CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Order for Second Reading read. 2.08 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."

In March this year, I informed the House that the CPF Minimum Sum Scheme will be revised so as to better prepare CPF members for a longer retirement period. The Bill before the House seeks, among other things, to amend the CPF Act to effect the changes to the Minimum Sum Scheme.

Under the Act, CPF members who continue working after reaching 55 may make lump sum withdrawals of CPF savings, made after 55, at 3-year intervals. Clause 4 of the Bill amends the Act to require CPF members who are unable to set aside the full Minimum Sum at age 55 to top up their Minimum Sum before they are allowed to withdraw lump-sum any CPF contributions made after the age of 55. Nevertheless, such members will always be able to withdraw at least half of their cash savings accumulated during the 3-year period. In other words, every CPF member who continues working after the age of 55 will always be able to withdraw some cash amount three years after they have reached the age of 55, ie, at the age of 58, even if they are not able to meet the full Minimum Sum requirement. It also requires a CPF member and his spouse who wish to jointly set aside 1(r) times the Minimum Sum to irrevocably nominate each other to be the beneficiary of their Minimum Sum. This provision will ensure that the surviving CPF member will not end up having less than the full Minimum Sum when the spouse dies.

Mr Speaker, Sir, clause 4 also allows the Minister to raise the age at which withdrawal of the monthly amount commences to correspond with the prevailing retirement age. The present retirement age is 60 introduced since July 1993. This will be gradually raised to 67 over the next 10 years. Pegging the monthly withdrawal age to the prevailing retirement age is necessary in order to ensure that the Minimum Sum can last the duration of a CPF member's retirement. Also included in the clause is a provision to allow CPF members who have not attained the prevailing retirement age to begin withdrawing from their Minimum Sum if they are physically or mentally incapacitated from ever continuing in any employment.

Sir, during the Budget debate in March this year, I informed the House that my Ministry will study the implications of allowing CPF members to use their CPF savings to top up their spouses' Minimum Sum. I am pleased to inform the House that the Ministry has since concluded its review and decided that this should be allowed just as we already allow CPF members to use their CPF savings to top up their parents' Minimum Sum requirement. Clauses 5 and 6 amend the Act to provide for this. The provision will help spouses with low or no CPF savings to set aside a minimum sum for their retirement.

Sir, the other clauses of the Bill contain amendments that are not related to the revised Minimum Sum Scheme. I shall highlight the more significant ones.

The amendments in clauses 7 and 8 have the effect of raising the upper age limit from the present 55 to 60 years for CPF members covered under the Home Protection Insurance Scheme. The upper age limit was set at 55 as it was then the common retirement age. However, as we have legislated that the retirement age should be set at 60 now, it would be logical to raise the age limit to 60.

Clause 9 amends the Act to similarly raise the upper age limit of the Dependants' Protection Insurance Scheme from the present 55 to 60 years. It also sets 16 years as the lower age limit of the Scheme as it is not the intention of the Scheme to cover young persons who have no dependants.

The changes to the Home Protection Insurance Scheme and the Dependants' Protection Insurance Scheme will require payment of additional premiums. However, the additional period of protection for the families and dependants of CPF members will be well worth the premium increases.

Sir, clauses 3 and 11 of the Bill amend the Act to allow CPF members to use their Medisave to pay premiums of a medical insurance approved by the Minister for Health. One such insurance scheme will be the IncomeShield. The intention is to allow CPF members to use their Medisave to pay premiums for IncomeShield insurance cover commencing from 1st July 1994. 1st July 1994 is also the date of implementation of MediShield Plus. Hence, these clauses shall be deemed to have come into operation retrospectively from that date, as provided in clause 1 of this Bill. This will allow regulations made under the enabling provisions of these clauses to be brought into effect retrospectively from 1st July 1994.

Sir, I beg to move.

Question proposed.

Encik Othman bin Haron Eusofe (Marine Parade GRC): Sir, I rise in support of the Bill.

