CENTRAL PROVIDENT FUND CONTRIBUTION (Reduction and servicing of housing loan instalments)

Mr Shriniwas Rai asked the Minister for Manpower if he will give assurance that there will be no reduction in Central Provident Fund contribution during this financial year ending 31st March 1999.

Mr Chiam See Tong asked the Minister for Manpower whether he will elaborate on the measures that the Government will take to ease the financial burden of the workers when the employer's CPF contribution rate is cut.

Dr Lee Tsao Yuan asked the Minister for Manpower how many Central Provident Fund Board members are currently withdrawing funds to service monthly housing loan instalments and of these, how many are currently withdrawing funds up to the maximum allowable.

Mr S Iswaran asked the Minister for Manpower how many Central Provident Fund (CPF) account holders will need to seek other sources of funds to service their home mortgage loans when there is a 5% or 10% reduction in the employer's contribution to CPF.

Dr Lee Boon Yang: Sir, Question Nos. 11, 12, 13 and 14 are on the same subject. May I have your permission to take them together?

Mr Speaker: Yes.

Dr Lee Boon Yang: Mr Speaker, Sir, as at the end of May 1998, 524,006 active CPF members are withdrawing CPF savings to service monthly housing loan instalments. Of these, 101,914 CPF members (or 19.4%) are withdrawing the full amount of their monthly contributions to service mortgage repayments.

I have previously stated that the Government has no intention to cut the employer's share of CPF contributions this year. I would like to reassure hon. Members that this is still the position. However, if the situation continues to worsen next year, we may have to consider a reduction in the employer's CPF contribution rate.

The number of people who have to seek alternative source of funds to service their mortgage loans is not just dependent on the size of the CPF reduction. It is also related to the amount of savings that the CPF member already has in his or her ordinary account. Some of these savings can be used to supplement the monthly contributions to meet the mortgage repayment. Furthermore, the distribution of a CPF cut amongst the Ordinary, Special and Medisave Accounts will also have an impact on mortgage servicing by CPF members. These are issues which will be carefully studied when it is necessary to make a CPF cut.

When CPF contributions were cut in 1986, several assistance schemes were made available by the Government, in particular, to help home-owners with their mortgage repayments. For those with HDB housing loans, HDB extended the loan repayment period and allowed conversion of the loans to easy-payment schemes such as the ballooning scheme. Those with no income or had used up their CPF balances could also apply to defer payments for up to a year. The Government also offered bridging loans to those with private housing loans to service. These were given at a special rate of 0.1% above the CPF interest rate. Home-owners who took bridging loans could repay either in cash or through their future CPF contributions over 10 years. Similar assistance will be considered if we need to make a CPF cut.

Mr Shriniwas Rai: Mr Speaker, Sir, could the Minister tell the House how many CPF members have sufficient funds to service their mortgage repayments if there is a CPF cut in the near future?

Dr Lee Boon Yang: Mr Speaker, Sir, as I explained in my answer, that would depend on how much we have to cut. It will also depend on how much savings the individual CPF member has in his Ordinary Account, and it also depends on how we spread the cut on the different accounts. CPF members would, of course, know that whatever savings they have in their Special Account could not be used for any other purpose. If, in fact, it is a crisis situation and we have to make a change, we could even consider allowing some of them to use part of their Special Account savings. These are all questions that have got to be carefully considered when we come to the point of considering such a move. I think it is premature at this stage for me to give Members figures of how many people will be affected because there are so many imponderables here.

Mr Shriniwas Rai: I am obliged to the Minister, Sir.

Dr Lee Tsao Yuan: Notwithstanding what the Minister said in his last statement, could he give us the figures for those who have withdrawn up to 90% and 95% of the full amount respectively, so that we can get an idea that if, let us say, the CPF is cut by 5% or 10%, how many will be affected? Because the Minister did say that 19.4% are withdrawing up to the full amount.

Dr Lee Boon Yang: Sir, as I stated in my answer, 101,914 CPF members are withdrawing the full amount. I do not have the figures of people who are withdrawing 95% or 90%. And as I said, even if we have the figures, it would still not reflect the actual scale of difficulties faced by CPF members because the cut can be spread in a number of ways, depending on the actual circumstances. And how they will be affected is also linked, as I said earlier on, to how much existing savings they have in their Ordinary Accounts.