CENTRAL PROVIDENT FUND (AMENDMENT NO. 2) BILL

Order for Second Reading read. 4.43 p.m.

The Minister for Communications and Minister for Labour (Mr Ong Teng Cheong): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The proposed amendments to the Central Provident Fund Act are summarized in the Explanatory Statement to the Central Provident Fund (Amendment No. 2) Bill, 1981. I would like to touch on the more important amendments in the Bill.

Sir, clauses 4 and 7 provide for amendments to the Central Provident Fund Act to enable the CPF Board to implement the private residential property scheme. Members are no doubt aware that the Government proposes to allow CPF savings to be used for the purchase of private residential properties. The rationale behind this proposal is to help CPF members who are either ineligible for public housing or prefer to own a private residential property. It is also to enable CPF members to invest their CPF savings in residential properties as a hedge against inflation.

The private residential property scheme will be implemented in two phases to soften the impact of the scheme on the property market. In the first phase to be effected from 1st June 1981, CPF members will be allowed to use their CPF savings to redeem their outstanding housing loans. In the second phase, effective from 1st January 1982, CPF members will be allowed to use their CPF savings to purchase residential properties. Under both phases, the property can be for the member's own occupation or for rental.

Under section 29 (g) of the Central Provident Fund Act, the Minister may make regulations to allow CPF members to use their CPF savings to purchase a property. However, the property can only be used for the member's own occupation and the CPF savings cannot be used to discharge an outstanding housing loan. Clause 7 seeks, therefore, to enable the Minister to allow a CPF member to use his savings for a property which is not owner-occupied and to discharge an outstanding housing loan.

Sir, CPF savings are meant to provide for the old age of the CPF member. The CPF Board has, therefore, a social responsibility to ensure that CPF savings used under the private residential property scheme are returned to the CPF together with accrued interest if the CPF member sells the property which he has purchased with CPF savings before he reaches the age of 55 years. To enable the Board to discharge this responsibility, clause 4 provides for a charge in favour of the CPF Board to be created on a property in respect of which CPF savings have been used. The charge will be subject to all prior encumbrances affecting the property.

The CPF Board may not be able to recover fully the CPF savings used in cases where the property is subject to an existing mortgage. The mortgagee may exercise his power of sale to recover the outstanding loan leaving an insufficient amount to meet the CPF Board's claim. In order for the CPF Board to discharge its social responsibility, it will be seeking a first charge in cases where CPF savings are used for properties subject to an existing mortgage. The Board would obtain the consent of existing mortgagees for the Board to have the first charge. In this regard, the Board has obtained the agreement of the Association of Banks and Finance Houses Association for the Board to have the first charge provided, of course, the collateral is adequate to protect the bank's and finance company's interest. This first charge would apply to the amount of CPF savings withdrawn. The accrued interest will, however, rank pari passu with the interest of the banks and finance companies.

Another important amendment is provided in clause 3 of the Bill which seeks to shorten the waiting period for a subsequent withdrawal of CPF savings of CPF members who have made a first withdrawal on or after attaining the age of 55 years. At present, under section 11 of the Central Provident Fund Act a CPF member who is 55 years of age and above must wait for five years before withdrawing again his CPF savings. Clause 3 seeks to amend section 11 to allow such a member to make one further withdrawal on or after every third anniversary of a member's date of birth after he has attained the age of 55, i.e. at the ages of 58, 61 and so on. CPF members concerned are those who have made a first withdrawal of their CPF savings on or after the age of 55 years and are still working. There is no need for their CPF savings to be accumulated for a long period. Instead they should be allowed to make a further withdrawal of their CPF savings every three years.

Sir, the Government is concerned about frivolous job-hopping by employees. To help minimize this problem, the CPF Board has introduced a scheme which allows an employer to obtain information on a prospective employee's employment history for the last three years. Clause 5 of the Bill seeks to allow an employer who wishes to obtain such particulars to apply to the Board upon payment of a prescribed fee.

Section 4 of the Central Provident Fund Act provides for the appointment of a Chairman and six members to the Board. The six members comprise two representatives each from Government, employers and employees. This composition is adequate for the role played by the Board in the past. However, with the introduction of new responsibilities and activities such as the Private Residential Property Scheme and the Home Protection Insurance Scheme, it will be necessary to appoint to the Board additional members. Clause 2 provides for section 4 of the Act to be amended to increase the membership of the Board up to four persons and the quorum of the Board from three to five persons.

Sir, I beg to move.

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 Ong Teng Cheong].

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