CENTRAL PROVIDENT FUND (AMENDMENT) BILL

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CENTRAL PROVIDENT FUND (AMENDMENT) BILL: Order for Second Reading read.

4.36 pm

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

This Bill seeks to amend the CPF Act to allow more members on the CPF Board and to clarify certain existing policies. This Bill also allows excess amounts from the Medisave Account to overflow into the Special/Retirement Account. Further amendments will enable a small group of members who are terminally ill or have serious medical conditions which result in severely impaired life expectancy, on a case-by-case basis, to withdraw some of their CPF savings. Finally, amendments are sought to allow families of CPF members who have passed away to settle their final hospitalisation bills using the deceased member’s CPF account.

Clause 3 expands the maximum number of CPF Board members from 12 to 15, and appoints the CEO of CPF Board as an ex-officio member. This amendment will allow CPF Board to tap on a greater range of expertise from its Board members, for example, in areas such as investment and fund management.

Clause 4 delegates the approving authority of CPF inspectors from the Minister for Manpower to the CPF Board of members.

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Clause 11(a) amends section 24 of the CPF Act to clarify the existing position where the statutory trust is not created when members use their CPF monies to purchase insurance or for investments. It also clarifies that all CPF monies, including monies invested under CPFIS, whether being transferred to and from, or being held with agent banks or any other parties, are protected from any set-off of any nature. It also clarifies that notwithstanding the provisions of the Bankruptcy Act, CPF monies withdrawn by bankrupt members for existing housing loans after bankruptcy are also protected from creditors’ claims.

Clause 12 amends section 25 of the CPF Act to clarify that the Intestate Succession Act and Administration of Muslim Law Act will apply for non-Muslims and Muslims, respectively, if no CPF nominations have been made.

Sir, currently, Medisave Account contributions in excess of the Medisave Contribution Ceiling, or "MA overflows", are automatically transferred to the Ordinary Account of the members. As announced in July last year, the MA overflows will instead be channelled to the members' Special Account or Retirement Account with effect from 1st July this year. As interest rates for the Special/Retirement Accounts are higher than Ordinary accounts, members will enjoy better returns on these savings. Clauses 5(d), (e), (f) and 14(a) provide for this. At the same time, the changes allow the Minister to reverse such MA overflows back into the Medisave accounts under exceptional circumstances when members are in need due to large medical expenses.

Sir, the majority of Singaporeans rely on their CPF savings to fund their retirement and medical needs for their old age.

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As average life expectancy has increased, we have also appropriately adjusted upwards the Minimum Sum and reduce the amounts that can be withdrawn at age 55 years, to cater to the fact that on average, the median life expectancy for those at the age of 62 will be 81 years for men, and 84 years for women. However, the current CPF Act does allow withdrawals by a member, or a committee of his person or of his estate, who is physically or mentally incapacitated from ever continuing in any form of employment.

The amendments proposed will also allow withdrawals by members who are terminally ill before the age of 55, or with chronic and serious illnesses that lead to severely impaired life expectancy, what we call SILE, in short. The CPF Board will allow withdrawals by such members who have been medically certified to have only a few more months to live, on a case-by-case basis, and where applicable, subject such withdrawals to sufficient funds being set aside in their CPF for their medical and other needs for their remaining life span as the Minister may specify.

The main purpose of clause 6 of the Bill is to amend section 15 of the CPF Act to allow the Minister to impose the terms and conditions governing withdrawals of CPF savings by members who are permanently physically or mentally incapacitated, of unsound mind, or terminally ill or have severely impaired life expectancy. Clause 6(e) of the Bill will allow couples under the Combined Minimum Sum Scheme to revoke their combined Minimum Sums so that the member with the medical condition can withdraw his or her savings under the new provisions while the healthy spouse will set aside the individual Minimum Sum applicable to him or her. The rest of clause 6 together with clauses 2, 7, 8 and 10 provide for consequential amendments for this policy change.

