balance of funds after the member has set aside the prevailing CPF Minimum Sum and the Medisave Minimum Sum when he turns 55 is available for distribution to the ex-spouse. The Minimum Sum and Medisave Minimum Sum at the point of withdrawal in the future may also be substantially different from that when the court order was made.

Therefore, the new principle underlying these amendments is that the CPF Act should facilitate the division of

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matrimonial assets under the Women's Charter, provided there is no leakage from the CPF system. But between members, if both members are within the CPF system, I consider it no leakage, and we can facilitate the rules under the Women's Charter. Hence, amendments will be made to, firstly, allow an immediate transfer of CPF monies to the ex-spouse's CPF account, if the ex-spouse is a citizen or Permanent Resident (PR). This shall be done without the Minimum Sum or Medisave Minimum Sum first having to be set aside once the court has ordered a distribution of CPF monies in a divorce. The CPF money to be distributed will be channelled to the ex-spouses' CPF accounts according to the accounts they originally resided in.

If the ex-spouse is not a citizen or a PR, immediate transfer of CPF monies is not allowed. Instead, the court can order the Board to pay the spouse when the member becomes eligible to withdraw his CPF monies. The member will not be required to set aside the Minimum Sum and Medisave Minimum Sum before the ex-spouse can receive her entitled share.

Secondly, the amendments will also facilitate the immediate transfer of immovable property to the ex-spouse, if the ex-spouse is a citizen or a PR. Transfer in this context would refer to a transaction where there is no cash consideration at fair market value other than the refund of CPF monies withdrawn for the purchase of the property. In such an instance, the CPF Act currently requires the requisite CPF refunds to be made to the member's CPF account before the transfer can take place so that there is no leakage of CPF monies.

In other words, with these amendments, the court will have the option of ordering the member to transfer the property to the ex-spouse without all or even any of the refunds being made to the CPF member's CPF account first,

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provided that a charge is placed to secure the refund of such CPF monies into the ex-spouse's CPF account should she sell the property later. In other words, even if the member who is a male now wants the property to be transferred to the ex-spouse, the current CPF Act does not allow that. The court does not have the ability. It says, "You will have to refund all the money that you have used to buy this house even if you have agreed to." What we are doing now is to amend it to say you can transfer the house, but we place a charge on the amount that was used to buy that house so that when she sells it later, that money is refunded back into the member's account. In effect, the CPF used by the member, and the accrued interest on that CPF, will be refunded to the ex-spouse's account in the event the property is sold.

Finally, the amendments will also enable the member's CPF investments to be transferred to or be liquidated to allow the ex-spouse immediate access to CPF assets which she is entitled to. The transfer of CPF investments is only allowed for an ex-spouse who is a citizen or a PR.

Clause 18 of the Bill inserts new sections 27A to 27I to facilitate the smooth and equitable distribution of CPF monies arising from the division of matrimonial assets. In particular, section 27B provides for the immediate transfer of CPF monies to the CPF account of the ex-spouse. Sections 27C to 27F provide for the immediate transfer of property to the ex-spouse. Section 27G provides for the immediate transfer of CPF investments to the ex-spouse.

Other related amendments are clauses 5, 6, 16 and 19. Clause 5 facilitates the transfers made under section 27B. Clause 6 exempts contributions to the ex-spouse's CPF account made under

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sections 27B to 27H as a result of division of matrimonial assets from counting towards the Voluntary Contribution limit. Clause 16 amends section 24, which provides for the protection of CPF monies and investments from member's creditors, to make it subject to sections 27B to 27H. Clause 19 makes consequential amendments to give priority to transfers of CPF monies in relation to matrimonial division under section 27B over the deduction of Home Protection Scheme premium from the member's CPF account.

The changes that I have announced pertaining to the division of matrimonial assets will apply to court orders made on and after 1st October 2007. It is not retrospective.

Deter manipulative transactions under CPF Investment Scheme

The last set of amendments, Sir, is to deter manipulative transactions under the CPF Investment Scheme. The intent of the CPF Investment Scheme is to provide members investment options to enhance their savings for retirement. But, sometimes, manipulative transactions that lead to the leakage of CPF savings have been reported and indeed should be prohibited. So these amendments will strengthen the CPF Act to deter such manipulative transactions.

Clause 20 of the Bill creates a new offence for any person to manipulate any CPF Investment Scheme transactions. Clause 21 enables the courts, upon a member's conviction in connection with the investment, to order the refund or transfer of any shortfall to the member's CPF account caused by manipulated trades.

These changes will take effect from 1st October 2007.

Sir, I beg to move.

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Question proposed.

5.01 pm

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Deputy Speaker, Sir, any amendment to the CPF Act which seeks to help Singaporeans increase their retirement savings is timely and should be supported. At a time when we are facing challenges from an ageing society, increased life expectancy and rising cost of living, ensuring that Singaporeans have adequate savings for retirement is a critical challenge that we must overcome.

