Central Provident Fund (Amendment) Bill

Mr Speaker: Minister for Manpower.

3.47 pm

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

The Central Provident Fund (CPF) system is a key pillar of Singapore's social security system which helps CPF members set aside savings for their retirement, housing and healthcare needs.

We regularly review and update the CPF system. The Bill effects the following changes: first, the CPF Special Account (SA) will be closed for those aged 55 and above from early 2025 onwards; second, the Bill expands the Home Protection Scheme (HPS) to offer cover to CPF members with certain pre-existing conditions that are not so severe; and lastly, the Bill introduces amendments to clarify processes and streamline the administration of the CPF Board and CPF schemes.

The first two sets of amendments in the Bill, which effect the closure of the SA for members aged 55 and above and the expansion of the HPS, are part of the evolution of the CPF system to continue serving the needs of Singaporeans.

The closure of the SA has been discussed at length in this House since it was announced at Budget this year. As I had earlier explained during the 2024 Committee of Supply debate for the Ministry of Manpower (MOM), the principle behind closing the SA for members aged 55 and above is to right-site CPF monies. Only CPF savings committed towards long-term retirement needs should earn the higher long-term interest rate.

Today, members aged 55 and above have four CPF accounts: one, the Ordinary Account (OA); two, the MediSave Account (MA); three, the SA; as well as four, the Retirement Account (RA). From the second half of January 2025 onwards, the SA of members aged 55 and above will be closed and they will have just three CPF accounts. CPF members will be notified when their SA is closed, through a hard copy notification, as well as an email or SMS where applicable.

As per the current practice for members turning 55 today, members' SA savings will be transferred to the RA, up to the Full Retirement Sum (FRS) applicable to their cohort. The savings in the RA will continue to earn the higher long-term interest rate, which is currently at 4.14%. With the closure of the SA, any remaining SA savings will be transferred to the OA and can be withdrawn.

Members who wish to commit their withdrawable savings to their long-term retirement needs can opt to transfer their OA savings to their RA up to the Enhanced Retirement Sum (ERS). With the ERS raised to four times the Basic Retirement Sum (BRS) from 1 January 2025, more than 99% of CPF members aged 55 and above today would be able to transfer all their SA savings to their RA, if they wish to do so. As Members of the House would know, CPF members can then choose to start receiving their RA savings as monthly retirement payouts anytime from the age of 65 to 70.

In gist, the SA closure will not prevent members from earning the higher long-term interest rate. They can do so by voluntarily transferring their savings to the RA, up to the prevailing ERS. But if members want to retain the flexibility to withdraw these savings at any time, then the savings can remain in the OA and earn the OA interest rate.

The Bill will permit the Board to implement the SA closure and the necessary related actions, such as transferring members' SA savings into their RA and OA.

Next, I will speak about the expansion of the HPS. The HPS is an insurance scheme that protects CPF members and their loved ones from losing their Housing and Development Board (HDB) flats in the event of the member's death, terminal illness or total permanent disability. Today, members are covered at a standard premium rate if they are assessed to be generally in good health, even if they have pre-existing health conditions. The vast majority of applications are approved. However, around 1.3%, or about 1,400 HPS applicants, are rejected annually due to pre-existing health conditions based on factors, such as overall severity, prognosis, control of the health condition and the member's health risk profile.

While we cannot cover all pre-existing health conditions, we will expand HPS from mid-2025 to cover those with certain pre-existing conditions that are not so severe, such as certain types of strokes and heart disorders. In line with industry practices, these members will pay higher premiums that are commensurate with the higher likelihood of claims. Even with this premium loading for such members, the HPS would provide coverage at one of the lowest premiums that such members would pay in the current market.

For members who are eligible for coverage today, there will be no premium loading and no change to the standard premium rate.

To ensure that the HPS remains sustainable and affordable for the majority of members, the small minority of members with more severe health conditions, such as those currently receiving treatment for cancer, would not be able to participate in HPS. This is also in line with industry practice.