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Sir, currently, a deceased member’s Medisave cannot be used to pay his last hospitalisation bill if authorisation was not given by the member or committee of the person before his death. This may create hardship for the family of the deceased member who has to pay the medical bill, especially if the family members are not nominated to receive the deceased member’s CPF monies. In principle, it is also inconsistent with the purpose of Medisave, which is to first provide for a member’s medical expenses, and not for bequest.

Clause 9 inserts a new section 16(A) to allow a family member or committee of the person to authorise the use of the deceased member’s Medisave for the member’s last hospitalisation expenses. Clause 6(c) specifies that the nominees of the deceased member will only be entitled to the balance of the CPF monies after deducting the final hospitalisation expenses.

Sir, I beg to move.

Question proposed.

4.42 pm

Mdm Halimah Yacob: Sir, I welcome the many positive changes that are being proposed under this Bill. The CPF scheme is an important and integral part of our social security system and it cannot remain static. Changes have to be made to take into account new needs and to cover any shortcomings or gaps that are discernible as a scheme is implemented. So I view these changes positively and urge the Ministry to consider other areas where refinements are needed.

Sir, one need that has to be addressed, and which has not been touched upon in this Bill, is the generally lower CPF savings rate that women today face. Women are living longer, require more medical attention but have lower

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savings rate. For instance, in 2000, males aged 50-54 had an average of $66,123 in their CPF accounts before retirement while their female counterparts had only $39,211. And this is a problem that is not only confined to older women although those in their 50s to 80s face bigger challenges. Even younger women may continue to face the prospect of lower savings when they grow older because of the lower labour force participation rate of women. In 2000, for example, only 55.5% of women aged 15 were part of the labour force compared to 81.1% of men in the same category.

Sir, I would therefore like to suggest that the CPF Board undertake a comprehensive study on this issue and, in particular, look into ways of strengthening the CPF savings rate for women so that they too can age with greater security. The study could, for instance, look into ways of incentivising husbands to top-up their wives' CPF accounts. There have also been concerns about wives not knowing when their husbands nominate other beneficiaries other than themselves. The CPF study could also consider the possibility of requiring wives to be notified should the husband decide to nominate a beneficiary other than herself.

I wish to call upon the CPF Board to undertake the study and for this purpose, to consult with as many stakeholders as possible who are knowledgeable and can contribute ideas on how to better strengthen the CPF savings rate of our women. I believe that this is an important and urgent task and I hope that the Minister will respond positively to this request and even set a timeline for the commencement of such a study and the completion of its report.

Sir, let me now touch on the three amendments proposed under this Bill which I consider significant and to seek clarifications from the Minister on some areas. The first is the amendment to

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section 15(2) which increases the number of grounds on which a CPF member may withdraw his CPF money. The existing law is very rigid. A member can withdraw his CPF money only if he is found to be

physically or mentally incapacitated from ever continuing in any employment, which is extremely limiting. Before a member who is physically or mentally incapacitated can withdraw his CPF money, he has to show that he completely cannot perform any work.

With the new amendment, the Minister is given greater flexibility to approve other situations where physical or mental incapacity exists but is not of such a nature that prevents the person from ever continuing in any employment. The addition of sub-paragraphs (f) and (g) are also welcome changes. These two sub-paragraphs provide two additional grounds for a person to withdraw his CPF money. A person who is either suffering from a medical condition leading to a severely impaired life expectancy or someone who is suffering from a terminal illness or disease could now also apply to withdraw his CPF. These changes would greatly help a needy CPF member to provide for himself and his family, and lessen their financial burden.

However, I would like to seek a clarification from the Minister on the reasons why there is no corresponding amendment to section 28, which deals with the Home Protection Scheme (HPS) and section 40, which deals with the Dependants' Protection Insurance Scheme (DPIS). Both sections 28 and 40 provide for the HPS or the DPIS to assist a CPF member when he becomes incapacitated. Under section 28, his outstanding HDB housing loan will be paid for by the HDB, and under section 40, his family will enjoy insurance benefits when he is incapacitated or dies.