The amendment in this Bill that will, amongst others, allow more Singaporeans to top up the CPF accounts of their family members, is therefore particularly welcome. This area will be the focus of my speech. I will leave the proposed amendments relating to matrimonial assets to Mdm Halimah and other female counterparts to respond.

While I support the amendments, I have some concerns to raise. Sir, statistics have shown that many Singaporeans are facing problems accumulating the Minimum Sum in their CPF accounts. While the expansion of the CPF topping-up scheme will open the doors for more family members to make contributions to the CPF accounts of their loved ones, I am especially concerned about low-income elderly workers who are destitute or are being taken care of by people who are or may not be their immediate family members. While I agree that the family unit is the primary social support structure for Singaporeans, I feel that the definition of "family" should be broadened to include caretakers of the elderly member as this may, at times, not be someone from the member's immediate family.

As healthcare costs continue to rise, I would also like to suggest that the top-up

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scheme be extended to the Medisave accounts of parents, grandparents and siblings of the contributor. This will ensure that CPF members have sufficient amounts in their Medisave accounts for hospitalisation and healthcare needs.

Let me now turn to broader issues related to the CPF.

Sir, the Prime Minister recently announced some initiatives to help Singaporeans save more and stretch their retirement savings longer. These changes are welcome as they will help boost Singaporeans' CPF savings. We have to move quickly and introduce changes that will help our society face the challenges of an ageing population before it is too late. I feel that there is a general understanding on the need for these changes but, at the same time, there is a feeling of an overcast sky as many are worried that they will have to work longer and, yet, at the end of the day, not have a high quality of life towards the end of their lives. Gone are the romantic illusions of the golden years of retirement.

The situation is even bleaker for lower-income families who may be living hand-to-mouth and may be so caught up in making ends meet day-to-day that thinking about the future and planning for retirement is something that is totally beyond them. There is therefore an urgent need to think of more ways of helping Singaporeans boost their CPF savings. A Straits Times' survey recently reported that seven out of 10 Singaporeans feel that they will not have enough retirement savings. With half of those who are still working, having $45,000 or less in their CPF accounts, I still feel that the changes are not enough to ensure that Singaporeans will have sufficient savings for their retirement needs.

Bigger changes must be thought through and made and new ways have to be explored to help Singaporeans build

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stronger retirement nests. The 1% increase in CPF rates announced by the Prime Minister brings much cheer to Singaporeans but, at the same time, many are worried that pegging the interest rates to bonds may mean volatility as it follows the economic cycles, even though the risks are lower compared to the stock market.

Sir, we should find ways to help Singaporeans make more informed choices when they invest their CPF savings. Statistics tell us that about 45% of members who sold their investments or CPFIS made losses. 32% made equal to or less than the 2.5% returns for the Ordinary Account and only 23% made gains. Perhaps, the CPF Board could team up with appropriate partners to have public education campaigns to educate Singaporeans on investing an investment judiciously or, at least, to make better calculated risks.

Moving on, some Singaporeans have suggested that the CPF Board buy shares of Temasek Holdings which will fetch higher returns for CPF members. I believe this suggestion is worth looking into, considering that Temasek Holdings is after all not only a Government investment arm, but has also proven to bring about attractive returns on its diversified investments.

One other way of boosting Singaporeans' savings is to enhance the Supplementary Retirement Scheme (SRS). This is an area that I have proposed several times to be looked into but, so far, the Government has been non-committal in reviewing the current Scheme. In addition to proposals I had made in past speeches, I would like to also propose the following changes to make the SRS more attractive to CPF members.

Sir, currently, members can make contributions to the SRS only up to age

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62. But with policy changes to make more Singaporeans remain employable beyond 62, this age cap should be reviewed. This review can, in fact, be done without having to have legislative changes for the retirement age to be pushed further beyond 62 years old. Apart from this, the CPF Board should also consider reducing the tax on 50% of the withdrawn amount of savings upon retirement, especially if the withdrawn sums are used for critical needs, such as medical expenditure. At the same time, the contribution cap of 15% could also be increased to encourage more Singaporeans to save and accumulate higher retirement savings.

Beyond making SRS attractive to CPF members, employers could also be given an option to contribute to their workers' SRS accounts, like what is being done in the United States for the US individual retirement arrangement, or the IRA.

To encourage employers to do so, corporate tax benefits could be offered based on the amount they contribute. The CPF Board should have joint efforts with financial institutions to educate the public on the SRS to generate greater public awareness of this Scheme.

