CENTRAL PROVIDENT FUND (AMENDMENT NO. 2) BILL

Order for Second Reading read. 2.18 pm

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

Sir, the Bill proposes additional provisions for the collection of compulsory Medisave contributions from self-employed persons and the use of CPF savings by CPF members to pay for their share of the cost under the HDB upgrading programme. The Bill also seeks to provide for the appointment of a Deputy Chairman for the CPF Board who, in the absence of the Chairman, will carry out his duties.

Mr Speaker, Sir, as announced by the Minister for Health during the 1992 Budget Debate, self-employed persons will be required to contribute to Medisave. This will enable self-employed to provide for their hospitalisation needs. It is in the interests of the self-employed to save in anticipation of their future needs.

Sir, from 1st July 1992, all self-employed earning more than $200 per month (or $2,400 per year) were required, under section 77(1)(e) of the existing CPF Act, to contribute 3% of their earned income into their Medisave accounts. The rate of contribution will increase to 4% in January 1994 and thereafter by 1% per year until it reaches the same rate of Medisave contribution as for employees.

Sir, the new provisions to be included in the CPF Act for the collection of Medisave from the self-employed are in clauses 4, 5, 8, 9 and 11. I shall elaborate on these clauses.

Clause 4 amends section 5 of the Act to extend the investigation powers of the CPF Board's inspectors to cover the self-employed.

Clause 5 of the Bill provides for the charging of interest on late payment of CPF contribution by the self-employed. The interest charged will be credited into the Medisave account of the self-employed to make up for the loss in interest that would have accrued had he contributed his Medisave payment on time.

Clause 8(b) provides for the crediting of contributions made by the self-employed to the Medisave, Ordinary or Special Account as the Minister may direct. Sir, such contributions will initially be channelled entirely to the Medisave account. However, should the amount accumulated in the Medisave account exceed the prescribed limit (which is $15,000 currently), the excess will be channelled to the Ordinary Account, as is the practice for employees.

Sir, clause 8(c) is a new provision. At present, there is a prescribed upper limit of $15,000 for each CPF member's Medisave, and I have mentioned this earlier. Upon reaching this limit, monthly contributions are credited to his Ordinary Account. Clause 8(c) will enable such overflows into the Ordinary Account to be transferred back to the Medisave account. However, applications for such transfer are subject to approval by the Minister. This provision is intended to help those CPF members who have exhausted their Medisave savings after reaching the prescribed limit, but continue to have large balances in their Ordinary Accounts.

Sir, many of the self-employed require licensing by the various authorities to carry out their trade or business or to practise their profession or vocation. To ensure that such self-employed persons do contribute to Medisave, clause 9 of the Bill gives the licensing authorities the power to impose contribution to Medisave by the self-employed as a condition for the granting or renewal of any licence, certificate or permit. In practice, the licensing authorities will require the self-employed to show proof of their Medisave contributions before licences are issued or renewed.

Clause 11(a) of the Bill empowers the Minister to make regulations to provide for the appointment of agents for the assessment, collection and recovery of CPF contributions. For instance, the Inland Revenue Department could be appointed under this provision to assess and, if necessary, collect CPF contributions for the self-employed as an agent of the CPF Board.

Sir, the Government is now embarking on an upgrading programme for older HDB flats. Upgrading will enhance the value of older HDB flats. It is, therefore, in the long-term interest of owners of such HDB flats to be allowed to use their CPF savings to pay for their share of the upgrading cost. Clause 11(c) of the Bill empowers the Minister to make regulations to allow CPF members to withdraw CPF savings for this purpose.

Finally, Sir, the Ministry is also taking the opportunity to amend section 11 of the Act to strengthen the existing financial and auditing provisions as requested by the Auditor-General. These new provisions, as well as the existing ones, are in the new Second Schedule created under clause 7 of the Bill. Sir, HDB, URA and TAS have similar provisions in their Acts.

Sir, I beg to move.

Question proposed.

Mr Goh Chee Wee (Boon Lay): Mr Speaker, Sir, I support the Bill.

It is well-intentioned. It provides for the self-employed persons to open and to contribute to their Medisave accounts. It also allows the use of CPF for the upgrading of HDB flats. I have spoken to a number of self-employed persons - the hawkers, taxi drivers and shopkeepers. Their response to the Medisave scheme for the self-employed has been positive. Generally, they appreciate the need to put aside some money while they are still fit and healthy, and the need to save to pay for the medical bills and to meet the unforeseen emergencies is all the more pressing with rising medical cost.

As regards the scheme to allow HDB owners to use their CPF for upgrading work, this is welcomed by the flat owners. But I have a question to ask the Minister. The HDB flats which are to be upgraded are generally the older ones. Invariably, the residents who live in those flats tend to be our older citizens. Some may still have their children staying with them but there are those whose children have already been married and moved out. So some of these older residents may have difficulty paying for the upgrading work. They may not have CPF accounts, or may not have sufficient balance in their accounts. I would like to know if the Government would allow such flat owners to use the CPF savings of their children to help pay for the upgrading work, if their children are willing to help. After all, there is already a CPF Topping-Up Scheme in place, which allows the children of the CPF account holders to top up their parents' CPF retirement accounts.

