CENTRAL PROVIDENT FUND (Withdrawal of voluntary contributions by self-employed facing financial difficulties)

Mr Chiam See Tong asked the Minister for Manpower whether he will allow those persons who are self-employed and have made voluntary contributions to their own Central Provident Fund (CPF) accounts to withdraw that part of their CPF comprising voluntary contributions to tide over their present financial difficulties.

The Minister for Manpower (Dr Lee Boon Yang): Sir, self-employed persons are not required to contribute to the CPF beyond the Medisave component. Those who wish to make additional contributions do so voluntarily. Such contributions are subject to prevailing CPF withdrawal rules.

The Government encourages the self-employed to contribute to the Central Provident Fund as they also need to save for their old age. Self-employed can claim tax relief on these contributions and enjoy a minimum guaranteed tax-free return of 2.5% per annum.

I understand the difficulties faced by some self-employed persons. However, releasing the CPF savings to meet immediate financial needs would defeat the purpose of such savings. We need to take a long term view. The most sustainable way for people in financial difficulties is to get a job to support themselves and their families. Self-employed whose businesses or trades are not doing well may want to consider taking a job for the time being. My Ministry will help the unemployed to look for new jobs.

For Singaporeans suffering financial hardship, the Ministry of Education has a scheme to help pay the educational expenses of school-going children in their families. The Ministry of Health operates the Medifund to help those who have difficulties paying their medical bills incurred at public hospitals. For the needy, whose savings are running out and who lack family support, there are also community assistance programmes administered by the Ministry of Community Development and Sports, Community Development Councils, the National Council of Social Service, self-help groups and other voluntary welfare organisations. These are part of the Government and community support available to those who are facing difficulties.

Mr Chiam See Tong (Potong Pasir): Sir, from what the Minister has said, there is, in fact, no advantage at all in putting money into one's CPF account. If a self-employed were to put his money in a bank, in times of hardship, he could go to the bank and withdraw his money. In this particular case, the person came to me and said, "I am broke. My wife wants to leave me. My children want to disown me." He is in a real financial hardship, because his business has failed.

Mr Speaker: Order. Mr Chiam, can you ask your question?

Mr Chiam See Tong: Yes. Is it possible for the CPF Board to allow him to borrow from his CPF account?

Dr Lee Boon Yang: Sir, I think it is wrong for Mr Chiam to imply that there is no benefit for a self-employed to contribute voluntarily to his CPF account. The advantages of such contribution are quite obvious. One is tax exemption on the CPF contribution. Second, the guaranteed minimum interest the CPF Board will pay. So, he cannot say that there are no advantages. There is a trade off. You get tax exemption and guaranteed minimum interest. And the trade off is that you abide by the CPF withdrawal rules.

Sir, we cannot operate a CPF system on the basis of a savings bank. If a self-employed wants to save some money and withdraw as and when he needs the money, then it is best for him, with his surplus income, to put that money in a savings bank, whether it is the POSBank or some other banks, and withdraw those savings when he needs them, rather than put it in the CPF. The CPF is a place for long-term savings for a person's old-age needs. It is not a place for you to put money aside for a few months and then take out as and when you feel that there is a greater need for those savings.

Mr Hawazi Daipi: Sir, would the Minister consider some exceptions in really extenuating circumstances? For example, some taxi drivers may not have enough savings to top up their Medisave accounts, and they can only renew their vocational taxi driver's licence if they top up their Medisave accounts. Can they borrow money from their Ordinary accounts on a temporary basis for the purpose of topping up their Medisave accounts to renew their taxi driver's licence?

Dr Lee Boon Yang: Sir, the Member has raised a totally different issue, but I will try and address it, because the contribution for Medisave account by the self-employed is mandatory. It is a requirement. They have to contribute in order to renew the vocational licence, whether he is a taxi driver or a hawker. This is to ensure that our self-employed, particularly this group of self-employed, also put aside sufficient savings to meet their old-age requirements for healthcare expenses. On top of that, if they choose to contribute voluntarily to the rest of the CPF accounts, they are welcome to do so and they enjoy the same benefits, which I have outlined to Mr Chiam a moment ago. I think we should not mix the two streams of savings. We should encourage the self-employed to continue to contribute a small amount from his trade income for his Medisave requirement. There should be no difficulty, because the contribution is actually a percentage of his trade income. It is not an arbitrary figure decided by the Central Provident Fund Board. What he contributes, whether it is 6%, 7% or 8%, is based on his trade income. If his trade income is low, his contribution rate will be equally low. It is proportional. So it is not an unreasonable request on him. It is a request which I think every self-employed should be able to comply.