Nevertheless, CPF members who face financial difficulties in repaying their mortgage loans can approach HDB for further assistance.

The expansion of HPS will be implemented from mid-2025. For those offered coverage with premium loading, participation will be on an opt-in basis. We will assess any future developments to industry practice in our regular review of the CPF system. Taken together, the closure of the SA and the expansion of the HPS coverage to more members with pre-existing health conditions will evolve our CPF system to better serve the needs of Singaporeans over the course of their lives.

The remaining four amendments are to streamline the administration of the CPF Board and CPF schemes.

Firstly, we will amend the CPF Act to simplify the CPF Board structure. The amendments give the Minister the discretion to appoint a Deputy Chairperson from amongst the Board members. This is in line with common practices across other Statutory Boards. There will be no change to the maximum number of 15 Board members. The Board currently comprises a Chairperson, a Deputy Chairperson, six tripartite representatives and seven other persons. After the amendments, the Board will comprise a Chairperson, six tripartite representatives and eight other persons. Excluding the Chairperson and the CEO of CPF Board, the Minister may now appoint a Deputy Chairperson from any of the remaining Board members with the President’s concurrence. CPF Board will continue to operate efficiently with this change.

I will now move on to the next amendment. Currently, when members sell their property, their sales proceeds are distributed in a specific order. For example, a member with an HDB loan would have to repay any outstanding property tax, outstanding HDB loan and resale levies, before refunding the amount of CPF savings used in the purchase of the property including accrued interest.

As implemented by the Ministry of National Development and HDB starting from the October 2024 Build-To-Order (BTO) exercise, there is a New Flat Classification Framework which will classify new flats as Standard, Plus and Prime based on locational attributes. This new framework will help to achieve three important objectives: one, it keeps home ownership affordable; two, it maintains a good social mix; and three, it keeps the system of public housing subsidies fair for everyone.

To ensure affordability, Plus and Prime flats come with additional subsidies to enable a wider range of Singaporeans to purchase them. This is on top of significant market discounts that are applied to all BTO flats today.

And to ensure fairness for everyone, these additional subsidies will be recovered upon the sale of the flats. Plus and Prime flats will also come with additional restrictions, such as the 10-year minimum occupancy period (MOP), to discourage quick flipping and support genuine home buyers.

This set of amendments will allow HDB to recover a percentage of the resale price or market valuation of the flat, whichever is higher, that is commensurate with the extent of additional subsidies provided. The recovery of additional subsidies will be done before the required CPF housing refund is made to the member's CPF account. This maintains parity with other flat buyers who did not receive these additional subsidies and is important to preserve the fairness of our public housing subsidies.

We will also amend the Act to clarify that the CPF Board requires CPF refunds only upon property disposal and not at the point of transactions, which involve the issuance of a new lease or title without any changes to the ownership of the property. Such transactions include the purchase of recess areas outside of one's HDB flat and lease extensions.

Some members today also provide undertakings to pledge their property to CPF Board, to access more funds in their RA for immediate use. In some cases, new co-owners could be added after the existing owner had pledged the property. The amendments clarify that CPF Board also requires new co-owners to refund the pledged monies to the existing owner's CPF accounts, upon disposal of the property.

Lastly, we will remove provisions that were previously included to support the CPF Job Record Scheme and which are no longer relevant today. In the past, employers could request for CPF Board to share prospective employees’ employment history under the CPF Job Record Scheme. This scheme was terminated in 1983 and CPF Board has not shared any prospective employees' employment history with employers since then. As such, we will amend the CPF Act to remove this provision.

Mr Speaker, Sir, please allow me to say a few words in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] The Government regularly reviews and updates the CPF system to ensure it continues to meet the needs of Singaporeans at different stages of life.

Previously, we announced the closure of the SA for CPF members aged 55 and above. This is to ensure that only long-term CPF savings can enjoy a higher long-term interest rate. This will take effect from the second half of January 2025. We will notify affected members by letter, as well as an email or SMS.