On the amendment to section 18 of the Central Provident Fund Act, I am happy to note that the Minister has accepted the suggestion made by one of the members of the Labour GPC, Mr Chng Hee Kok, during the debate on the Minimum Sum for the extension of the existing provision to cover spouses. Sir, I hope that the Minister will now take up with the Minister for Finance for cash top-up of spouses' account to be granted tax exempt status.

Sir, I am also happy to note that section 30(5) of the Act will be amended to raise the age for members eligible to join the Home Protection Insurance Scheme to 60 years or above.

Sir, similarly for the Dependants' Protection Insurance Scheme, the amendment to paragraph (a) of section 42(2) of the main Act. Here, Sir, I would like to ask the Minister for a clarification whether the age will be raised subsequently to keep pace with the raising of the retirement age in the future.

Sir, I would like to ask another clarification on clause 5 of the Amendment Bill. I would like to know whether there will be any limits imposed on the amount which can be transferred to the parent's or spouse's account, especially if the member has adequate funds to cover his own needs.

Sir, finally, on the Home Protection Insurance Scheme, I would like to ask the Minister whether he would consider extending the scheme to cover mortgages of private properties, ie, loans taken from sources other than the housing authority as defined in the principal Act. Sir, if it is felt that the mortgages of these properties may be too high, perhaps a limit could be set for a start, say, an amount not exceeding $300,000.

Dr Kanwaljit Soin (Nominated Member): Sir, I congratulate the Minister for proposing the amendment to section 15 by introducing subsection (6A) which requires that if a joint account of a Minimum Sum is set up by a husband and wife, the CPF Board will permit that sum to be reduced to 1 1/2 times the Minimum Sum if they each execute a memorandum under section 26(1) nominating each other to receive the amount of the Minimum Sum belonging to either party on the death of the other party. I would urge the Minister not to stop here but to go one step further.

I would like to propose that in all cases where a CPF member is married, he or she should be required to execute a memorandum under section 26(1) nominating the other spouse to receive the amount of the Minimum Sum belonging to the party on the death of that party. The procedure should be the same, whether only the husband or the wife or both parties are members of the Board, and whether or not there are one or two accounts for the Minimum Sum, or whether there is a joint account. In each case, the CPF member should be required to execute a memorandum nominating the spouse as the beneficiary of the Minimum Sum. If a member dies before the age of 55, the whole of the CPF account can go to his or her nominee, as the situation is at present.

What I am suggesting is that after withdrawing the CPF account at 55 years of age, the law should step in to make sure that the entitlement to the Minimum Sum after the member's death should go to the remaining spouse and not to any other nominated person. This amendment would reflect the CPF member's personal responsibility towards the financial maintenance of the remaining elderly spouse. We cannot leave the responsibility of looking after the aged only on the children, but it should be shared, wherever possible, by a husband or wife who constitute a couple and have the means to do so through the Minimum Sum in the CPF account.

If we do not institute this proposed amendment, then the following scenario is possible. Let us look at an example where only the husband is working and the wife is not working for a wage. He withdraws his CPF account at 55, leaving the required Minimum Sum behind. He then unwisely spends his money on the proverbial wine, women and song, and even takes out a mortgage on his home. He then dies an untimely death, after having named the mistress as the nominee to whom the Minimum Sum in the CPF account will go to. In such a case, would it be right that we institute a law, like the proposed Maintenance of Parents Bill, requiring the children to maintain their parents if we have not even ensured the responsibility of one elderly spouse to another?

We therefore have a golden opportunity now to amend the CPF Act to ensure that the financial responsibility of looking after the elderly husband or wife is shared, wherever possible, by the couple themselves before expecting the children or the community to shoulder that responsibility. I would urge the Minister to agree to this amendment.

Dr Lee Boon Yang: Mr Speaker, Sir, first, I would like to thank Encik Othman Haron Eusofe, Chairman of the GPC for Labour, for his support. He raised the question of whether I would continue to pursue this idea of making cash top-up under the Minimum Sum Scheme by CPF members to their parents' or spouses' CPF accounts to be tax exempt. I think this is a matter that really has got to be pursued further with the Ministry of Finance and I would urge the Member to also take it up directly with the Minister for Finance.

