REDUNDANCY PAYMENTS FUND (DISSOLUTION) BILL

Order for Second Reading read.

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

The Bill seeks to dissolve the Redundancy Payments Fund (RPF).

This Fund was established in March 1968 under the Redundancy Payments Fund Act to administer the retrenchment benefits paid to employees affected by the withdrawal of the British forces from Singapore. Under the Act, all such benefits must be paid into an account in the RPF. If the retrenched employee is a citizen, he can withdraw monthly amounts from this account until it is exhausted. However, if he is a non-citizen, his monthly payments stop when two-thirds of the original balance are exhausted. The remaining one-third is paid to him only when he leaves Singapore permanently or when he acquires Singapore citizenship.

There were originally a total of about 25,000 members in the Fund. As at the end of last year, only 556 members were left. Eighty-nine of these are citizens, of whom three are still receiving monthly payments from the Fund. The remaining 467 are non-citizens who will receive their one-third residual balances when they leave Singapore permanently or when they acquire Singapore citizenship.

Sir, with only three citizen members still receiving their monthly payments, the RPF is now practically dormant. The Government has decided to dissolve the Fund as it has outlived its purpose.

As at the end of last year, the Fund has a balance of $4.4 million, of which $1.1 million belongs to the existing 556 members, while the remaining amount is surplus. The surplus came about because investments of the Fund between 1968 and 1986 were earning higher returns than the interest rate of 5.25% per annum paid to members in accordance with the Act.

Government has decided that the citizen members be paid their balances in full before dissolution of the Fund. This is provided for in clause 4 of the Bill.

As for the non-citizen members, they are provided for in clause 5 of the Bill. Non-citizen members who are already residing abroad, or about to leave Singapore permanently, will be given a final opportunity to withdraw the balance due to them. If they fail to do so, the balance will be transferred to their Medisave accounts. The clause also provides for the balances of non-citizen members, who reside in Singapore, to be transferred to their Medisave accounts.

Sir, clause 9 of the Bill provides for the transfer of the remaining balances in the RPF, including accumulated surplus, to the Workers' Fund established under the Workmen's Compensation Act. Amongst other uses, the Workers' Fund provides financial assistance to injured workers who have failed to secure workmen's compensation.

Finally, Sir, clause 11 of the Bill seeks to repeal the RPF Act.

Sir, I beg to move.

Question proposed.

Encik Othman bin Haron Eusofe (Marine Parade GRC): Mr Speaker, Sir, I want to seek a clarification from the Minister regarding the moneys in the Redundancy Fund. As I see it, the moneys in the Fund belong to the members. And if this is correct, should not the surpluses in the Fund be distributed to the members or credited to their Medisave accounts, instead of being transferred to the Workers' Fund, as provided for in clause 9 of the Bill? Could the Minister explain, please?

Dr Lee Boon Yang: Mr Speaker, Sir, the question is whether the surpluses in the RPF should be distributed to the existing members.

Sir, as I said earlier on, the surplus came about because over the years the rate of return earned from investment of the Fund was consistently higher than the interest rate of 5.25% provided for under the Redundancy Payments Fund Act. Most of the investments were in the form of government bonds. In 1968 when Government fixed the interest rate of 5.25%, the prevailing interest rate ranged from 5.5% to 6%. All the payments from the RPF were also exempted from income tax. Therefore, the 5.25% guaranteed under the Redundancy Payments Fund was significantly better than the prevailing interest rate in 1968. Furthermore, the Government also undertook to pay this amount of interest even if the revenue from the principal in the Fund amounted to less than 5.25%. So the 5.25% is a guaranteed return on the money held in trust for the members of the Fund. Hence, all members have been adequately compensated and transfer of the surplus to the Workers' Fund is fair and equitable. Furthermore, the Workers' Fund will be available to help the workers who have been unsuccessful, for a variety of reasons, in their claims for workmen's compensation.

Mr Chiam See Tong: I believe Members would like to know the amount in the Fund, the number of members and, in the case where a member cannot be traced,because this Fund first came into being 24 years ago, what happens to the unclaimed funds?

Dr Lee Boon Yang: Mr Speaker, I did say earlier on that, at the end of last year, there were only 556 members left in the Fund, and for any unclaimed funds, the administrator of the Redundancy Payments Fund will mount a special exercise to locate and to pay all the members the amount that is due to them. If the member has passed away in the meantime, then the money will be paid to the nominees. However, if the member has no nominees, or he is not traceable, the money that is standing in his account will be transferred to the Public Trustees to be disposed of in accordance with the law.

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. - [Dr Lee Boon Yang].

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