CENTRAL PROVIDENT FUND (AMENDMENT) 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."

Under the current Central Provident Fund Act, the Government may credit a cash grant only to the Ordinary Account of a CPF member. Sir, the Prime Minister has, during the Parliament sitting of 7th July 1995, announced the Pre-Medisave Top-Up Scheme for all Singapore citizens aged 61 and above on 1st of April 1995. The intention of this scheme is for the Government to make grants ranging from $300 to $1,050 to older Singaporeans who retired before or soon after the CPF Medisave Scheme was announced in April 1984. This will help older Singaporeans build up their Medisave savings to meet increased medical expenditure in old age. It is, therefore, necessary to amend the Act to allow cash grants to be paid directly to the Medisave Account. Clause 2 of the Bill seeks to do this by allowing cash grants to be credited to any CPF account as the Minister may direct.

Sir, the existing section 14(2) of the CPF Act provides that cash grants may only be withdrawn if it is explicitly provided for under regulations made under section 77. However, not all CPF withdrawal regulations are made under this section. For instance, regulations on MediShield are made under section 57. Thus, cash grants paid by the Government under the Pre-Medisave Top-Up Scheme cannot be withdrawn for MediShield under regulations made under section 57. To rectify this, clause 2 of the Bill amends section 14(2) to allow any cash grant to be withdrawn in accordance with provisions of the Act or any regulations made under the Act.

Mr Speaker, Sir, under the Revised Minimum Sum Scheme, CPF members who do not have sufficient CPF savings to set aside the full Minimum Sum at age 55 are required to top up the shortfall with future CPF contributions. They do so when they subsequently apply for withdrawal on or after every third anniversary. Clause 3 of the Bill introduces section 18A to allow CPF members to transfer their Ordinary Account savings to top up their Retirement Accounts at any time after age 55. Members will recall that the Minister for Finance had approved the payment of an additional 1.25% interest above the normal CPF interest for savings in the Special Account. This was implemented on 1st July 1995. Clause 3 of the Bill will enable members to take advantage of the higher interest rate payable on savings in the Retirement Account, thus further enhancing their old-age savings.

Sir, about 1.4 million CPF members had bought Singapore Telecom (ST) A' shares with their CPF savings under the national share ownership scheme. Of these, about one million of them did not buy any other shares with their CPF savings. Other than the ST A' shares, many older CPF members may possess no other shares. Existing CPF nomination rules cover only the distribution of cash savings in the CPF account of a deceased CPF member, and not shares bought with CPF savings. As a result, such shares belonging to a deceased CPF member will be disposed of as the estate of the deceased. This estate will be distributed in accordance with the will of the deceased or, in the absence of a will, the intestate succession law. Where the ST `A' shares form the entire non-cash estate, disposing the shares by either way will be tedious and not cost-effective. This is particularly so for low-income CPF members where their families may have to incur cost and wait a long time for the shares to be distributed.

Sir, to save CPF members the trouble and cost, clause 5 of the Bill introduces a new section 26A to extend the nomination provision to cover the disposal of shares or class of shares that the Minister may designate. If any nominees are unable to receive the shares, the CPF Board will also be empowered to sell the shares and pay the nominees their proceeds.

The Government has decided that only ST A' shares and other similar shares sold by the Government under the national share ownership scheme will be designated for disposal in this way. This is because such shares had been treated differently right from the start. For instance, ST A' shares were bought only with CPF savings without requiring CPF members to meet the criteria of the CPF Basic or Enhanced Investment Schemes. CPF members also did not need to open an Investment Account to buy the shares. Furthermore, the ST `A' shares are held under a block account with the Central Depository Pte Ltd (CDP), and not in the individual names of members.

As for ST `B' shares and other securities bought with CPF savings under the CPF Investment Schemes, they will continue to be disposed of as estates of the deceased, as is the current practice.

Sir, I beg to move.

Question proposed.

Mr Low Thia Khiang: May I seek clarification from the Minister, Sir? I would like to know whether, with this Amendment Bill, Singaporeans who do not have an existing CPF account will still need to pay $50 to open an account so that they will qualify for the top-up in their Medisave account.

Dr Lee Boon Yang: Mr Speaker, Sir, if a member does not have a CPF account and he wants to qualify for the Pre-Medisave Top-Up Scheme, then the first thing he has to do is to open a CPF account. The next thing is to put in a co-payment of $50 to qualify for the top-up for that year. In other words, for the next three years, if a person wants to qualify for the annual top-up, he must pay $50 a year into his own CPF account.

Mr Low Thia Khiang: A further clarification, Sir. Is $50 a requirement under the scheme, or is it a minimum requirement to open a CPF account?

Dr Lee Boon Yang: Mr Speaker, Sir, there is no minimum requirement to open a CPF account. In fact, we are welcoming Singaporeans who do not have a CPF account to just fill up a CPF application form. They need not even have to put in any amount for a start. But if they want to qualify for all the various top-up schemes, they will have to deposit their co-payment.

Mr Chng Hee Kok: Mr Speaker, Sir, I rise to support the Bill. My only question for the Minister is: in the disposal of shares in which the prices vary from day to day, how are the interests of CPF nominees protected in the event of disposal of the shares?

Dr Lee Boon Yang: Mr Speaker, Sir, if the shares have to be disposed of by sale, which means the nominees are unable to receive the shares, for instance, when the nominee is a minor, a bankrupt, or a person of unsound mind, then the CPF Board will have to sell the shares and pay the proceeds from the sale to the nominees. They will have to take the nearest available date or the most opportune time to sell the shares regardless of the price of the shares at that point in time. The whole purpose of this amendment is to expedite the distribution of CPF assets to the member's nominees. Therefore, the sale will be made as soon as it is administratively possible.

Mr Speaker: May I remind hon. Members that this is no longer Question Time. We are debating the Bill and the rules governing the debate will have to apply.

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.