ADJOURNMENT MOTION

Mr Lee Hsien Loong: Mr Speaker, Sir, I understand that some Members would like to debate my Statement and in accordance with Standing Order No. 42, I beg to move,

"That Parliament do now adjourn."

Question proposed.

Mr Yeo Guat Kwang (Aljunied): Mr Speaker, Sir, the CPF changes by the ERC is arguably a set of recommendations that most significantly affect Singaporeans. This is evidently so as there are 2.9 million CPF members with balances of almost $94 billion with the Board. Changes to the CPF will fundamentally influence the way we save and the way we invest.

As a labour MP, the most common reaction I have come across in the last one week is why did the Government cut the CPF for older workers. Will the lower CPF contribution for workers aged 50-55, amounting to a saving for employers, make much of a difference in making these workers employable? I can understand their views.

The CPF is not a magic potion, or as in the Chinese saying, "wan ling dan" that "yao dao bing chu". Perhaps, this is a key problem of the image of the CPF system. It has been so successful in the past and it covers so many areas that people have come to regard it as something that can fix all problems straightaway. Not so in this case. Lowering the older workers' CPF contribution alone does not automatically make them employable. However, we believe it will certainly make it more attractive for employers to retain and hire them. We have to view this from a broader perspective. It is part of the many schemes that the Government is putting in place to help older workers stay employable.

Besides the proposed CPF adjustments, there are many schemes to help enhance the employability of older workers. For example, older workers get higher levels of funding support under the Skills Redevelopment Programme. I am happy that DPM has announced the People-for-Job Traineeship Programme launched by the Ministry of Manpower last year will be extended for one more year to help older workers and workers above 40 years old to make career transitions by providing wage support. I am also very happy that the Government is now also extending this support from six months to nine months for workers who are aged 50 and above.

Sir, in some respects, we should look at the CPF changes as a catalyst as we restructure the Singapore economy. The key task of the ERC must not be lost in our debate. The CPF recommendations cannot be seen in isolation. In my view, the CPF changes will spur greater labour market reforms and increase wage flexibility. These will make Singapore more attractive for investment. Thus, more jobs can then be created.

But I strongly urge employers not to treat the CPF changes as just a wage cut or cost-saving exercise. They cannot and must not implement the changes in a blanket manner. I am glad that the Government, as an employer, has decided to take the lead. For deserving workers above 50 years old who face the CPF cut, employers in the private sector can also plough back the CPF savings in monthly variable components (MVC) or bonus (AVC).

I am glad that the ERC proposed that the monthly income floor range for employees' CPF contributions also be raised, from the current range of $200-$363 to $500-$750. This increases the take-home pay for workers earning below $750. This will help them better meet the current needs and encourage more to take up part-time jobs, and also encourage workers to enter the workforce again.

Sir, part-time workers are a group that deserves more attention and help. We know that employers generally do not provide benefits for part-time workers. For example, they do not get much medical or leave benefits. This should not be the case. Employers should seriously consider to pro-rate the benefits to further attract more people to take up part-time jobs with these CPF changes.

Besides the ERC recommendations, I hope the Government can consider doing more to help the lower income workers, as they work hard to earn an honest living and more can be done to help them. When the Government implements CPF top-ups or distributes New Singapore Shares in future, the older and the lower income workers must take top priority. This will make up for the reductions in their CPF as a result of the ERC recommendations.

Mr Speaker, Sir, I am encouraged that the ERC studied the issues thoroughly in its report. The key recommendations go some way in enhancing the CPF members' retirement savings, especially with the 1% increase to the Special Account. The cap on housing loans will also preserve more CPF savings for members, as otherwise they may be eroded through housing loan interest payments.

However, while the ERC has recommended that the Minimum Sum be raised beyond $80,000, it did not say what the new target should be, when it should be achieved, or what provisions should be put in place to ensure that it is met. We all know that the Minimum Sum is not enough. But what exactly will be enough? We need to let Singaporeans know so that they can work towards it. The ERC could have been clearer in this respect.

During the Committee of Supply debate, I asked the Minister for Manpower how was the Minimum Sum derived and whether it was enough. In reply, the Minister said that the Minimum Sum is literally the bare minimum. Sir, I hope the Government can give a clearer indication of what the new target should be when it considers the CPF recommendations.

Another question I would like to ask is whether we should also set regular adjustments to Medisave contributions, like the Minimum Sum, to be raised further in future. Many workers do worry that their Medisave is not enough. Let me share a feedback I received from a union leader. She told me:

"It is timely to refocus CPF and bring the focus back to retirement savings and medical. My parents had very little in their Medisave and, when they were hospitalised in recent years, they had to draw on all the children's Medisave. Fortunately, there were four of us for them to draw on. A relative of mine had all his CPF Medisave savings wiped out over a few years when his dad suffered from cancer. The old man had minimum Medisave and he has only one child."