He also asked whether there is a limit on the amount of top-up that would be allowed by a CPF member who wants to top up his spouse's Minimum Sum account. The way we allow this top-up is to ensure first that the CPF member who is proposing to make such top-up has at least twice the Minimum Sum requirement in his account that allows him to set aside his own Minimum Sum requirement and then have another half of his CPF cash balance available. He can then use his excess CPF savings to top up the Minimum Sum account for his parents or his spouse. The maximum topping up that is allowed is the difference between the prevailing Minimum Sum amount and the recipient's CPF balance at the age of 55 before any lump sum withdrawal has been made. That is the limit. In other words, you can only top up your parent's or your spouse's account to the Minimum Sum requirement.

He has also asked, under clause 9, which concerns the Dependants' Protection Insurance Scheme, whether the upper age limit for coverage under the Dependants' Protection Insurance Scheme will be raised when the retirement age is revised in the future. The answer is yes, the upper age limit for the Dependants' Protection Insurance Scheme will be raised whenever the retirement age is revised.

On the Home Protection Insurance Scheme, Encik Othman has asked whether we will consider enabling private property owners to also seek insurance coverage under the Home Protection Insurance Scheme and he suggests that maybe we set a limit to the coverage of, say, $300,000. Sir, the intention is not to allow private property owners to come under the coverage of the Home Protection Insurance Scheme. The reason is that mortgages for private property can be very high. In today's real estate market, the mortgages for private property could easily exceed a million dollars or more. And if you provide coverage even for a fixed limit, whether it is $200,000 or $300,000, you would still not satisfy the needs of the CPF members who have bought private property. You will only be partially meeting the needs of these members.

On the other hand, if you allow a full coverage under the Home Protection Insurance Scheme, you expose the scheme to risks of very hefty claim, many times more than the claims that would be made for HDB flats. This could result in the need to raise the insurance premium in order to ensure that the scheme itself is viable and can be continued to be funded in the long term. If you do that, it would be a disadvantage to many lower income owners of HDB flats. Generally, those who own private properties are professionals and others who are in the middle or upper income group and they can well afford to insure their properties with private insurance companies if they wish to.

Sir, I next turn to Dr Soin's comments. She is suggesting that we go beyond just making those who set aside 1 1/2 times the Minimum Sum amount in a joint account to make it automatic that the CPF member must nominate as beneficiary his or her surviving spouse, including those without CPF accounts. We have not done so because there are many circumstances under which this may be contrary to the wishes of the CPF member himself or herself because some CPF members may still want to leave part of their CPF savings to their parents, some may want to leave part of it to their siblings, brothers and sisters. I think it is very difficult for us to envisage all these situations and make it compulsory that as soon as you are married, all your CPF savings automatically go in full to your spouse. We would prefer to encourage CPF members, once they are married, to immediately review their nomination for beneficiary and this is what CPF routinely does in its statement of account to members by asking: Have you updated your nomination? Many people do, in fact, become CPF members before they are married. So for those who are recently married, they should take note of this advice from the CPF Board and take the necessary step, which is a very simple step, of nominating their spouse as beneficiary by just submitting another nomination form to the Board.

The other suggestion is to ensure that the Minimum Sum will go to the spouse after 55 years of age. If they are both working, then they would have to set aside 1 1/2 times of the Minimum Sum which is required by law. Of course, they could set aside separately, each one a full Minimum Sum, but, in most cases, people will opt to set aside 1 1/2 times. With this amendment, it would result in the surviving spouse receiving a minimum of the full Minimum Sum. In most cases, they may even get the 1 1/2 times. In exceptional circumstances, they would still be protected by having access to the full Minimum Sum. That is the purpose of this amendment: to ensure that every surviving spouse will have at least the full Minimum Sum and not be left without anything or less than the full Minimum Sum.

