CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Order for Second Reading read.

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

In November last year, the Government announced a $10.5 billion package to reduce business costs. One of the measures was a 10% point reduction in the employer's CPF contribution rate. In order to assist owners of private properties who are servicing housing loans or HDB lessees paying market interest for their mortgage loans, a bridging loan was also announced. This bridging loan is a Government loan to affected homeowners to make up for the shortfall in CPF contribution due to the 10% point reduction.

The maximum amount of bridging loan released monthly will be the shortfall in the monthly loan instalment or the amount of reduction in the CPF Ordinary Account contribution, whichever is lesser. The interest charged on the bridging loan is the same as the HDB concessionary mortgage rate which in turn is computed at the prevailing CPF interest rate plus 0.1%.

The CPF (Amendment) Bill before the House today seeks to amend the Central Provident Fund Act to expand the Government's bridging loan to the borrowers' CPF Ordinary Account. In effect, the bridging loan money is subjected to the same charge as CPF savings released for property purchases under the CPF rules. It also gives the Government, through the CPF Board, the right to recover the bridging loan amount from the borrower's CPF accounts. This is the least cost approach to providing such a loan to the homeowners who would otherwise have to draw up another mortgage agreement.

The Bill also seeks to allow CPF members affected by the CPF cut to use their CPF Special Account savings to service the monthly payment of the upgrading cost incurred under the HDB Main Upgrading Programme

Sir, I will now go through the key clauses.

Clause 4 of the Bill introduces section 14(a) to provide for the Government to extend loans to CPF members under approved loan schemes. The new section allows the CPF Board to direct monies for the bridging loan from the Government into the Ordinary Account of a CPF member requiring such loans. These monies are deemed to be CPF contributions and may be used for the purpose prescribed by regulations which include financing the purchase of residential and commercial property. This new section 14(a) also provides for the member's CPF contribution to be used to repay the bridging loan and interest.

By deeming the money lent as CPF contributions, properties which have been purchased through the use of the bridging loan will, through the existing provision of the CPF Act, be subject to a statutory charge to secure the refund of those monies to the CPF accounts of the borrowers. This would allow the CPF Board, acting on behalf of the Government, to recover the bridging loan and interest directly from the borrowers' CPF accounts if they fail to repay or breach the terms and conditions of the loan.

Currently, under the CPF Act, a member may withdraw his or her CPF savings in a lump sum upon attaining the age of 55, and after setting aside the prevailing CPF Minimum Sum or if a member becomes physically or mentally incapacitated, or is found to be of unsound mind before reaching the age of 55.

Sir, arising from the introduction of a bridging loan scheme, it is necessary to ensure that any loan taken should first be paid before the CPF member can withdraw his or her savings.

Clause 6 introduces a new section 15(a) to require a CPF member who has not fully repaid his bridging loan to do so before he will be allowed to withdraw his CPF savings on the ground that he has become physically or mentally incapacitated or is found to be of unsound mind. However, a member who reaches the age of 55 will continue to be allowed to withdraw his CPF savings after setting aside the Minimum Sum even if he has not fully repaid his bridging loan. This is because the CPF Minimum Sum currently set at $55,000 is more than enough to cover the maximum bridging loan anticipated, which is about $13,000, based on a loan of $360 per month for a duration of three years.

Currently, a CPF member who has been declared a bankrupt cannot withdraw his CPF savings unless the CPF Board authorises his withdrawal with the approval of the Minister. Although a bankrupt CPF member cannot qualify for a bridging loan, there is a possibility that a CPF member may become a bankrupt after he has taken on a bridging loan. To deal with such situations, clause 6 of the Bill amends section 27 to require a bankrupt member to repay his bridging loan plus interest before he can withdraw his CPF savings.

Currently, about 1,500 CPF members are servicing their HDB flat upgrading cost with their CPF Ordinary Account savings. As announced by DPM Lee, in order to help CPF members who are affected by the CPF cut, we would allow those who have used up their CPF Ordinary Account savings to draw on their Special Account savings to meet the shortfall in their monthly housing loan repayment, subject to the amount of the cut in the CPF contribution. In line with this decision, I think it is only rational to allow those who are using their Ordinary Account savings to service the upgrading cost to also tap savings in their Special Account. This is provided for by clause 7 which amends the CPF Act to allow CPF members to use their CPF Special Account savings for monthly payment of their share of upgrading cost under the HDB Main Upgrading Programme.

However, this amount of the Special Account savings which can be used will be capped at the amount of the shortfall arising from the CPF cut to the Ordinary Account contribution. I would like to stress at this juncture that this is not a permanent feature, in other words, allowing the Special Account savings to be used either for servicing housing loans or for paying their share of the upgrading cost. This is a temporary arrangement because once the economy recovers and we start to restore the CPF contribution rate, the existing rule where only CPF Ordinary Account savings can be used for upgrading works or servicing housing loan will apply.

Sir, currently, the CPF Act provides for the General Manager of the Board and Board members to sign legal documents which require the CPF Board's seal. Such legal documents could be deeds of arrangement and deeds of postponement which set out the distribution of sales proceeds of the property between the CPF Board and the mortgagee financier under the CPF Property Scheme. This arrangement had resulted at times in inconvenience when the General Manager and Board members were not present in Singapore. Clause 2 of the Bill therefore amends the CPF Act to enable any Deputy General Manager of the CPF Board to sign legal documents which require the Board's seal in addition to the General Manager and Board members.

Sir, in conclusion, the amendments proposed in the Bill will ensure that the bridging loan money extended by the Government to CPF members is protected. The amendment will allow members who are using their CPF Ordinary Account savings for the upgrading cost of their HDB flats under the Main Upgrading Programme to use their Special Account savings to meet the shortfall in their monthly instalment payment.

Lastly, the amendment will also enable the Board to be more efficient in its administration.

Sir, I beg to move.

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.