The affected members need not worry. After the SA has been closed, the savings in it will be transferred to the RA up to the FRS. These savings will continue to earn higher long-term interest rates. If a member's RA has already reached the FRS, the remaining savings in the SA will be transferred to their OA and can be withdrawn at any time.

Members can also choose to transfer the savings from their OA to the RA up to the ERS. This way, members can earn a higher interest rate and receive higher retirement income. From 2025 onwards, the ERS will also be increased to four times of the BRS. This means that currently, over 99% of the affected members will be able to transfer all their SA savings to the RA.

The Government will also expand the coverage of the HPS from mid-2025. Members with certain pre-existing conditions that are not so severe, such as certain types of stroke and heart disorder, will be able to get coverage. Even if they are required to pay a higher premium, the premium will still be amongst the lowest in the current market. We will assess any future developments to industry practice in our regular reviews of the CPF system.

We will also streamline the administration of the CPF Board and the CPF schemes. The overall revisions will ensure that the CPF system, as an important pillar of our country's social security system, can continue to meet the needs of Singaporeans.

(In English): Sir, let me conclude. The CPF (Amendment) Bill will give effect to the closure of the SA for members aged 55 and above from the second half of January 2025 onwards, as well as the expansion of the HPS to cover more CPF members with pre-existing health conditions from mid-2025 onwards. It will also clarify processes and streamlines the administration of CPF Board and CPF schemes.

All in all, this ensures that the CPF system continues to serve the needs of Singaporeans over the course of their lives and to continue to remain effective as a key pillar of Singapore's social security system. Mr Speaker, I beg to move.

Question proposed.

Mr Speaker: Mr Louis Ng.

4.04 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill will refine the CPF scheme and I stand in support of it. I have three points of clarification to raise.

My first point is on the closure of the SA for members 55 years old and above. The new section 13AA(1) provides for an exception where the SA of a member who has attained 55 years of age may not be closed if any prescribed circumstances apply. Can the Minister explain what it intends these circumstances to be?

The closure of the SA was the subject of extensive discussion during the Committee of Supply debates earlier this year. It has also been the subject of much discussion by the general public. The policy is understandably of significant concern for some Singaporeans who have to reconsider their retirement nest eggs.

CPF members may top up or transfer savings from their OA to SA to enjoy higher interest rates while building a retirement sum enough to enjoy the highest possible monthly payouts in retirement. This results in a higher-yielding SA that can be withdrawn on demand after they turn 55. I am heartened to see that there have been numerous explainers by both the CPF Board and the Government to clarify the rationale for the changes. But the reality remains that some CPF members will need to re-evaluate their retirement strategies.

Can the CPF Board and the Government share what steps and resources will be extended to members to help them navigate the impact of this new policy on their personal retirement plans? Can the Government also share how many members are expected to be able to reach the FRS following the top-up from the SA? This milestone is significant to members because after it is reached, the balance in the SA will go to the OA.

In 2022, the CPF Board shared that they expect about eight in 10 active CPF members turning 55 in 2027 to be able to set aside at least the BRS. Moving forward, will the Government regularly share the number of members expected to reach the BRS, FRS and the ERS?

My second point is on how the changes to the HPS will impact current members with pre-existing conditions. Currently, the CPF Board already has the power under section 31(2) of the CPF Act to allow a person who is not in good health to join the HPS. Such a person must apply to the CPF Board to join the HPS. The CPF Board may impose conditions, such as requiring medical examinations and disclosure of health information. The amendments will allow the CPF Board to impose additional terms, such as the exclusion of pre-existing health conditions and impose premium loading. Can the Minister share if there are members who are not in good health but are already covered under the HPS under the section 31(2) exception? For these members, will the amendments affect the terms and conditions to which they are currently subject to?

