CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Order for Second Reading read. 5.54 pm

The Minister for Labour (Mr Lee Yock Suan): Mr Speaker, Sir, I beg to move, "That the Bill be now a Second time."

Sir, the Bill seeks to amend the Central Provident Fund Act to enable the Central Provident Fund Board to establish and run the Dependants' Protection Insurance Scheme (DPIS). The Scheme will insure active CPF members against the risk of permanent incapacity or premature death before the age of 55. They will be insured for a sum of $30,000 which is equivalent to about three years' wages for the average worker. The scheme is optional. Those CPF members who do not wish to be insured under the scheme are free to opt out.

The premiums will be deducted yearly from the Ordinary and/or Special Accounts of the insured member. I will now ask the Clerk of Parliament to circulate an Annex (Cols. 111 - 112) showing the annual premium for different age groups. The annual premium will be $30 for a member below 35 years old. It will increase in four steps with age as mortality risk rises with age. For the oldest age group of 50-54, the premium will be $190. Annex (Cols. 111 - 112)

I shall now highlight the key provisions of the Bill.

Clause 4 of the Bill seeks to create a new Part IVA in the principal Act consisting of 12 sections, sections 37A to 37L, to provide for the main features of the Scheme.

Section 37B authorizes the CPF Board to establish the DPIS.

Section 37C provides for all new CPF members and all existing active CPF members (ie, those for whom a CPF contribution has been made in the six months prior to the commencement date of the scheme) to be automatically covered under the DPIS if they are citizens or permanent residents. Unless they opt out, they will be covered up to the age of 55 years. Those who opt out may subsequently apply to rejoin the scheme subject to conditions to be imposed. Members who are not automatically covered may also apply to join the Scheme.

Section 37D gives the Board the power to cancel the insurance cover of those who are already permanently incapacitated or suffering from terminal illness before joining the Scheme. Any premium paid will be refunded to their CPF accounts with interest if they have not made any false or misleading statements to the Board. This is to safeguard the interest of the vast majority of healthy CPF members. Otherwise, the DPIS will become a huge charity scheme at their expense. The DPIS is meant to insure CPF members against the risk of being afflicted with permanent incapacity or premature death in future.

As a further safeguard, section 37E requires those members who join the DPIS after its inception to sign a health declaration, and if necessary, to undergo a medical examination. However, for practical reasons, existing active CPF members will not have to do so.

Section 37F provides for the annual premium payable to be prescribed under regulations and to be deducted from the member's Ordinary and/or Special accounts. Those who have insufficient balances in their accounts to pay the full premium will be given pro-rated cover, unless they pay the balance in cash.

Section 37G provides for the establishment of a Dependants' Protection Insurance Fund into which all premiums will be paid and out of which the insurance benefits will be met. It is intended that the DPIS will be run at cost. The premium rates and the operation of DPIS will be reviewed periodically and any surplus above a minimum level will be distributed to participants of the Scheme.

Section 37I provides that if an insured member stops contributing to CPF, he will continue to be covered for three years after his last contribution provided he pays his premium.

Upon the death of the insured member, the insured sum will be paid to his nominees. For those who die without any nomination, the laws of intestacy will apply. For permanent incapacity cases, the insured sum will be paid by monthly instalments over a period not exceeding three years. This is to ensure that the incapacity is genuine and permanent. The instalments will stop if the insured member recovers from the incapacity and is able to return to work. These provisions are contained in section 37J.

Sir, as commonly found in other insurance cover, the DPIS will not cover claims arising from war or warlike operations and from persons who participate in a riot. This is provided in subsection (4)(d) of section 37J. There are, however, no such provisions under the Home Protection Insurance Scheme (HPIS). My Ministry has decided that similar provisions should also be made in the HPIS. Clause 3 of the Bill amends the Act for this purpose.

Sir, I beg to move.

Question proposed.

Mr Lim Boon Heng (Kebun Baru): Sir, I rise to support the Bill.

This scheme is wholly laudable and deserves the full support of Members of this House. We are aware that many workers are still not insured and if a CPF member should unfortunately be permanently incapacitated or pass away, then his dependants may suffer financial hardship. This is particularly so for the lower income workers because this is the group of workers who are most likely not to have taken up insurance cover for themselves and for their families. So we should thank the Minister for moving this Bill.

There are a few technical questions I would like to ask the Minister. First of all, why is the cut-off at age 55 years? Perhaps the Minister wishes to reinforce the point that the withdrawal age of CPF remains at 55 and therefore it is a convenient point to draw the cut-off age. However, we are encouraging the raising of the retirement age to 60 and beyond if it is possible. So there is a case for the cut-off age to be raised at least to 60 years. We should also take into account the fact that many Singaporeans marry late and have their children late. So when they reach the age of 55 years their children may still be in secondary school or may be in a tertiary institution. So if they should be permanently incapacitated or should pass away, then the dependants are doubly hard hit. So would the Minister consider raising the age of this scheme to 60 years, if not now, perhaps after review at a future date?

