CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Order for Second Reading read.

11.26 a.m.

The Minister for Labour and Welfare (Mr Lim Yew Hock): Mr Speaker, Sir, I rise to move, "That the Bill be now read a Second time."

The main purpose of the Bill which is before the House today is to enable seamen to enjoy the benefits of the Central Provident Fund Ordinance. The definition of "employee" in the present Ordinance does not include those who venture beyond territorial waters unless its interpretation is substantially strained. There is no reason why seamen should be excluded from the provisions of the Ordinance and hon. Members will note that this Bill brings seamen within its scope by amending the definition of "employee" to include a master, seaman or apprentice employee on a vessel the owners of which have a place of business in Singapore or have their agents here.

The opportunity has been taken to rectify certain defects in the present Ordinance which make administration difficult. Most of these are trivial but there are three, Sir, to which I should like to draw the attention of hon. Members.

The first is the amendment of the definition of "employee" by deleting the reference to a waiting period of three months and inserting in section 7, where it more properly belongs, a provision to the effect that the employer shall pay contributions to the Fund in respect of each employee who has worked for the employer for a period of not less than one month. The experience of the Central Provident Fund Board has been that a waiting period of three months leads to non-compliance with the Ordinance, and that unscrupulous employers keep employees for just under three months and then dismiss them. I would point out that the Federation Ordinance limits the waiting period to one month.

The second is the amendment to section 14 of the Ordinance so as to provide that on the death of a contributor the money shall be paid directly to a person or persons nominated by the contributor in his lifetime for the beneficial use of those persons, instead of, as at present, to a trustee or trustees. It has been apparent to the Central Provident Fund Board for some time that the conception of a trustee is a matter of difficulty even for the educated layman, and it is not at all understood by the generality of contributors, who mistrust the arrangement. Further, Sir, the actual recipient of the contributor's money is completely ignorant of his duties as a trustee, and although the Board does its best to advise a trustee recipient, the position is not satisfactory. There is no legal value or safeguard in the present arrangement and it is thought that the contributor should be enabled to dispose of his money to selected individuals.

The third, Sir, is the amendment of section 7A to increase the interest charged on late contributions from one-half per cent per month to one per cent per month with a minimum of one dollar. It is considered that the old rate is too low. Hon. Members will realise that late payment means a delay in investing the monies received into the Fund and the Board must be compensated realistically if the members of the Fund are not to suffer. The charge also must be high enough to cover the administrative cost of collection.

The remaining amendments are designed to improve the administration of the Fund and to remove one or two ambiguities. I shall not go into them in detail as they are explained in the Explanatory Note at the end of the Bill.

Hon. Members will note that clause 1 makes provision for the Bill to come into effect on 1st June. The main reason for this is that the Bill benefits a new class of employees - the seamen - and that it provides additional benefits to a great number of employees whose work is of a temporary nature by reducing the waiting period from three months to one month. I am sure, Sir, that this House will agree with me that there is no justification for delaying these overdue reforms. Mr Speaker, Sir, I beg to move.

Question proposed.

11.31 a.m.

Mr John Ede (Tanglin): Mr Speaker, Sir, when notice was given of the introduction of this amending Bill, the Liberal-Socialist Party expected that an injustice perpetrated by the Government in this Bill was about to be removed. Certain improvements have been made, but the one that really matters has remained untouched.

The House will remember that the Central Provident Fund Ordinance was rushed through on a Certificate of Urgency on the 29th of June, 1955, and put into operation two days later at a time when we were all new to the work of the Legislature. It was lauded to the skies by the Minister for Labour and Welfare as a great piece of social legislation. But the implication of one section remained undetected in the haste of pushing the Ordinance through all its Readings on the same day without the public having a chance to consider it, and the iniquity of it has only come to light in recent months. Indeed, it is even doubtful whether it can stand the interpretation put upon it by the Central Provident Fund Board, but in failing to amend it, the Government has given full backing to this iniquity. Or rather, I should say that there is an amendment before us but acting against the interests of the contributors. I refer to section 11(2) of the principal Ordinance - whether you read it there or in the amended form in clause 9 before us today. Let me read it, Sir, in the form in which it is proposed to amend it now:

"The Board shall cause to be credited to each member of the Fund the amount of every contribution paid in his respect and, immediately upon the declaration by the Board under subsection (3) of section 6 of this Ordinance of a rate of interest for the preceding year, interest at that rate on the amount standing to his credit in the Fund at the commencement of such preceding year in such manner as the Board may direct;".

That means - this is what the Government wishes it to mean - that the Board will only pay interest on the amount in the contributor's account on the 1st of January of each year, and will not pay any interest on the next 12 months' contributions. In other words, the Board has the whole of the contributions to the Provident Fund for 12 months duly invested without giving any proportion of the current year's interest to the persons to whom the money belongs. Sir, we cannot accept this position which seems to us not only unfair but contrary to the intentions of the Ordinance. It would perhaps be more convenient if I go into the implications in greater detail at the Committee stage, and so at the moment I only bring the matter to the attention of the Members of the House.

11.34 a.m.

Mr Lim Yew Hock rose-

Mr Speaker: Mr Minister, in reply?

Mr Lim Yew Hock: Yes, Sir. Mr Speaker, Sir, I am indeed amused to be told that the interpretation of the Provident Fund Board in regard to section 11(2) is an injustice perpetrated by the Government. The Central Provident Fund Board, Sir, is an independent body. It was set up under the Central Provident Fund Ordinance to operate the Ordinance and it can fully exercise the powers conferred upon it by the Ordinance. The Government does not interfere nor does it give any directions.

The hon. Member was not right when he said that this Government rushed the Bill through. I thought that the Progressive Party, which has now been embraced by the Liberal-Socialist Party, would want to claim credit for the introduction of that Bill. What the Government did in, I think, June 1955 was to amend the Schedule to the Ordinance so that any employee who draws less than $200 need not have to contribute to the Fund, whereas his employer will in duty bound be asked to donate five per cent. That was only what the Labour Front Coalition Government did.

Sir, section 11 of the Ordinance has been interpreted by the Central Provident Fund Board in such a way that clause 9 of the Bill now seeks to remove the ambiguity. Sir, I think it is wrong to say that there is any attempt at cheating the contributors. The money is a trust fund held in trust for them. Whatever money is not distributed to the contributors by way of interest will still be kept in the fund for further distribution. Sir, this matter came to light as a result of a newspaper article. It was suggested by that newspaper article what the hon. Member now seeks to amend, but it was pointed out by the Chairman of the Central Provident Fund Board that it would of course be open to the Board to direct that interest should be paid in the manner suggested in the article, and in the manner sought by the amendment. The adoption of this suggestion, Sir, would mean that after each year's end some two and a half million separate interest calculations would need to be made, as the Board is not empowered to decide the interest rate until after the end of the year. This vast calculation would be possible but at a cost in time and labour which would be out of all proportion to the amount of the interest involved. Indeed, Sir, in the long run the increased cost of administration would in fact reduce the total amount of interest available for distribution to contributors. What the Central Provident Fund Board seeks to do is to try to protect the interests of the contributors and not to spend money indiscriminately in increasing administration costs.

The Member for Tanglin, Sir, said he would have more to speak about this during the Committee stage, and I, Sir, would like to speak a little bit more too at the Committee stage when he raises the matter again.

Question put, and agreed to.

Bill accordingly read a Second time.