My third and final point is on the members with pre-existing conditions who are not currently under the HPS. The explanatory statement states that the amendments are intended to permit persons with "certain serious health conditions" to join the HPS, subject to premium loading. The Minister previously shared that about 1.2% to 1.8% of HPS applications were not approved due to serious pre-existing medical conditions.

Will there be an exhaustive list of these "certain serious health conditions" that the Ministry will use to include or exclude individuals from the HPS going forward? What proportion of the previously rejected 1.2% to 1.8% of HPS applications are expected to benefit from these amendments?

Given that the basis for their rejection may now be re-evaluated, will such applicants be notified that they can submit a new application to be considered again? It would be a shame if the expansion of the HPS fails to benefit seriously ill segments of the population purely because they were unaware that their rejection could be reconsidered. Notwithstanding these clarifications, I stand in support of this Bill.

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 4.25 pm.

Sitting accordingly suspended

at 4.08 pm until 4.25 pm.

Sitting resumed at 4.25 pm.

[Mr Speaker in the Chair]

Central Provident Fund (Amendment) Bill

Debate resumed.

Mr Speaker: Assoc Prof Jamus Lim.

4.25 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Speaker, the amendments proposed to the CPF Act have several objectives, which the Minister has already explained. I will focus my comments on the clauses relating to prioritising the recovery of subsidies following the sale of flats and those pertaining to the closure of the SAs. While I support the Bill, I have concerns over these two aspects.

Clauses 28 and 29, taken together, require that owners of HDB flats that have enjoyed additional subsidies to prioritise the repayment of said subsidies from proceeds, following the sale of the flat. I believe this is to accommodate the larger subsidies that are likely to be extended for Plus and Prime flats.

The notion of repaying what one owes is, on its face, unobjectionable. That said, I believe many of us in this House have had residents appeal for consideration of higher mortgage loans because they cannot afford the cash outlay.

This could lead to a disconnect: those selling a flat would now be required to fork out a cash amount, so as to pay off the subsidies but, in doing so, they exhaust much of any cash gains that were made from the sale of the flat. Yet, they could still well face a gap between the market price of their next resale flat versus its official valuation, which would have to be made up with cash on hand. I have had residents in Sengkang face such a dilemma when they seek not even to upgrade, but to downgrade, and I am certain that they are not alone.

More generally, this is one of the unintended consequences of the current HDB pricing model, where a higher sticker price is de-emphasised simply because subsidies mean that the de facto price faced by buyers would be lower. But if valuations and, perhaps more importantly, mortgage loans are still based on the nominal price, and we insist on subsidies being fully repaid in cash, then we inadvertently impose a liquidity crunch on those who wish to sell, since we strip these sellers of a significant part of the cash amounts that they would otherwise need as downpayments on their next flat.

At present, HDB appears to be dealing with this issue on a case-by-case basis, accepting appeals that occasionally enfold additional amounts into the HDB Flat Eligibility (HFE) mortgage loan. But the bases for HDB decisions are opaque and, more importantly, I believe I have raised what amounts to a systemic issue that should merit more careful study by HDB.

Another key thrust of this Bill addressed by clauses 2 through 16 is to impose institutional reforms that would put an end to CPF “shielding". This practice, which allows the hiving off of SA funds from being transferred into the RA, thereby accruing higher returns while also enjoying higher liquidity, had become so widespread that websites and financial institutions were openly advising on how to pursue the practice. It got to a stage where one could legitimately wonder if the Government was at least tacitly endorsing this CPF hack.

Perhaps more troubling, it appeared to have been a loophole exploited by those who were somewhat better-off and financially more sophisticated. After all, ensuring that there would be sufficient excess funds in the OA to make up for any BRS shortfall during the transfer window would only be possible if one had larger CPF balances to begin with. This strategy would also typically be known to those who ran in more financially-informed circles or, at least, had access to a savvy financial advisor.

For these reasons, the Workers' Party (WP) is not opposed, in principle, to the closure of this loophole, given how it tended to benefit this relatively select group. However, I believe it is worthwhile making a few additional points.

