REVIEW ON USE OF CENTRAL PROVIDENT FUND (For purchase of trustee stocks)

The following question stood in the name of Mr S. Chandra Das:-

Mr S. Chandra Das: To ask the Minister for Labour whether he will review the use of Central Provident Fund for the purchase of trustee stocks.

Mr Eugene Yap Giau Cheng (Mountbatten): Question No. 1, Sir.

The Minister for Labour (Dr Lee Boon Yang): Mr Speaker, Sir, when the CPF Investment Scheme was first introduced in 1986, CPF members were generally unfamiliar with investments in the stock market. Government decided to restrict CPF investments in shares to companies which meet the criteria in the Trustees Act. The intention was to exclude non-trustee companies which are smaller and without a track record. When the Investment Scheme was liberalised in 1993, non-trustee shares were allowed subject to some limits under the Basic Investment Scheme. As for the Enhanced Investment Scheme, no restrictions were placed on non-trustee shares.

Companies which meet the trustee criteria have generally been stable. However, this cannot be taken to mean that investment in trustee stocks is guaranteed to be safe and sound. That is why CPF members are urged to exercise prudence and judgment in investing their CPF savings. By requiring CPF members to set aside their Minimum Sum and limiting them to investing 80% of the remaining balance, the CPF Board has helped to reduce members' exposure to risks in the stock market.

In January 1997, the CPF Board will merge the Basic and Enhanced Investment Schemes into a single CPF Investment Scheme. Under this Scheme, eligible members will be able to invest up to a maximum of 20% of their available savings in non-trustee stocks. This was announced on 19th March 1996 when I informed this House of the merging of the Investment Schemes.