On the issue of annuities, increasing life expectancy makes it necessary for Singaporeans to look beyond their CPF pay-outs which can only last 20 years. While there is a general understanding on the need of having lifelong funds due to an increase in life expectancy, there is this worry at the back of some people's minds that if they die young, the money invested in the tail-end annuity will not be returned to the family. Sir, rather than making buying annuities compulsory, the CPF Board could consider offering another option to those who prefer to extend their CPF pay-out period from 20 to, perhaps, 30 years. This will cater to Singaporeans who do not mind getting less after spreading their savings over a longer

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period of time, but wish to have the balance returned to their accounts or families upon death.

Another factor to consider is to extend an opt-out scheme for people with serious illnesses from having to take up an annuity as they may need the higher regular monthly pay-outs for their immediate needs and may not live beyond 85.

Finally, Sir, I believe there is still a lack of understanding amongst Singaporeans on how critical it is for them to have adequate savings for retirement. Some may not understand the rationale for delaying the drawdown period and many more may not be able to appreciate the need of annuities. There is a critical and urgent need to step up public education efforts and outreach has to be done in different languages to ensure that no one gets left out.

5.11 pm

Mdm Halimah Yacob: Mr Deputy Speaker, Sir, I rise in support of the Bill. I would like to single out two particular amendments, which are pro-family and which also strengthen support for our ageing population, for mention.

Under the first set of amendments, CPF members can now use their CPF funds to top up not only the retirement accounts of their parents and spouses, but also that of their grandparents and siblings. The old law is restrictive as it allows a member to transfer money from his account only if he is topping up the retirement accounts of his parents or spouse but not if he is topping up the retirement account of a grandparent or sibling. To top up the retirement account of a grandparent, he has to use cash which is rather prohibitive. The old law also does not allow a CPF member to top up the retirement account of a sibling.

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This had made it difficult for those who want to provide for the needs of older siblings, particularly women who have little retirement savings of their own and who may not have any family or children to support them. So, I applaud this change which is pro-family and which will help to enhance the retirement security of older Singaporeans who are unable to provide for themselves.

I also applaud the change under Part IIIA on division of fund-related assets in matrimonial proceedings. This amendment is progressive and will provide better protection for our women and children in divorce proceedings. This amendment was the result of a court decision in the 1995 case of CPF Board v Lau Eng Mui where the court ruled that CPF forms part of the matrimonial assets that are available for distribution in divorce proceedings. But there was no provision in the CPF Act which allows the Board to allow for an immediate transfer of the CPF funds of the CPF member to the CPF account of his ex-wife and she has to wait until he reaches 55 years old and even then, she will only get the amount ordered by the court after the Board has set aside the Minimum Sums for retirement and Medisave accounts of the member. In the end, there may be very little that the ex-wife receives despite the court order and the ex-wife and her children suffer grave hardship. In the event that the court orders the transfer of the matrimonial property to the ex-wife, there is also a problem. The ex-wife has to refund the ex-husband's CPF monies first before the property can be transferred to her as the Board has no powers to allow a transfer if this is not done. Again, this causes hardship, as the ex-wife usually does not have the means to reimburse her ex-husband's CPF monies. Hence, the amendment to the Act will allow the CPF Board, upon the order of the court, to transfer the funds immediately and the ex-wife does not have to refund the member's CPF monies

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before the flat can be transferred to her, provided that if she sells the flat, then she has to transfer the amount to her own CPF account. Again, this is a pro-family policy and will help to alleviate the hardship caused to many women and children in divorces who would otherwise be deprived of a roof over their heads.

However, Sir, I have three issues to raise and seek the Minister's response to them.

First, currently, a member is not allowed to transfer his CPF savings to top up the Medisave account of his family members. This is a point referred to by Dr Ahmad Magad. In view of the greater flexibility allowed to CPF members to top up the retirement accounts of their family members such as the grandparents, parents, spouse or siblings, allowing them to also top up the Medisave accounts of their family members should be a logical and necessary extension.

Many older Singaporeans, especially women, do not have sufficient Medisave savings to last them for life, which is even more critical now since our life expectancy is about 80 years old. So, I would like to ask the Minister whether the Ministry could consider allowing CPF members to top up the Medisave accounts of their grandparents, parents, spouses and siblings. This is also one way for us to address the problem of many Singaporeans who are not covered under MediShield, a large number of whom are women. If there are no Medisave savings for them, then they will not have MediShield coverage, because MediShield coverage is automatic so long as there is Medisave savings. So there are compelling reasons why we should allow CPF members to use their CPF funds to top up the Medisave accounts of their family members.