First, we should understand why, beyond the notion of fairness mentioned earlier, this loophole was ultimately unsustainable from a purely financial perspective. Sustaining an interest-bearing SA after the age of 55 would have meant savings that combined both higher interest rates relative to the OA, with comparable liquidity. Yet there is almost always an inherent tradeoff between higher returns and these returns being locked into an investment for a longer duration. This is fairly standard stuff in financial economics.

Pension managers, such as CPF, would not have been exempt from this tradeoff and their allocations to more illiquid investments is what, in part, would have allowed them to harness the higher returns necessary to meet SA obligations. But when we promise higher returns but still allow account holders to withdraw their funds at will, we short-circuit this process, which threatens to unravel the otherwise sound long-term investments that CPF will have taken exposure in. Hence, given its inherent unsustainability, this loophole had to be closed.

That said, there is at least some degree to which we need to acknowledge that closing the loophole amounts to an upending of both account holders' expectations, as well as the legacy rights of those who invested in the SA prior to this Bill. This is, of course, yet another reprise of the theme of retrospective lawmaking, which is something that both my hon friend Louis Chua, as well as I, have raised in this House on prior occasions.

In this instance, it is the notion that those who will now experience disruptions to their retirement planning, since they had originally planned on having SA income as part of their retirement portfolio, need not be compensated. But as mentioned earlier, there was little indication that what they were doing was either inappropriate or illegal.

To be clear, those who invested in the SA have, undeniably, enjoyed the higher rates associated with locking their balances in that account in the meantime. In fairness, it was always known that there would be a transfer of SA funds into the RA at the age of 55. Still, there are at least some who would have been hurt by this change in policy. Hence, while calling for outright compensation for this group may be a step too far, it seems at least fair to acknowledge that some have been, at the very least, inadvertent victims in the Government's policy shift and to ask how they may be able to receive guidance on how to go forward.

Perhaps, more fundamentally, we should also ask the question of what drove so many to seek to squeeze higher returns in the first place. Part of this, surely, is that, despite assurances by the Government that the CPF rate is adequate for retirement, those that were taking advantage of this SA loophole clearly thought otherwise.

That is why the WP had, in this House, previously suggested that CPF rates be raised to reflect high inflation, that it be computed with daily or monthly rates to better harvest returns or that it also considers one-off adjustments to the OA rate, not just to deposit but also lending rates, which tend to better reflect the global cost of capital, among others.

I am hopeful that CPF Board will continue to extend options for our account holders to build up sufficient savings for retirement. One useful reform, which admittedly goes beyond the pure scope of the Bill but is consistent with its spirit, is to offer more options for higher returns.

This goes beyond re-examining how we calculate the OA interest rate, as important as that may be. We should also look to expanding the universe of CPF-approved investments. At the moment, there remains a dearth of low-cost index fund options, for a portfolio of either domestic or internationally-diversified companies. Decades of research has shown that these are among the most appealing ways to build retirement wealth. Rather than continue to indirectly encourage the overweighting of real estate in our retirement portfolios, we should ensure that equities which tend to offer even higher returns, on average, over the long run, feature prominently for future generations' CPF savings. This could even have a secondary spillover effect, bolstering our moribund stock exchange.

Sir, the purpose of this speech is of course, not to offer this House investment advice. Rather, I hope to highlight how many Singaporeans feel that their rate of accumulation of CPF savings is less and less able to keep up with their retirement needs.

Some of this has led to pathologies, such as a stretch for yield in exploiting the SA loophole. Others have tried to parlay the HDB housing ladder, but this effort runs up against the goal of keeping public housing more affordable. This is further exacerbated by how extracting cash from a housing investment may be more challenging than sometimes believed, as I explained earlier on in my speech. Further bolstering the returns available from CPF savings, through ways I have described, will strike at the heart of the problem that has led many to hunt for returns via either shielding or housing.