In arguing for the spouses to be automatically legislated as being the beneficiary of the spouse's CPF savings, Dr Soin mentioned about the legislation for children to maintain their parents and, therefore, we should also make it a law to require the spouse to maintain their surviving member. Here, there is a slight difference in that although the legislation, which will be discussed in this Chamber later, argues for a principle that the children will be required to maintain their parents, it is not so clear-cut because the issue still has to be settled in a court of law. The proposal by the Nominated Member is an enabling provision. It should be settled in a court of law. Whether the child should be required to pay maintenance, and how much and how often should the maintenance be given, all these have to be settled in court. The proposition is that there should be a legal basis on which the parents can make the claim.

In the case of CPF, I think it will be very difficult for us to make an exclusive legislation to say that all the deceased CPF member's savings should automatically go to the spouse. We would have to leave it to the CPF member to make the nomination for his beneficiary. We can protect the spouse, in this case, through the Minimum Sum Scheme, to ensure that there is an irrevocable nomination if they choose to benefit by setting aside less than the normal amount of the Minimum Sum. But apart from that, I think it will be extremely difficult to argue that we should insist that they set aside all their CPF savings for the needs of the surviving spouse. Because, as I said earlier on, there may well be cases where CPF members do want to leave behind part of their CPF savings for their parents or for their siblings. So it is very difficult for us to interfere in such a situation.

Dr Kanwaljit Soin: Clarification, Sir. Maybe I did not make my point clear. I was not talking about nominating for the full CPF account. On that point, I said that a member could leave the nomination as it is where a member could decide who he or she wants to nominate. I was referring only to the nomination for the Minimum Sum amount, that is, after withdrawing the amount at 55, whatever is left by law for the Minimum Sum amount, that should, by legislation, go to the elderly spouse. From what I can see, Mr Speaker, Sir, by having subsection (6A), you are protecting a couple where both of them are working, but you are not protecting a spouse who is not working. If her husband is working and she is not working, she does not have an account and the one-and-a-half times do not apply to her. And she, in that case, may be left high and dry if that Minimum Sum does not go to her.

I am not arguing about the rest of the CPF account which can be left to siblings or parents. I am only requesting for that amount in the Minimum Sum which by that time both spouses will be elderly. They will be just around 50. If the man is 55, the woman will be around 50 as well. So that is what I am urging the Minister to look into.

Dr Lee Boon Yang: Mr Speaker, Sir, under that scenario, I think, in most cases, elderly CPF members would have nominated their non-working spouses to be the beneficiary of whatever residual CPF savings that they have. I do not think there is a need at this juncture to make this a compulsory requirement. What we can do, as I have said earlier on, is to continue to remind CPF members that if there has been a change in marital status, they must always update their nomination forms. Because, in fact, many people, before they were married, do nominate their parents or siblings as beneficiaries of their CPF savings. But once they are married, we constantly remind them that this is the time for them to amend their nomination and to register that they now want to nominate the wife. And if it is the case, then, for most CPF members, they will have no difficulty in ensuring that the residual amount of CPF savings in their Minimum Sum account goes to the surviving spouse.

I do not think there is a need to make this a requirement in legislation.

Dr Kanwaljit Soin: Would the Minister tell me what would be the disadvantage? Because we are just making sure that the elderly spouse does not then become a burden on the community. What would be the disadvantage of making sure that the man who is working outside the home is looking after the wife who has stayed at home and has not worked and does not have even the Minimum Sum to cover her?

I would think that this is in their ethos, responsibility for your family members, and not trying to be a burden on the state. I would urge the Minister that this would be something that is worth looking into.

Dr Lee Boon Yang: Mr Speaker, Sir, while there may not be an immediate disadvantage, I think we should be careful about imposing such a rigid requirement on all CPF members. It may be advantageous from the Nominated Member's point of view. But we should not jump to the conclusion that that is something that ought to be done immediately. As I said, there is nothing existing in law to stop CPF members, particularly older CPF members, from nominating their spouse as recipient of the CPF savings or the Minimum Sum amount. There is nothing to stop it and the CPF Board constantly reminds members about their obligations to update their nomination of beneficiaries. So we should leave it at that at this juncture.

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.