My second point is on the current age restriction for coverage under the Home

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Protection Insurance Scheme. Only those who are below 65 years of age are covered under the Home Protection Insurance Scheme, which discharges a member from liability to pay for his housing loan upon the death or incapacity of the member during the insured period. This is an important scheme that protects the homes of CPF members in the event of the death of a breadwinner or major contributor to the family income. But the protection accorded only to those below 65 years of age is unrealistic, as people are now marrying later and living longer and therefore take a longer time to pay off their housing loan. I have seen residents who are in their 50s with young children, and if the coverage stops at 65, their family would suffer if they are incapacitated or die and they do not have a roof over their heads, especially if they are the sole breadwinners. As the Prime Minister had pointed out in his National Day Rally speech, we can now expect to live up to 80 years old and therefore need to provide for all our needs longer. It is opportune, in my view, in view of the current discussion of raising the CPF Minimum Sum draw-down age and the need to work longer to remove this restriction. The 65 years age limit was set when our retirement age was 62 years. Now that we are setting a higher retirement age, the Ministry should seriously consider raising this age limit, and I urge the Minister to look into this.

My third point is on the need to educate CPF members on the intricate details of the CPF Act and the various schemes available to them. For example, with this amendment, CPF members can now top up the retirement accounts of their family members. If there is no campaign to educate them and raise their awareness, I fear that the take up rate for this scheme will be very low and we will not achieve our objective, which is to enhance the retirement security of those who are unable to provide for themselves. I would therefore like to suggest that the

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CPF Board launch a campaign to educate CPF members on the various schemes that are now available and how they or their family can benefit from them.

Finally, Sir, although this is not the subject of the amendments that we are discussing today, I agree that the recent changes announced by the Prime Minister at the National Day Rally will, to some extent, address the concerns of Singaporeans. The 1% increase in the CPF return is greatly welcomed. But most Singaporeans also feel that the most important consideration is whether or not they are able to continue working, particularly for those who have reached the age of 62 years. If they can continue to work, the 1% increase is certainly a great boost, and the higher Minimum Sum draw-down age is not a major concern. Hence, I think we need to work together very closely to address this concern of Singaporeans, particularly those of 62 years and above, over availability and access to jobs. In the NTUC, we have been working very closely with our social partners and we have worked with more than 200 companies to place 3,080 workers above the age of 62 in jobs. But we certainly need to do a lot more, as we can see that the numbers of those who are reaching this age is rapidly increasing.

On this note, Sir, I support the Bill and I look forward to the debate in September on the other amendments.

5.20 pm

Mdm Ho Geok Choo (West Coast): Mr Deputy Speaker, Sir, I wish to acknowledge a few observations and highlight a few issues in relation to the amendments tabled.

First, I applaud the amendment to section 18. This amendment will add greater flexibility to CPF members who wish to support their aged parents,

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grandparents and siblings, and provide greater voluntary support for the aged.

Sir, as mentioned by the Minister, our population is fast greying. In fact, according to a Straits Times' report last Friday, the dependency ratio will grow from nine economically active persons supporting one older person over 65 years old today to 3:1 by 2030.

Sir, this amendment will help Singaporeans take personal responsibility for caring for their loved ones in their sunset years. It is not unnecessarily onerous, as the member will have any outstanding funds credited back to his account upon the death of those loved ones to whom he has made contributions.

It also provides greater flexibility for CPF members to transfer part of their savings to the Special Accounts of those who have not yet reached 55 years of age. Like my colleague, Mdm Halimah, before me, I would also like to ask whether top-ups for Medisave account of family members are included.

Sir, the Government has always championed the development of the family as our basic social unit. This amendment will go a long way towards strengthening of the institution of the family.

I also applaud amendments to sections 18A and 18B, which allow a member to transfer funds from his Ordinary Account to his retirement account. These new provisions will enable a CPF member to plan and manage his retirement financing needs more proactively and at an earlier stage.

Sir, with reference to Part IIIA, section 27B, on order of court for transfer or payment of money standing to the credit of a member, I applaud the amendment to facilitate transfer of property to the ex-spouse. At the meet-the-people sessions,

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MPs often have to grapple with the plight of ex-spouses who have no immediate means to take over or sell the property because of the need to refund the CPF used for the purchase of common property before the divorce.

Sir, I am informed through the briefing notes from the Ministry of Manpower relating to these amendments that the new amendments will allow a court order to effect an immediate transfer of a member's CPF monies to the CPF account of his or her ex-spouse. This, according to the notes, will be done without the Minimum Sum and Medisave Minimum Sum first having to be set aside. Unfortunately, I cannot find mention of this in the amendments tabled. I therefore seek confirmation that this is indeed the intent of the new Part IIIA of this Bill. If this were so, then I fear we are getting into dangerous waters.

Let me first reiterate that I am all in support of the Women's Charter, and for the protection of the rights of all parties in divorce proceedings. By all means, we must give ex-spouses what is due to them from the members' Ordinary Accounts. However, we must constantly remind ourselves of the intent of the CPF Act. The CPF is intended as a form of savings for its members, and especially to create a nest egg to sustain members through their retirement years. As the Prime Minister's National Day Rally speech underlines, retirement and ageing will become major issues in the years to come.