Mr Speaker: Ms Jean See.

4.36 pm

Ms See Jinli Jean (Nominated Member): Mr Speaker, my speech will focus on Part 2 of the Bill on the amendments relating to HPS. HPS is a mortgage-reducing insurance that protects CPF members from losing their HDB flat in the event of death, terminal illness or total permanent disability. Except for HDB owners with serious pre-existing illnesses, HPS insures CPF members until the age of 65 or until the housing loans are paid up.

The Bill’s proposed amendments are much welcomed. Nonetheless, I would like to seek clarification on three areas.

First, I appreciate the intention to expand the HPS to admit more CPF members. I note that in the Minister's written answer in August 2024 to Member Ms Yeo Wan Ling's Parliamentary Question on coverage for the HPS, the Minister had replied that, "In the last three years, about 1.3% of HPS applications were rejected due to serious pre-existing medical conditions. The top reasons for such rejection is due to the applicant having multiple pre-existing medical conditions or cancer." I also note from the Minister's speech earlier that the expanded HPS would cover those with less severe pre-existing conditions.

Therefore, similar with Member Louis Ng's point, to what extent would the expanded HPS cover this cumulative 1.3% of HPS applications that were rejected in the past three years due to serious pre-existing medical conditions? What about those who were previously rejected by HPS and are now under private mortgage insurance?

Second, in the same Parliamentary Question response, the Minister had cited the affordability of premiums across all HPS policyholders and the financial viability of the scheme as considerations when reviewing the coverage of HPS. In this regard, how does the expansion of the insured base impact the premium for members in the medium term?

Third, I note that section 32A provides for the Board to impose premium loading on a CPF member whose assessed health risk exceeds the threshold determined by the Board, so long as the Board is satisfied that the member meets all other health-related criteria determined by the Board. Could the Minister explain the process by which the Board determines the health risk threshold and the frequency by which this threshold would be reviewed?

For members who must bear premium loading, what is the process and frequency for the Board to review these members' assessed risk and their premium loading payable? How does the Board determine the premium loading amount and would the amount vary from individual-to-individual and from year-to-year? If so, what is the expected variance?

Notwithstanding these clarifications, I support the Bill.

Mr Speaker: Mr Yip Hon Weng.

4.39 pm

Mr Yip Hon Weng (Yio Chu Kang): Mr Speaker, Sir, the CPF (Amendment) Bill we are debating today is about securing the future of our residents. Imagine a family's breadwinner is suddenly struck by illness or disability. Overnight, their world is turned upside down. The breadwinner can no longer provide, medical bills start piling up and anxiety sets in. In these difficult times, the last thing anyone should fear is losing their home. Yet, for many families, this fear becomes a reality when health crises strike unexpectedly.

The proposed expansion of HPS is a significant step toward addressing this concern. It offers a critical safety net for residents, helping them to manage the financial responsibilities of home ownership, especially in light of rising costs and uncertain circumstances. While I support this initiative, I seek clarity on several aspects to ensure these provisions truly protect the financial well-being of our residents, without creating unintended burdens.

First, Mr Speaker, Sir, I am concerned about the introduction of premium loading for residents with higher health risks under the HPS insurance scheme. While I understand the need for financial viability, this amendment risks increasing costs for those least able to bear them. Premium loading based solely on health risks could be seen as penalising residents for becoming ill. Is that truly fair? Section 32A of the Bill allows CPF Board to impose additional premiums. I urge the Minister to explain the rationale behind this measure and, more importantly, how will it impact low-income and elderly residents who are already grappling with healthcare expenses?

Second, Mr Speaker, Sir, I worry that this policy may disproportionately affect individuals with pre-existing conditions and those from lower-income groups. What safeguards are in place to prevent this? How will the Ministry ensure a balance between the scheme's financial sustainability and maintaining affordability and accessibility for all, regardless of health status?