I would also like to ask the Minister whether the CPF members will be notified when they are covered by this DPIS. I think it is important for the beneficiaries to know that there is this cover so that they can claim from this scheme if they are aware that they are entitled to claim. Will it cover all the permanent residents, because we know that there are different types of permanent residents, and some of them do not carry the blue Singapore identity card. How many CPF members will benefit from this scheme as of this moment?

I would also like to ask the Minister why does the scheme continue to cover the CPF member for three years after he has stopped contributing to this scheme or to the CPF because this is a departure from the normal insurance practice.

Sir, I support the Bill.

Dr S. Vasoo (Tiong Bahru GRC): Mr Speaker, Sir, I rise to support the Bill.

The Bill, in fact, offers protection to the dependants of families from becoming destitute. Ultimately it is a form of social security through contribution by members. My concern is basically the large number of self-employed workers who may not be CPF members. I would like to know firstly, what steps will be taken to ensure that this group of self-employed workers are protected, and,secondly, whether the premiums will be the same for those self-employed workers who want to join the DPIS scheme. Thirdly, whether the Ministry will be taking various other steps to encourage particularly those lower income workers who are not CPF members to participate in the scheme?

Dr Lee Siew-Choh: Mr Speaker, Sir, I rise merely to add my small voice from the Opposition in support of this Bill, and I also congratulate the Minister for having proposed this Bill because it will help people who may become very dependent when the time comes. But my only concern is that although he says that the scheme will operating at cost, nevertheless the premium could be a bit high for certain people. I think the Minister should find ways to reduce some of the premiums if CPF members complain that the premium is a too high.

Mr Lee Yock Suan: I wish to thank all the Members who have spoken in support of the Bill. In particular I note that Dr Lee has also supported the Bill.

I wish to answer the various questions raised briefly, starting with the questions raised by Mr Lim Boon Heng. He asked why the scheme stops at age 55. There are a number of reasons for this. Firstly, most CPF members will have sufficient savings and also homes fully paid for at age 55. So there is less need for them to have an insurance scheme of this kind at the late stage in their lives. The other reason is that premiums for older members, those above 55, will be more expensive. It will be higher than the $190 per year for those between 50 and 55. So since members can withdraw their CPF at 55, they may wish to decide for themselves whether they wish to use the money for insurance or for other purposes.

As to whether we may consider raising this to age 60 in future, I suppose the door is not closed but we will have to review this periodically.

The second question is whether we will notify CPF members when they are covered by the scheme. The answer is yes. When the scheme comes into operation within a month or so, CPF Board will be sending out letters to all those active members who are covered under the scheme. Together with the letter will be an option form in case some members wish to opt out of the scheme.

As for permanent residents, the intention is to cover all the permanent residents. However, there are some permanent residents who do not have blue Singapore identity cards and we may not be able to trace them in the CPF record. So if these people do not receive the notification letters and wish to be covered, they should inform the Board and apply to come in.

The third question concerns the number who will benefit from this scheme. The number is about one million active members who will enjoy the protection against the risk of premature death or permanent incapacity. Of course, nobody wishes to come across or to meet with these calamities. But every year perhaps 1,000-2,000 members may suffer from these calamities and they will be able to draw upon the sums insured. The scheme will be most beneficial to the young widows who have relatively low savings.

The fourth question: why does the scheme continue to cover for three years after the member has stopped contributing CPF? Members stop contributing after they drop out of the job market or it could be that they have become seriously ill and too ill to work. So the thinking is that it will be unfair to stop the insurance cover just when they most need the cover. That is the reason for this feature. But if there are members who feel they do not want to have the insurance, they can inform the Board and they can opt out.

Coming to the questions from Dr Vasoo, he is mainly concerned with the self-employed workers. The intention of my Ministry is to try and bring as many of these people as possible under the CPF umbrella. So we are working on these measures. But we will allow those self-employed who want to join the scheme to come in and do so at probably the same premium rates. But we may have to require that they have a health declaration or go for a medical check up because obviously we do not want to end up with all the bad cases coming to us.

The last question is from the Non-Constitutency Member. He supports the Bill but expressed some concern about the premiums. The premiums are very low. We have tried to keep them as low as possible. For 60% of the members who are below 35 years old, they need only pay $30 per year or about $2.50 per month from their CPF. So it is really very small. For the older members the premium is higher because the risk of death increases with age. We have done it this way by different age groups to reduce the extent of cross - subsidy between the different groups. But the intention, as I have said, is to operate the scheme at cost. So if, say, after two years of operations we find that the premiums are too high, we will refund the money back to the members. They can be assured that this is the cheapest possible form of insurance that can be offered because the CPF has a machinery already in place and they can just check off all these amounts from the computer records. There is no cost involved in selling the insurance as in the case of private insurance. So it is only possible for the CPF Board to operate the scheme in this manner at cost.

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 Lee Yock Suan].

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