CENTRAL PROVIDENT FUND (Use of contributions for purchase of privately-built fists)

Mr Ang Nam Piau asked the Minister for Labour (a) what is the rationale of raising the Central Provident Fund contribution rate from 15 per cent to 15 1/2 per cent; (b) whether there will be any further increase in CPF contribution; (c) what is the reason for not allowing CPF members to use the additional 1 per cent CPF contribution to buy publicly-built flats; and (d) whether the Government will consider revising the present policy by allowing CPF members to use their savings to buy flats and houses built by the private sector for their own occupation.

The Minister of State for Labour (Mr Sia Kah Hui) (for the Minister for Labour): Mr Speaker, Sir, the basic objective of the Central Provident Fund is to provide workers with savings for their old age or in the event of their being permanently disabled. Although the amount withdrawn by members of the Fund on reaching the age of 55 has on the average been increasing steadily over the years, the position is still unsatisfactory.

As at 31st December, 1976, 481,788 persons or 70.8% of the members of the Fund who were actively contributing at that time have balances less than $5,000. These members have a total balance of $873.85 million giving an average of only $1,814 per member. The low balance is attributed mainly to the use of such savings for the purchase of publicly-built flats. Under the existing legislation, members are permitted to use the whole amount standing to their credit for the purchase of publicly-built flats and also the whole of their monthly contributions for the payment of instalments towards the purchase of the flats.

To ensure that members have sufficient savings left after providing for housing, the rate of contribution has to be increased and the amount of such savings that can be allowed to be used for the purchase of publicly-built flats has therefore to be restricted.

With regard to the second question, the hon. Member for Thomson would recall that at the Parliament sitting on 27th May, 1977, [col. 38] the Minister for Finance had indicated that the appropriate rate of contribution at any given time must depend on all circumstances, including the state of the economy, at that time. If any variation in the rate is deemed justifiable, Government will give consideration to the arguments for such variation.

With regard to the last question, I have to report that the policy of not allowing CPF members to use their savings to buy flats and houses built by the private sector will stand. Privately-built properties are profit-oriented and subject to market forces and speculation. CPF savings of workers should not be used to buy flats and houses sold at prices which are considerably higher than their real value. The use of CPF savings for the purchase of publicly-built flats for the middle and lower income groups already go a long way to assist the great majority in purchasing a flat. There are therefore no good reasons at this point of time why CPF savings should be used to purchase privately-built properties.