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The word "incapacity" under both sections 28 and 40 are defined in the same way as the existing section 15(2). In other words, like the existing section 15(2), a person can enjoy the benefits of the HPS and the DPIS only if his physical or mental incapacity is of such a nature that it prevents him from ever continuing in any employment. I would like to seek the Minister's clarification as to why sections 28 and 40 have not been amended to bring them in line with the amendment to section 15, so that the Minister is given the flexibility to decide on the types of situations where a mental or physical incapacity is deemed sufficient for a member to benefit from the HPS or the DPIS.

Sir, I would also like to ask the Minister on the reasons why the new grounds stated under sub-paragraphs (f) and (g) for the withdrawal of CPF money are not applied to the HPS and DPIS? In other words, if a person is suffering from a medical condition leading to a severely impaired life expectancy or he is suffering from a terminal illness or disease, why is he not eligible to benefit from the HPS or the DPIS? Although in these situations, he may be allowed to withdraw his CPF, the point is that he may not have any CPF to withdraw, but his condition makes it impossible for him to continue providing for his family or to pay for his outstanding HDB monthly payments. The Minister's clarification on this discrepancy between the amended section 15(2) and the existing sections 28 and 40 would be appreciated. Could the Minister also provide information on how many people have benefited from the DPIS and HPS schemes, and how many have been allowed to withdraw their CPF on the ground of physical or mental incapacity?

The second amendment which is worth noting is the amendment to section 13(6), which now allows the amount in a person's Medisave account that is in excess of the prescribed limit to overflow

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into either the Ordinary Account, Special Account or Retirement Account. In the existing provision, the overflow from the Medisave is only allowed into the Ordinary Account. As we now live longer, it makes sense to allow for overflows into the Retirement Account or Special Account, which is paid a higher interest rate and which will be used only for a person's retirement. It does not make sense, because in the current provision, the overflow goes into the Ordinary Account, and the person can then use it to buy shares or to purchase a bigger home.

However, Sir, there could be some CPF members who do not have much savings in their Ordinary Account and who may need the money and now find that they cannot use it for their HDB instalments. Can the Minister give some indication as to how many people are likely to be affected by this change and what can be done to assist them?

The third amendment that I welcome is the new section 16A, which now allows a CPF member or a prescribed person to authorise the withdrawal of a deceased person's Medisave to pay for his medical expenses incurred before his death. Under the current provision, CPF money of a deceased member does not form part of his estate and accrues to the person whom the CPF member has nominated to receive the money upon his death. The problem arises if this nominated beneficiary refuses to pay for the hospital bills of the deceased member. With this change, the Medisave can be deducted even without the nominated recipient's approval so long as it has been authorised by the deceased member before his death, or it is authorised by a prescribed person. There is, however, one point that I would like to raise here. To ensure greater clarity so that all Singaporeans understand better, perhaps the Minister could explain who are considered as prescribed persons who

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could authorise the deduction from the balance standing in the Medisave account of a deceased member to pay for his medical bills after his death. Are these family members or does it also include Government agencies? A clarification from the Minister would be really useful.

Finally, Sir, I would like to ask the Minister for the rationale for not amending section 29(5), which continues to deny those who are 65 years old and above from the benefits of the Home Protection Scheme. On the one hand, we have been actively promoting policies to encourage Singaporeans to work as long as possible as we are living longer. On the other hand, we have policies such as this one, which is unfair to older Singaporeans. Even if they work and are able to pay for the Home Protection Scheme premiums, they cannot enjoy the protection provided under the Scheme. I think it is time the MOM reviewed this policy and end the discrimination by removing the current age limit.

4.52 pm

Dr Ng Eng Hen: Sir, let me, first, thank Mdm Halimah for supporting the Bill, as well as her studious study of the many intricacies of the Bill, which shows that she does her homework and she reads the Bill quite closely.

She asked a number of questions which I would like to address, in terms of adequacy of women's CPF balances. She is quite right that women, on the whole and in general, have lower CPF balances than men. This is really a function of how long they work and their participation in the labour force. She rightly points out that the labour force participation rate for women is lower.