Sir, I think we need to also ensure that people have enough savings for their medical needs in future.

In conclusion, Sir, I support the changes, but I urge the Government to continue to explore more ways to help the older and lower income workers who will see reductions in their CPF accounts. How will they meet their retirement needs? What is the level of CPF Minimum Sum which is adequate for their retirement?

Sir, employers too must do more. They cannot let the Government just carry the can. They can actually play a much more constructive role in helping their employees adjust to the changes, particularly for the older workers. To the employer, I would like to say: do not discriminate against older workers but continue to reward them fairly for their contributions. Redesign the jobs to increase productivity and employability of the older workers and attract part-timers. At the end of the day, CPF changes will introduce wage flexibility that will make companies more competitive. With the employers taking a more active role, this would mean more jobs for workers, together with all the changes recommended. Only in this way can we achieve a win-win outcome for both employers and employees.

Dr Teo Ho Pin: Mr Speaker, Sir, I rise in support of the CPF changes as proposed by the Deputy Prime Minister.

Although the changes to the CPF system are gradual, it is a step in the right direction in preparing Singaporeans for the future. Faced with global competition and an aging society, Singaporeans must adopt more prudent and longer term financial planning for their present and retirement needs.

The CPF system has benefited many Singaporeans over the years. It has helped many Singaporeans to own homes, pay part of their medical expenses, and also to have some cash savings for retirement.

With medical advancements and better healthcare, the life span of Singaporeans will increase, thus requiring more Singaporeans to plan for a longer retirement period. This, coupled with the increasing health costs, will pose an undue financial burden on retirees, if they do not have sufficient savings after retirement. Therefore, it is necessary for us to fine-tune our CPF system to help Singaporeans better cope with these changes.

Sir, I wish to highlight the impact of the proposed changes on CPF members, employers and the property market.

Impact on CPF members

The proposed increase of CPF contribution rate to the Special Account and the lowering of the CPF withdrawal limit for housing will ensure adequacy of CPF funds for retirement needs. These measures will encourage CPF members to be more prudent when purchasing property not using HDB subsidised loans. It will also indirectly provide some barriers for existing HDB homeowners to upgrade into private property. As such, future Singapore generations may encounter some difficulty to own private homes. But these measures are necessary to address the "asset rich and cash poor" situation faced by some retirees today.

The proposed increase in the contribution rate to Medisave and the devolution of MediShield to private insurers will also increase the affordability of CPF members on their healthcare expenses in future. But we need to be cautious in adopting a healthcare insurance approach, as many countries have experienced abuses of such a system resulting in drastic increases in health costs.

Impact on employers

The proposed changes have minimum impact in helping to reduce business costs in Singapore. A 4% saving in employers' CPF contribution for employees aged between 50 and 55 years old will not provide much incentive for employers to employ these workers. Instead, this group of workers will lose out 4% of their CPF savings for five years. I do not think employers will modify their salary system to specifically provide variable wage component for these workers. In fact, many of these older workers may not be in a position to bargain with their employers, thus literally losing 4% of their salary.

Sir, I would like to urge the Government to allow businesses to adopt market practices to reward their workers aged between 50 and 55. These workers should be rewarded based on their work performance. We should not cap their CPF contributions and cause the existing 110,000 workers in this age group to suffer a pay cut. We should instead make workers and employers both understand that they have to give and take, to ensure that their companies can survive and continue to provide employment. The CPF contribution should not be used as a tool to save jobs or reduce business cost.

To help older workers to remain employable, we should continue to encourage skills upgrading and provide incentives for companies to employ older workers, such as providing tax rebates.

Impact on property market

The proposed 150% limit on CPF withdrawal for housing will not have significant impact on the property market, except for HDB upgraders. The reduction of salary ceiling for CPF contribution from $6,000 to $5,000 will affect the mortgage payment plan for home buyers, especially dual income HDB families which plan to upgrade to private property. The 150% CPF withdrawal limit will also curb demand for private housing as these potential home buyers are usually in their 40s and 50s, and will not be able to secure a 25-year bank loan. It will also affect the repayment ability of home buyers in the distant future, especially when interest rate increases.

But, in the longer term, the proposed CPF changes will lower the attractiveness of property as an asset class for investors. This will provide more price stability in the property market, thus avoiding drastic property price fluctuations, which have caused some bankruptcies.

Sir, the proposed CPF changes will provide a more balanced portfolio for CPF members to better prepare themselves for their future needs.

Sir, I support the CPF changes.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended at 3.00 pm until 3.20 pm. Sitting resumed at 3.20 pm