I also urge the Government to consider the broader implications. Will premium loading inadvertently leave those who need protection the most without adequate coverage? We must not allow a policy designed to provide security to end up creating new challenges. By the time HPS is needed, how many members will have had to dip into their CPF to pay off their loans?

Third, Mr Speaker, Sir, I call on the Minister to ensure transparency in how premiums are adjusted, as stated in section 32A(3). This is critical to avoid arbitrary decisions, especially when it comes to reducing premiums for residents whose health improves. A clear and understandable framework will foster trust and fairness. How frequently will CPF Board review these premiums and how will such reviews be communicated to members?

Fourth, Mr Speaker, Sir, I seek clarity on the types of conditions that will be covered under the expanded scheme. The inclusion of individuals with serious pre-existing conditions is commendable. However, I ask for more clarity on the conditions that will be covered and how these assessments will be made.

I understand that eligibility is not based on a predefined list of conditions. Instead, it depends on the severity, prognosis and control of the condition, alongside the individual's overall health profile. However, many HPS applications in recent years have been rejected due to common pre-existing conditions like cancer, stroke or kidney failure. These are not rare conditions. They are the unfortunate realities faced by many of our residents. Some cancers detected and treated early pose a low risk of recurrence. Similarly, stroke patients who have been treated and have recovered well are less likely to experience another stroke. Should not these patients, who are now relatively healthy, be reconsidered for inclusion?

What avenues for recourse or appeal will CPF members have if their conditions improve but they are still rejected from extended HPS coverage or face higher premiums? Who will be on the medical review board making these decisions?

Can individuals undergoing treatment for common age related conditions, or those at risk of developing them, expect to be covered under the expanded HPS? Just as important, how will we communicate the eligibility criteria to the public in a transparent and easily understood way? Clarity is essential to avoid disappointment and to ensure residents can rely on the protection that HPS promises.

In closing, Mr Speaker, Sir, while the intent behind these policy changes is commendable, we must commit to transparency and clear communication. When premiums increase, we must be prepared to explain why and show how these changes will bring tangible benefits. We must also outline the support available for those who struggle with higher premiums, such as subsidies, payment plans, or alternative solutions. Most importantly, we need to ensure that safeguards are in place to prevent undue burdens and provide fair access for all Singaporeans, regardless of their financial situation.

With these commitments, I believe this Bill can enhance the well-being of all Singaporeans. Mr Speaker, I support the Bill.

Mr Speaker: Mr Neil Parekh.

4.45 pm

Mr Neil Parekh Nimil Rajnikant (Nominated Member): Mr Speaker, Sir, thank you for allowing me to join this debate on the important amendments to the CPF Act. Sir, the CPF (Amendment) Bill presents significant updates to the CPF Act of 1953, aimed at enhancing retirement adequacy and simplifying the management of CPF accounts. For Singaporeans, particularly those entering their silver years, this Bill represents a boost to financial security.

The automatic closure of CPF SAs at age 55 and the transfer of funds to the OA or RA, are a significant step towards streamlining CPF management. It ensures that retirees can efficiently access their savings when they need them the most.

This Bill also ensures that the provisions around clearer interest calculations and fund management foster greater trust in the CPF system, an essential element in preserving confidence in our social security infrastructure. These amendments can foster a more equitable labour market where workers have access to adequate retirement savings. This could enhance employee satisfaction and retention in the long run, benefiting businesses through reduced turnover and improved morale.

This Bill is also a win for businesses. The clarified guidelines for managing CPF-related insurance schemes, including the HPS insurance scheme, offer greater transparency and simplicity for employers managing insurance on behalf of their employees. The streamlining of CPF account administration also makes it easier for employers to manage contributions and compliance. These, in turn, will reduce administrative burdens, allowing businesses to focus on their core operations. However, besides providing some benefits to our citizens and businesses, this Bill may lead to certain challenges. Sir, I would like to seek some clarifications from the Minister.