The CPF Act has relentlessly protected this right all these years, some would say more aggressively than is necessary. But such protection of the Minimum Sum and Medisave Minimum Sum will become all the more critical as members reach retirement age.

I would therefore caution against any attempt, even by a court of law, to have

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funds in these accounts touched for purposes other than which they were designed for.

Sir, with reference to section 58A on offences relating to investment, the inclusion of this new section will give the CPF Board more teeth to prosecute any member and/or third parties who willfully defraud the Board into releasing members' funds through the manipulation of the CPF Investment Scheme (CPFIS).

I see this amendment as both proactive and preventive. Given the tight conditions on the use of CPF funds today, and the extended withdrawal age and withdrawal limits to come, there will no doubt be creative attempts to effect premature withdrawals illegally.

The CPF Investment Scheme is a convenient conduit for such attempts. I would like to ask the Minister whether there are comprehensive measures in place to ensure we plug any loopholes and provide punitive measures against any attempt to defraud the Board.

Sir, like my colleague before me, I am also in agreement that CPF can be very complex for the layman to understand. Even the CPF website does not provide easy access to the basics of CPF. The concern is how are the less educated and those who are unable to read be able to understand the intricacies of CPF. Perhaps, we could organise more roadshows in the heartlands to educate the people, at least, inform them about the exact workings of the CPF and their benefits and rights, especially with regard to situations where they can withdraw their CPF savings and what CPF can be used for. In fact, most complaints relate to having money being locked up in the CPF, making it tough to make ends meet in times of severe illnesses or not being able to access the money despite having a terminal illness. But we know that this is not true. The current CPF Act provides

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for withdrawal in such circumstances. Therefore, more support for CPF policies can be garnered if people truly understand what CPF is about and how it benefits them. How can the Minister look into ways to better reach out to the general public?

On this note, I support the amendments in the Bill.

5.25 pm

Mr Liang Eng Hwa: Sir, I rise to support the Bill.

First, I would like to address the issue of expanding the Minimum Sum topping-up scheme. I support the idea of allowing CPF members to top up the accounts of their grandparents and siblings. This is consistent with the value system that we have been promoting where family is the next line of support. This amendment is also timely, as the CPF Minimum Sum will be increased from $99,600 in 2007 to $120,000 in 2013. This is clearly a significant increase, especially for members from the lower income group. But truth be told, how many CPF members or their families will do that? Most of us help our family members by giving them cash outright. Neither the giver nor the recipient would be keen to put that money away in a CPF account. It is far more convenient and accessible in a bank account. For those who plan ahead, they will purchase insurance policies for their loved ones.

Sir, while the revised CPF rates are looking more attractive for some amounts and still unsure for the balance, I think we need to offer greater incentives, either in the form of tax benefits or higher interest returns, for this scheme to be utilised more widely. I have a few suggestions.

Firstly, the tax benefit for cash top-ups. Like it or not, tax can be the most

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direct and effective way to shape behaviour. Currently, members making cash top-ups under the CPF Minimum Sum topping-up scheme will enjoy tax relief of up to $7,000 per calendar year. In view of the increase in the Minimum Sum as well as to further encourage such cash top-ups, may I suggest to the Minister to not only extend this tax relief to the expanded scheme but also increase the tax relief beyond the $7,000 cap.

One way the Ministry can look at is to use the contribution cap for the Supplementary Retirement Scheme (SRS) as a reference. The SRS contributions cap is determined by multiplying the appropriate SRS contribution rate and the absolute income base. For members who have not made contributions to SRS and hence have not yet enjoyed the tax relief, we should extend this full quantum of tax benefit to them as well when they top up their family member's Retirement Account or Special Account. These top-ups are in line with SRS' objective, which is to encourage Singaporeans to save more for their old age by means of voluntary contribution, even though it is not for themselves.

I understand that the number of such CPF top-ups is low. Perhaps, the current tax reliefs are just not attractive enough to get members to use the CPF as a vehicle to render support to one another.

Secondly, I also urge the Ministry to explore additional forms of benefits or incentives for members to use funds from their CPF accounts to top up their family members' Retirement Accounts or Special Accounts. I understand that members

already enjoy tax relief from their individual CPF contribution. However, to get members to take the next step of topping up their family members' accounts so as to strengthen their financial security during retirement, we not only need education but also direct incentives. I like the D-bonus and V-bonus

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announced by PM during the National Day Rally. Perhaps, we could consider a T-bonus, which is a Top-Up bonus, to encourage family members to help their less well-off relatives to enhance their retirement savings. It may work.

Thirdly, I hope that the Ministry can also look at lowering the 1.5 times prevailing Minimum Sum amount before such top-ups are allowed. Currently, to top up your family members' CPF Minimum Sum using CPF, your net balances in both the Ordinary and Special Accounts must be more than 1.5 times the prevailing Minimum Sum. The balance above that can then be used for the top-ups.