How do we increase their balances? We do not need a committee to study this. They just have to work longer and contribute more. If they do not

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contribute, they do not build up their CPF balances.

How do we get them to work longer? I think there are issues that we can consider. We have considered this issue in a number of committees. We do note that the increase in labour force participation rate of women has actually increased faster than men, because they started from a lower base. So that is good news in terms of what she has asked for.

Can it go up higher? Yes. Do we want to? I think so, because I would view CPF adequacy not just for men and women. While she is quite correct to say that CPF balances for women are lower than men, I think we miss something if we treat it as a gender issue, and I do not want to quite completely approach it as a gender issue.

Our CPF system is predicated on families - both men and women and children, supporting one another within that family. So if we can get family members of a household to have adequate CPF monies and we have allowed flows and use of CPF funds in other aspects - that will be our first approach. Because I really do not see anything wrong if indeed in a household, theoretically, the breadwinner is either male or female, and having enough to support the whole family. So it should not be a gender issue. But Mdm Halimah is right to say that the labour force participation rate of women is lower and contributions are lower, and this is something that we need to help move up. I think we can do that through a number of ways.

She also touched on the nomination procedure for CPF members. Should we also inform the family if they have not been nominated? That is quite a loaded

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question and an explosive one. I will be responsible for telling on a lot of CPF members, and I am not sure I want to be that popular or unpopular. We have to think seriously on it, because it also touches on issues of disclosure. Do I maintain the balance between privacy of that person's account who he can nominate, as in a will? For example, in a will, if you are not willed into it, you are not informed. We have said that the nomination procedure should be made simple. But if I trade off that balance in terms of privacy and tell the immediate family that they have not been nominated, then everyone will know. So I think this is something that we have to consider.

She has asked for clarifications on sections 28 and 40, which is on the Home Protection Scheme (HPS) and the Dependants Protection Insurance Scheme (DPIS). Let me just quickly state that there is no discrimination and there is no discrepancy. The reason why there has been no consequential amendment is because HPS and DPIS are pooled risks. For individual accounts, if you are severely ill with a terminal disease, we now say that you have to set aside a certain sum for your remaining lifespan, but you can take out the rest of your money. There is no pooled risk.

For the Dependants Protection Insurance Scheme and the Home Protection Scheme, you are actually pooling the risks. So if I allow a larger pool of members who are at greater risk - in other words, I say now I include not only those who are permanently incapacitated from ever continuing to work and include the terminally ill and the severely impaired life expectancy, then, obviously, more people within the Dependants Protection Insurance Scheme and the Home Protection Scheme will be able to claim. And when there are more claims and more pay out, the obvious happens - premiums have to go up. So it is really a

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trade off between how expensive the premiums of that particular scheme, and this includes those above 65, which I have dealt with in this House.

Do we have a scheme that keeps the premiums very low, as a basic scheme, to cover dependants and home protection? Or do we add terminal illness and the severely impaired illness above 65 years? There is a trade-off. And our figures show us that, contrary to what she has said in terms of affordability, there is a sharp fall off when the premiums go up, especially for those who are ageing. So I think we want to be careful and be mindful that it serves a scheme as a basic protection. By all means, members can buy riders on it but with their own money. Also, remember that there is a trade off to what we take in premiums from Medisave, DPIS, HPS and retirement adequacy. So I think it is a necessary trade-off and we think that this is the right balance. But the reason why there have been no consequential amendments is not one of discrimination. It is just an economic factor.

She has asked for numbers in terms of those who are physically incapacitated, terminally ill and of unsound mind. It is about 700 a year. She has asked who in the family members can withdraw for the member's last hospitalisation. I tried to look for details. Specifically, the spirit of it is that we want the member's last hospitalisation bill to be paid from his Medisave account. So, sensibly, since he is already deceased, his immediate family will be able to authorise. Can someone, in lieu of the family, decide? I think the spirit of it is that we want the deceased member's last hospitalisation bill to be paid with his money. Let me go through and see what we have actually crafted in law, but that is the spirit.

