CPF MINIMUM SUM SCHEME (Particulars)

Mr Charles Chong asked the Minister for Labour (a) how many Central Provident Fund members have set aside the minimum sum on reaching the age of 55 years since the inception of the Minimum Sum Scheme in January 1987; and (b) what action will he take to safeguard the value of the minimum sum of $30,000 from erosion by inflation.

The Minister for Labour (Mr Lee Yock Suan): Mr Speaker, Sir, the Minimum Sum Scheme was implemented on 1st January 1987. As at 31st January 1989, a total of 8,427 CPF members have set aside the minimum sum in cash when they applied to withdraw their CPF savings upon reaching 55 years of age. Of these, 344 have deposited their minimum sums with approved banks, 557 have bought annuities and the rest have left their mini- mum sums with the CPF Board. Another 8,700 members have pledged their minimum sums in the form of properties.

Members may recall that when I announced the Minimum Sum Scheme in 1986, I informed the House that the minimum sum of $30,000 would be reviewed periodically to ensure that its real value is retained.

Over the past two years, the Consumer Price Index has risen by about 3%. To maintain the real value of the minimum sum of $30,000 at 1986 prices, it has to be increased by 3% to $30,900. The increase will take effect from 1st April 1989. CPF members who reach 55 years of age on or after that date will, therefore, be required to set aside $30,900 instead of $30,000. Those who own properties can pledge their properties in lieu of setting aside the minimum sum.

The amount that members can withdraw monthly from the minimum sum from the age of 60 will correspondingly be raised from $230 to $237 per month, an increase also of 3%. This higher withdrawal amount will come into effect from 1st April 1994 when the cohort of CPF members who reach age 55 on 1st April 1989 reach age 60 and withdraw their first monthly instalment. Those who join the Scheme before 1st April 1989 will draw down their minimum sums at the rate of $230 per month when they reach 60 until 1st April 1994, when the instalment will similarly be increased to $237 per month.

These withdrawal rates will apply to the minimum sums left with the CPF Board or deposited with approved banks. For those who have used their minimum sums to purchase approved annuities, the monthly instalments will be according to the terms of their annuity plans.

For a married couple who are both CPF members, the minimum sum will likewise be raised from $45,000 to $46,400 and the monthly withdrawal amount from $345 to $355 per month.

The new minimum sum of $30,900 from 1st April 1989 will also apply to the Approved Investments Scheme. CPF members must therefore have at least that sum in their CPF accounts or in the form of properties before they can invest part of the CPF balance in trustee shares or gold.

Henceforth, the minimum sum will be similarly adjusted every one to two years to preserve its real value. It is expected that such adjustments will be small. The public will be informed through the mass media.