This could also be another reason why the numbers of top-ups are low. Often, members would have a significant portion of their CPF amount used for the purchase of their property. As such, to have another net balance in the CPF account of more than the 1.5 times the prevailing Minimum Sum may be a challenge to most members. May I also suggest that CPF takes into account the amount of CPF funds used for the purchase of property in computing the amounts that are available for the top-ups.

I do have one comment on the amendments concerning the division of CPF assets in matrimonial proceedings. I welcome the amendments. Presently, a court order to divide a member's CPF money between the member and the ex-spouse, in most cases, the woman, is enforced only when he is eligible to withdraw his CPF when he turns 55, and has set aside both his Minimum Sums. However, not every case of matrimonial asset division involves the distribution of CPF monies. So far, in most cases, the courts would order such distribution only when the CPF forms the main bulk of the matrimonial assets. We may deduce in

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such circumstances that the parties are not wealthy people. With the divorce, the ex-spouse's financial situation is usually worsened. The delay in the distribution of CPF monies to the ex-wife may have a negative impact on her financial security and, in addition, prolongs her suffering, preventing a clean break.

So, I applaud this improvement to our current legislation. The amended Act makes the distribution of assets between two former spouses more equitable and timely, particularly in the many cases where the ex-spouse is the party who makes greater non-monetary contributions to the household. In most cases, they are the women - the wives and the mothers - who have given up their career and financial opportunities in the prime of their lives to take care of the young and the elderly. How do we evaluate their contributions in monetary terms? If we try, I suspect many families may not be able to afford the dedicated services diligently performed by our women. Their work is crucial to our family units and our nation. This amendment is another step in the right direction to acknowledge their contributions, and to support and protect them.

However, I would like to voice my concern over the caveat that there is to be no leakage of CPF even as the CPF Act is amended so as not to obstruct the operation of the Women's Charter. Like the saying goes, "All happy families resemble one another, each unhappy family is unhappy in its own way." Likewise, each court-ordered division of matrimonial assets in a divorce is different in its own way. The cases that I have encountered in my meet-the-people sessions have shown how complicated and unique each divorce case can be. There is the possibility of divorce cases which involve some leakage of CPF monies if the division is to be fair to the ex-spouse, for example, in cases where the ex-spouse requires immediate cash to

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manage the transition period. In my opinion, it is far more important to be equitable than for the CPF Board to be hung up on a technicality. I hope that provisions can be made to provide for some flexibility. We should not be overly concerned with plugging every possible fund leakage.

Sir, I support the Bill.

5.34 pm

Mrs Josephine Teo (Bishan-Toa Payoh): Mr Deputy Speaker, Sir, I support the amendments to the CPF Act.

I have two areas that I would like to touch on: first, on the division of fund-related assets in cases of divorce. I note that last year, there were a record number of divorces and annulments, numbering over 7,000 in Singapore, and that would be about 2% divorce rate. This compares to the 3% divorce rate in Hong Kong, 4% in Japan, and 8% in Britain. So, I think, as our society progresses, despite best efforts, it is not inconceivable for the upward trend for divorces to continue. At the same time, I note also that in the years 2003-2004, there were over 4,500 applications each year for the enforcement of maintenance orders. In other words, where spouses have been ordered to pay maintenance on a monthly basis to the families that they have since left, there were still many cases who were not able to fulfil their financial obligations. But, I think, in some of these cases, there were at least CPF monies that could be tapped and the amendments make this possible to happen.

With reference to the hon. Member, Mdm Ho Geok Choo's point that CPF is primarily for each member to accumulate savings for his own retirement, I do agree with her point, but I think that, at the same time, fulfilling financial obligations to upkeep of the ex-spouse and their

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children is also very important. So, in that regard, I think the amendments are a great help to divorcees who have been granted child custody because it makes possible for the immediate transfer of the CPF monies without the need for the Minimum Sum or the Medisave Minimum Sum to be first set aside. Because so much of our assets could be tied to the marital property, it is also a great help that we are removing the need to refund the CPF money used for the property purchase when the property is transferred by a member to his ex-spouse. I support these amendments because they ensure that there is more equitable distribution of matrimonial assets in the case of a divorce.

On the point of the transfer of the marital property, I note, however, that when the property is sold, the CPF for that property plus accrued interest has to be refunded to the ex-spouse's account from the proceeds of the sale of the property. I support this as it helps the ex-spouse to better plan for retirement through accumulation of the CPF savings. However, I think this point has to be made very clear to the ex-spouse who continues to live in the marital property. This is to ensure that in the event of a sale, the ex-spouse is not caught by surprise by the larger sum of money to be refunded to the CPF. In fact, when I shared this amendment with a union leader, he was very astute and he immediately said to me that if something like that were to happen and the marital property resides with the lady, it makes the lady very "marriageable", and that many men would find her very attractive because of the property she now owns. So, his point to me, which I would like to share with the House, was that immediately after a divorce, it is often true that women could find themselves in a very vulnerable state and, therefore, be open to such forms of perhaps being taken advantage of.