Sir, on a general note, I agree with her that CPF rules need to be changed from time to time, because of our changing

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demography and needs. But I think these measures that we have done, although small, are significant to alleviate the use of CPF monies when appropriate.

Mr Low Thia Khiang: May I seek a clarification from the Minister? The Minister mentioned about this spirit of the law in withdrawing the CPF monies. On the withdrawal from the CPF account of the deceased to pay for the last hospitalisation bill, the Bill is crafted in such a way that it allows a "prescribed person" to be able to use the CPF for the payment.

Dr Ng Eng Hen: Sir, the current situation is that if someone goes to a hospital and he has not authorised his family members to use his own Medisave and then he passes away, the family cannot use his Medisave to pay for his last hospitalisation bill. And it is made worse if that person has chosen someone else to give his CPF monies to. So, the remaining family members have no access to the deceased member's CPF accounts to pay for his last hospitalisation bill as they do not have the authority to take the CPF monies because they are not the nominees. So the amendments allow the family members to use his CPF funds to pay for his last hospitalisation bill.

Mdm Halimah Yacob: Can I just seek some clarifications from the Minister? First, I would like to clarify that I am in full support of strengthening the family and in using the CPF as a tool to strengthen the family. In fact, the suggestion that I have made for a study to be done on the situation of CPF savings for women is intended to contribute to that objective, ie, strengthening the position of the family. This is precisely because if someone else is nominated other than the wife, obviously the children will suffer. If the husband dies and the money does not go to the wife and the children, the entire family suffers as a result of that. That is the basis of the recommendation that I have made. And I

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hope that the Minister would look into some of these issues because I think these are really important issues. Increasing the labour force participation rate is one way, but I think we are not going to be able to completely address that issue when we deal with this aspect of low CPF saving rates for women. So we need to look at other ways as well.

My second question, Sir, is this. The Minister said that you cannot have similarity. Under the existing provisions, there is similarity between sections 15(2), 28 and 40. When he said the changes to section 15(2) cannot be extended to sections 28 and 40, my question is: is there any other mechanism to help those who are faced with a terminal illness or, as stated under the new amendments, who are faced with the prospect of a shortened life expectancy, and they are not able to pay for the their mortgage payments or take care of their livelihood or that of their dependants? Are there some provisions to help them, because that is the raison d'etre , as I understand it, of the HPS and the DPIS?

Sir, I really hope for some clarifications from the Minister on these points.

Dr Ng Eng Hen: Sir, we will take into account the Member's suggestion to review the nomination process. But from what I understand, it is not the nomination process but who gets nominated. If it is my own view, obviously, I would believe, like many of the Members of the House, that you should nominate your dependants, ie, your family. But do you want to, in some ways, enforce it so that members who do not, get called up, and those who are not nominated, get informed? So, it is not a simple question to answer.

In terms of the Home Protection Scheme and the Dependants' Protection

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Scheme, as Mdm Halimah knows, the Dependants' Protection Scheme has been privatised. She has asked a more important question - a practical one - how then do these members who are terminally ill or have severely shorterned lifespan be catered to? Let us accept a trade-off. The answer is that as it is insurance-based, they can always buy riders for that.

For the Home Protection Scheme, it is not so much a problem for the terminally-ill ones because there is a shortened lifespan. I agree with her that for those who have shortened lifespan but still have many more years to live and cannot work, it can be a problem.

For the Dependants' Protection Scheme, I think that the insurance companies, who will respond flexibly now that it is privatised, will allow people to pay more premiums to be able to take from the Dependants' Protection Scheme, and if you buy with a higher premium with loosening criteria, if you like, to benefit from the DPS.

For the Home Protection Scheme, the premiums are still low, and I would say that members do buy concurrent insurance. So, the answer to that is for those who feel that they want to be provided for, to buy other insurance products that will cover this risk.

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 Ng Eng Hen].

Bill considered in Committee; reported without amendment; read a Third time and passed.