CENTRAL PROVIDENT FUND INVESTMENT SCHEME

Mdm Ho Geok Choo asked the Minister for Manpower (a) if he will provide an update on the plans and actions taken to date to liberalise the Central Provident Fund (CPF) Investment Scheme; and (b) how does the CPF Board intend to market new plans to the CPF members.

Dr Lee Boon Yang: There are currently no plans to further liberalise the Central Provident Fund (CPF) Investment Scheme, apart from implementing the ERC recommendation to offer low-cost privately managed pension plans to CPF members.

The Board is studying the best practices for pension plans in other countries. A consultant was appointed in December 2002 to assist in establishing an appropriate pension plan structure within the CPF framework.

The objective of such pension plans is to enable members to have a better chance to obtain higher long-term returns through a well-diversified portfolio. The private pension plans are meant to facilitate regular investments over a long-term horizon, but should not require members to make complicated investment decisions (cost of participation should be kept low). This is to cater for the majority of CPF members who are not investment-savvy.

Details on the private pension plan framework will be announced in a few months' time. The Board is also working out strategies to educate members on private pension plans. This will build on existing public education efforts to increase members' understanding of the financial market and investment products.

This would include the admission criteria for pension plan providers and investment guidelines for pension plans. The Board has sought public feedback and will also be seeking feedback from the financial service industry soon.