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So, I hope that the CPF and the HDB can work together to ensure that the obligations of the ex-spouses who get to keep the marital property fully understand their obligations and fully understand that in the event of a sale, they do have to refund the monies back to the CPF, and this would be a larger sum than when they originally contributed towards the purchase of the property.

In that regard, I do want to thank the Minister for the changes which, as Mdm Halimah has correctly pointed out, are pro-family, and I think it would help single parents and their children to move on in life.

The second point that I would like to make is on the expansion of the Minimum Sum topping-up scheme. The Minister had earlier during Question Time, in response to a question that I had raised, pointed out that up to 40% of the active members at age 62, still do not have the Minimum Sum. In fact, the median shortfall is about $34,500, if I remember it correctly. So, what it means is that, in fact, quite a lot of people do not have what they need to prepare for retirement.

Noting that the key objective of the CPF is to save for our own old age, I therefore support the idea that the eligibility criterion for topping-up is maintained at 1.5 times the prevailing Minimum Sum. This is in reference to the point that hon. Member Mr Liang had raised, where he asked whether the scheme could be made more flexible to allow members who do not necessarily have 1.5 times the prevailing Minimum Sum in his Ordinary Account and Special Account to be able to top up the Minimum Sums for their family members. Unlike Mr Liang, I do think that it is important to maintain this eligibility criterion simply because the key objective of the CPF is to save for our own old age.

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However, notwithstanding that I believe we should maintain the eligibility criterion, I do think that there are cases where the members are no longer actively contributing to the CPF, and that is because they have left Singapore either because of marriage or because they have migrated. I have come across cases where there are family members who have moved overseas and they do not mind helping their siblings, parents or grandparents through the CPF monies that they still have. However, under the current regulations, they still have to meet the eligibility criterion of 1.5 times the Minimum Sum, which they do not have. Perhaps, they have maybe about $50,000 in their CPF accounts and they would like to be able to top up the accounts of their family members. I wonder if, in such cases, the Ministry could consider allowing partial transfers on a case-by-case basis.

On this note, I would like to thank the Minister for the amendments. I eagerly await the Ministerial Statement on future changes to the CPF. Sir, I support the Bill.

5.41 pm

Dr Ng Eng Hen: Sir, let me thank Members for their support. Many of them have said that they look forward to the Ministerial Statement on September 17th - I look forward to it too - and I will answer Dr Ahmad Magad's and other questions related to that. I think that is a more appropriate occasion.

Dr Magad asked whether we should allow those with serious illnesses to opt out of whatever longevity insurance schemes. Let me say that already is in existence. In other words, currently, if a person has terminal cancer or serious illness which the doctor certifies that he has truncated life expectancy, he is already allowed to withdraw his CPF or part of his CPF monies. So, that already

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exists and, in that sense, there is no need for that to be confused with what we are doing next.

Let me address some points that Members have brought up. Firstly, on broadening the list of recipients. As Dr Magad pointed out, can we also include caretakers? We have expanded the list of recipients quite substantially in this review. We have now included siblings, not only of the donors but of the recipients. So, for the donors, we have said, siblings, and the recipients, if you are below 55, we increase the amounts. I think that is an extension, and let us see what happens after this. Should we now include caretakers? It is a little bit trickier because then I will need to have a legal definition. But there may be instances where someone says, "Look, I am willing to do so. Can I, indeed, be allowed to?" I think we can consider that.

Dr Magad and Mdm Halimah also asked why is it that we do not allow people to top up Medisave accounts. The reason is that we already allow members to use their Medisave accounts to pay for the healthcare needs of other family members. For example, the CPF already allows a family member to use his CPF Medisave savings to pay for the hospital bills of his immediate family members - in other words, spouse, children, parents and grandparents. If your family member goes to hospital, you can already use it. In addition, we also allow the use of Medisave savings of a member to pay for the MediShield insurance premiums of family members, as well as non-immediate family members, ie, siblings, cousins, aunts, etc, but on the condition that the person whom you are paying for does not have enough Medisave savings to pay for his premiums, and that is logical. But the point is that we already allow Medisave savings to be used for hospitalisation and to pay for premiums.

I suppose some would say, "What happens if the person who can help me

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conks first? He can't help me." That is something we can consider. But the reason why we have looked at Special Account or Retirement Account

is because most members have more Medisave savings than their Retirement or Special Accounts. So let us focus on this. In principle, I do not object to this. But this does not seem to be an area of focus for me at this point of time.

