CENTRAL PROVIDENT FUND (Government's assistance to vulnerable groups)

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CENTRAL PROVIDENT FUND:

(Government's assistance to vulnerable groups): The following Question stood in the name of Mdm Ho Geok Choo -

10. To ask the Minister for Manpower (a) what forward strategies are being formulated with regard to our Central Provident Fund (CPF); (b) how does the Government propose to help the vulnerable groups comprising non-working spouses, non-contributing CPF members and the working poor in their retirement days; (c) if he can provide a breakdown of the number of people in these categories; (d) how can the Government tap on community and self-help groups to assist these people; and (e) how does the Government propose to help these vulnerable groups respond to the social and economic environment changes.

Mr Zainudin Nordin: Question No. 10, Sir.

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, as at end December 2003, there were about three million CPF members, of whom about 30%, or 877,000 members between the ages of 25 and 54, had not contributed to CPF for the preceding three months. Although these members were what we called "inactive", it does not mean that all of them had insufficient CPF savings to cover their retirement needs. For example, some may have other sources of income but opened their CPF accounts in order to qualify for Economic Restructuring Shares and other similar benefits.

Last year's Labour Force Survey estimates that there are 320,000 married

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females between the ages of 25 and 54 who are not working. Of these, 305,000 are homemakers or home care givers taking care of children, elderly or sick relatives.

Mdm Ho also asked for the working poor. I presume this means those who may not have enough for retirement even if they are employed. This is difficult to quantify, as there is no universally accepted definition for the working poor. So, let me instead use the Minimum Sum as a measure of adequacy. In 2003, of those active CPF members turning age 55, about 40% had set aside the full Minimum Sum. Our projections show that of those active members aged 45 last year, half will be able to achieve the Minimum Sum when they turn 55 in 10 years' time in 2013. In our longer-term projections, even at a CPF contribution rate of 30%, 76% of new CPF members who contribute regularly to the CPF from the time they start work and are prudent in using CPF for housing, will be able to meet the Minimum Sum of $120,000, in 2003 dollars, when they retire.

Our CPF system serves as the cornerstone of our retirement provision. It is a sound and sustainable system. Mdm Ho asked how we can help all Singaporeans, including those vulnerable groups, prepare financially for their old age. As this is an oral answer session, I propose not to go into a lengthy discourse, but touch briefly on key points.

First and foremost, we help people save enough in their CPF by helping them stay employable as long as possible through reskilling and skills upgrading. We should help them save enough for their expected life expectancy, which is why we will gradually raise the Minimum Sum to $120,000 in 2003 dollars by 2013.

Second, we must curb excessive consumption on housing and medical

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care. For example, we have tightened the rules on the use of CPF for property purchases. As medical expenses form a potentially large component of consumption, we must stretch the Medisave dollar. MOH has recently announced that they are reviewing MediShield for this purpose. Individuals can also reduce their medical needs by maintaining healthy lifestyles.

Next, we must emphasise the extended family as the social and financial support unit. We allow and encourage top-ups for spouses and parents. Family members can use their Medisave accounts for each other. For non-working spouses, we encourage their working spouses or children to top up their CPF Minimum Sum. For the Year of Assessment 2005, we have increased the tax relief ceiling for a member who tops up for his parents and grandparents who are aged 55 and older using cash, from $6,000 per year to $7,000 per year. This tax relief has also been extended to include non-working spouses who are at least 55 years old and who earned less than $2,000 in the preceding year. CPF Board will continue to review the topping-up conditions so that more members can benefit.

Apart from CPF, we must also help members find other sources of income. Most Singaporeans are home owners. With HDB's relaxation of rental rules, there are now 250,000 homes that can be rented out fully or in part. For the elderly and those not working, they should consider their home as a potential source of income. We will continue to explore workable options to monetise their housing assets.

The Government recognises that there are vulnerable groups who may have difficulty preparing adequately for retirement under the CPF system. We must help them to find employment and to upgrade their skills. We will work closely with community and union partners in this effort.

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In years of surpluses, the Government helps these Singaporeans by topping up their CPF. Since 1995, we have disbursed about $4 billion to CPF members. For Singaporeans who lack any family support and need financial assistance, various public assistance schemes and Medifund provide a safety net.

Mr Low Thia Khiang (Hougang): Sir, I would like to ask the Minister whether he would consider allowing children to top up the CPF accounts of their parents who have exhausted their Minimum Sum.

Dr Ng Eng Hen: Sir, I think I had answered Mr Low when he asked that question pointedly at the last Parliament sitting. Yes, they are allowed to. They are allowed to top up right to the Minimum Sum. So, we do allow children to top up their parents' accounts.

Mr Low Thia Khiang: Perhaps my question was not clear. What I am saying is that if the parents have exhausted their Minimum Sum, ie, the minimum amount which they already had in their account but exhausted, and the children have sufficient CPF funds in their accounts, would he consider allowing them to continue to top up their parents' Minimum Sum accounts from their own CPF accounts?

Dr Ng Eng Hen: Sir, that is under consideration and we will consider it. But at this point of time, practically, when they have accumulated their Minimum Sum, because it is paid out on annuity, it takes quite some time before that sum runs out. So, practically, that has not been a problem. The real problem is for the group of parents who have not accumulated enough, and for these we allow.

Mr Low Thia Khiang: Sir, with the current Minimum Sum amount, which is

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relatively low, for parents who are actually under the current Minimum Sum amount who have exhausted the amount, would the Minister allow their children to top up or perhaps increase the Minimum Sum allowable top-up to the current Minimum Sum amount?

Dr Ng Eng Hen: We can consider that. We do allow them tax reliefs when they top up in cash. So, that is one avenue where they can top up the accounts of those parents who have exhausted their Minimum Sum. So, that is one avenue open, and we do give tax reliefs for their top-ups. As to whether their children can use their CPF money to top up the accounts of their parents who have exhausted their Minimum Sum already accumulated, as I said, practically, it does not affect that many people because most parents who have accumulated enough CPF

sums, take some time before they exhaust it. And the profile of such families is such that for these parents, if the child has enough to top up their parents' accounts, usually they have also cash which they can use to top up their parents' accounts.

Ms Braema Mathiaparanam: Could I please ask the Minister whether the Ministry has any structure to alert non-working spouses as to when their working spouses are going to withdraw all their CPF monies so that they can enter into a joint decision-making process on how to use the monies?

Dr Ng Eng Hen: Sir, I am not completely sure whether I have understood the question. But for the individual CPF accounts, most spouses should know when their husbands turn 55 and whatever year they can withdraw the Minimum Sum. Whether we should consider reminding, I presume, the wife that the husband is reaching their age, we will consider.