CENTRAL PROVIDENT FUND (Rate of contribution)

[Mr Speaker in the Chair]

Mr Ang Nam Piau asked the Minister for Labour whether Singapore needs such a high rate of Central Provident Fund contribution and if he will consider lowering the rate of contribution for wage earners when they reach the age of, say, 40 years and 50 years.

The Minister for Labour (Mr Ong Pang Boon): Mr Speaker, Sir, whether the current rate of CPF contribution is adequate or excessive depends on the social security purposes CPF savings are made to serve. The primary purpose of CPF savings is to provide for members' old age. They are also an easy source of funding for the large number of members who use it to purchase flats and houses under the approved housing schemes. Further, in the future, there may be other social security needs, such as the two insurance schemes I mentioned in Parliament last week, to which CPF contributions will be put to use. If these social security needs are to be met, CPF contributions have to be maintained at current level.

As to the lowering of the rate of contribution for those above 40 years of age, I would like to mention that their social security needs are the same as those of younger age. Many of them are still using a substantial portion of their CPF contributions to meet the monthly payments for their flats and houses. Further, CPF records show that at the end of 1979 the average balance of members in the age group between 40 and 45 years who used their CPF savings to purchase flats or houses was about $10,500. The corresponding figure for those between 50 and 55 years was $12,000. With life expectancy increasing to 65 years for males and 70 years for females, workers need to save more to tide over a longer period of retirement. Unless sufficient savings are accumulated by maintaining the current level of contributions for those above 40 years, workers' standard of living in retirement will be considerably lowered.