Mdm Halimah and Mdm Ho Geok Choo, and I think Mrs Josephine Teo, also mentioned that our CPF schemes are complex, and I agree with them. Even as the Minister, I have to, sometimes, take time over the minutiae. I have challenged the CPF Board, and they are getting better at it. I said, "Look, you understand it. I understand it after some time. Can you make it simple so that everybody understands it and there is something easy that they can click on?" So they are using cartoons. We are going on roadshows, and I have launched a roadshow recently in a shopping centre. When we go to the schools, they tailor it to the students. So we are getting better, but I think we need to ramp it up. We need to step up our communications. And we have now launched "My Retirement Account". I welcome Members to go on the website. It is a bit jazzy, it has a tropical island theme. It tells you how to go to the spa, the gymnasium - these are retirement equivalents of spa, gymnasium - how to plan. And I think we need to do more about it.

Mdm Halimah made a good point. She said even after all this change, well and good, but people do not even understand it. They do not know how to do it. So I have challenged the CPF Board instead and said, "Instead of waiting for people to come to your website for information, can you push? And if that person has met the eligibility criteria, can you send a targeted letter to him or her and say, "Look, you've crossed 1.5, we think you have settled your own retirement needs.

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Do you want to transfer some of your funds to your family members?"." That is more targeted.

Mrs Josephine Teo asked how many. About one in four, aged 40 to 55, are potential donors, and that is a substantial number. Certainly, we can do that, and I agree with Members that that is something that we want to do.

Mdm Halimah asked some other points about the Home Protection Scheme. The Home Protection Scheme, capping at 65, is not pegged to the draw-down age. It is pegged to the HDB loan scheme, that is the liability, because, currently, the term of the HDB scheme is up to the age of 65, or whichever is earlier. So we are pegging our liabilities to that. If the HDB loan moves, we are quite willing to follow it, but we are pegged to that.

Mr Liang Eng Hwa made some points and asked why there was a low take-up. I think there are some reasons. First of all, people do not know. And I think the second limiting factor was the fact that there was a cohort Minimum Sum limit which until this new Bill was in operation. Because even if you want to top up the account of somebody who was 55 years old in 1987, who is older now, you can only top up to that amount. Because of these amendments, if the House passes the Bill, it will be raised to the prevailing Minimum Sum. So that is one reason. The other reason is the fact that you can top up only specific members and, as I said, I have expanded the list of recipients.

Mr Liang asked why do we not make it less restrictive, and allow some leakage. I think, on that score, I would be a bit careful. I want to make sure that there is an equitable distribution of matrimonial assets but, at the same time, I want to preserve retirement adequacy of both members. In the current Act, it was

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skewed against the spouse. So even if the court decided on the division of matrimonial assets, and here, I move on to matrimonial assets, the court did not have, as Mdm Halimah explained it clearly, the power. I know that division of matrimonial assets in themselves can be very tricky, and I do not intend to let the CPF distort that or to even prescribe how it should be divided. What basically we are trying to do is to say that, within the CPF system, you have the liberty to decide who gets what in a divorce.

Now, there were some questions asked about how much must be put aside by the member before you can transfer. Mdm Ho was saying, and she actually believes, that the spouse or the member should still be required to set aside his own Medisave and Minimum Medisave amount. What we are now saying is that the courts can decide who gets what. And the courts can decide actually that the member puts in X amount, but they are not hamstrung by the CPF Act. When the ex-wife sells the house, how much the ex-wife must put back into the member's account is again for the courts to decide. The courts can decide, for example, in division of matrimonial assets that no refund needs to be made. Again, that is up to the courts. Basically, we are saying that as long as it is impact within the CPF system, it is okay by us, because I am neutral as to which party is more or less protected. I just want to make sure that your retirement sums are protected. And I think that is the most sensible way to approach it, and that it protects both members. Previously, the Act was skewed against the spouse or it was preferentially enacted to favour the member. What I am doing now is making it more equitable for both members because, to me, they are both CPF members. I should not be made to decide who gets what more and leave it to the courts to decide.

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Mdm Ho asked for a pointed clarification whether this was so, that, indeed, the member does not need to set aside the Medisave and Medisave Minimum Sum, and that is indeed so. This is under section 27B(6) which allows the transfer, and that particular section allows for this.

There have been some suggestions made on the SRS. I take the point that Dr Magad has been pushing for this. But this is under the Ministry of Finance and, in terms of tax reliefs, as some other Members have also said, I take that the current tax relief for $7,000 is the limit that is set by MOF. It is an annual limit. It is not a lifetime limit. So, technically, you can do $7,000 every year. Honestly, I do not think that is a restrictive clause. I do not think that is the reason why people are not topping up. I take it that there are other measures. Basically, I take that these liberalisations are adequate. But even apart from this, there will be the great satisfaction that you would have provided and sustained another family member's retirement adequacy. But, notwithstanding that, I will pass his comments to the Ministry of Finance.

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. - [Dr Ng Eng Hen].

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