Sir, I would appreciate the Minister's response to this suggestion.

Mr Chiam See Tong: Sir, the original purpose of the CPF scheme is for the workers to accumulate a sum of money as security for their old age. Later on, the Government imposed such high rates that each worker has accumulated fairly large savings which are more than enough as a nest-egg for their old age. So the Government amended the CPF Act and the workers are allowed to use their CPF for various purposes other than the original intention of the CPF, such as buying of HDB flats, private houses and commercial properties, and also to invest in shares and gold.

Today, we have before the House this amendment which will stray from the original purpose in which the CPF was set up. A person is now asked to contribute not for his old age but as a form of medical insurance. Is the Government not straying from its original purpose? Having set a precedent today, then what is there to stop the Government from using the CPF for purposes other than as a security for old age?

Dr Lee Boon Yang: Mr Speaker, Sir, I wish to thank Mr Goh Chee Wee, Chairman of the GPC for Labour, for his support on the extension of the Medisave scheme to the self-employed. He asked whether a CPF member would be allowed to use his CPF saving to pay for the owner's share of the upgrading cost for his parent's flat. Mr Goh mentioned that there is already a Topping-Up Scheme for the children to top up their parents' CPF accounts. I would like to point out that the Topping-Up Scheme is only for the purpose of establishing the minimum sum for their parents' accounts. In other words, at the point of retirement, if their parents do not have sufficient balances in their CPF accounts to maintain a minimum sum, the children can use their CPF savings or cash to top up their parents' CPF accounts to the minimum sum level. In most cases, the parents are already owners of HDB flats and therefore they would be able to meet the Minimum Sum Scheme by pledging their HDB flats. Therefore, the Topping-Up Scheme is not applicable in this case.

As to whether we could allow members to use their CPF to top up their parents' CPF accounts to pay for their share of the upgrading cost, my feeling is that this is not necessary because the Minister for National Development, when announcing the HDB upgrading programme, also offered to assist the older home owners who lack CPF or cash savings to pay for their share of the upgrading cost. The Minister then said that the HDB will proceed with the upgrading for such people who may not have the cash or adequate CPF to pay for their share. But HDB will impose a condition that the owner must reimburse HDB when the flat is subsequently sold. In effect, HDB is saying that it is prepared to advance a second loan to the home owner to enable the owner to take part in the upgrading exercise, and that the payment of the loan would be deferred until the flat is sold. HDB will, of course, have to charge an appropriate interest on such loan. With this offer by HDB, there is no need for CPF members to use their savings to top up their parent's CPF account in order to enable them to meet their share of the upgrading cost.

Sir, Mr Chiam has said that the Government is straying from the original purpose of CPF by requiring the self-employed to contribute to Medisave. Medisave is not a new scheme. Medisave has been in existence since 1984. It is very much part and parcel of the original concept of the CPF Act to enable all wage earners, all workers, to put aside some of their income in anticipation of their future requirements, whether it is just retirement expenses, living expenses, but also to meet their future medical expenses. Therefore, extending the Medisave scheme to include the self-employed is very much in line with the objectives of the CPF scheme.

The extension of the CPF scheme for home ownership and to allow members to use their balance to invest in stocks, shares or gold is again part of the concept of allowing Singaporeans to increase their asset value. They are allowed to use their CPF savings to build up their assets, so that in future when they retire and when they are not working, they will have sufficient savings to provide them with income to meet their living expenses.

I do not think there is a need for me to answer the point about Government extending the use of CPF, because it is highly speculative. The Government has no other intention of allowing CPF to be used for purposes other than what has already been stated, which is for retirement, for housing and for medical expenses.

Mr Chiam See Tong: Sir, I just want a clarification from the Minister. In this particular amendment, self-employed persons will contribute to the CPF specifically for their hospitalisation and medical needs, and not for their old age. That is my point. Whereas other CPF members contribute, in the first place, for their old age needs, and then for other investments.

Dr Lee Boon Yang: Mr Speaker, Sir, I would like to thank Mr Chiam for raising this point. In fact, he is correct. We are only extending this contribution to the CPF by the self-employed for Medisave at this present moment. In fact, we would like to encourage all self-employed persons to contribute to the other accounts in the CPF, ie, Ordinary Account and the Special Account. I am very pleased that Mr Chiam supports this move. In due course, perhaps we can take up his suggestion and move in the direction to extend the entire CPF scheme to all self-employed persons. Anyway, at the present moment, CPF does encourage all self-employed persons to contribute to the CPF as any other employee. It is voluntary. And in order to encourage them, CPF actually provides all self-employed persons who make contribution to their CPF account tax exemption on CPF contributions up to a limit of, I believe, about $12,800 a year. So this is a gesture to ensure that the self-employed are not left out of the CPF scheme and they are also able to save from their current income to put aside money which they will need for their old age.

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.