One, could the Minister clarify when exactly the automatic closure of CPF SAs will take effect after a member turns 55? Will the members be notified beforehand and will they have options to manage their accounts before closure?

Two, how will the closure of SAs affect ongoing payments or contributions linked to these accounts?

Three, could the Minister provide more details on the formula for calculating interest on funds transferred from closed SAs?

Four, the Bill introduces expanded eligibility for the HPS, allowing coverage for individuals with serious conditions, subject to premium adjustments. How extensive will this coverage be for those with pre-existing conditions? How will premium adjustments for members with pre-existing conditions be handled, and will there be an appeals process if members disagree with the risk assessments?

Five, what support will be provided to small and medium enterprises (SMEs) to manage change of internal systems to handle the new CPF procedures that may increase compliance burdens for businesses, especially those with limited administrative resources? Six, could the Minister elaborate on the specifics of the governance changes that simplify the constitution of the CPF Board and what is the potential impact of this change? What changes have been made on the criteria for appointing the Chairperson and Deputy Chairperson of the CPF Board and how these appointments will ensure the CPF Board operates efficiently?

Sir, in conclusion, in my view, this Bill fosters better financial planning, greater transparency and confidence in our social security system. Together, these challenges will enhance both individual retirement readiness and the overall stability of Singapore’s workforce. Mr Speaker, Sir, notwithstanding my clarifications, this Bill has my full support.

Mr Speaker: Mr Edward Chia.

4.49 pm

Mr Edward Chia Bing Hui (Holland-Bukit Timah): Mr Speaker, Sir, I rise today to express my support for the CPF (Amendment) Bill 2024, particularly the expansion of the HPS. This amendment marks a significant step towards ensuring greater financial security for Singaporeans, especially those with serious pre-existing health conditions.

Currently, the HPS covers individuals in good health or with mild pre-existing conditions. Yet around 1.3% of applications are rejected annually due to more severe health issues. With this amendment, we will extend coverage to those previously excluded, specifically individuals with serious but well-managed health conditions. This is a commendable and forward-thinking initiative. However, as we continue to be more inclusive, it is crucial to explore how advances in medical technology can further enhance the scheme's scope. This brings me to my first point of incorporating medical advancements into HPS premiums.

We can look to countries like Germany and Canada for reference, where insurers frequently revise premiums for chronic illnesses, such as cancer, factoring in breakthroughs like immunotherapy and targeted treatments. This ensures that premiums reflect the progress of medical treatments. Singapore could benefit from such a similar approach of adopting a more dynamic review process. By integrating the latest medical advancements, we ensure that individuals receiving such treatments pay HPS premiums that are reflective of their improved health outlook.

May I ask the Minister what mechanisms does the Ministry have in place to regularly review HPS? Are there plans to incorporate advancements in medical treatments when revising premiums in such reviews?

My third point is about premium adjustments for patients in remission. In countries, such as Australia and the United Kingdom (UK), patients in remission often see a reduction in their premiums after a period without recurrence, two years in Australia and three years in the UK. With this in mind, I would like to ask the Minister what is the current review period and if the Ministry is considering shortening the review period for HPS premium adjustments for members in remission. Offering such relief would acknowledge the efforts of those who have overcome serious health conditions and now maintain stable health.

My fourth point is about broader risk pooling in national schemes. Countries like Sweden and Norway adopt an inclusive approach to risk pooling, spreading risks across the entire population. This significantly reduces the financial burden on high-risk individuals, making coverage more affordable for all. In Norway, for instance, the National Insurance Scheme provides automatic health coverage to all residents, including those with pre-existing conditions.

There is precedence in Singapore. MediShield Life provides an excellent example of how risk pooling can work effectively within a national scheme. It does so by spreading risks across a large pool, ensuring inclusivity for those with pre-existing conditions.

While MediShield Life already covers individuals with pre-existing conditions, HPS has historically excluded those with more serious conditions. Can we adopt a similar model for HPS, broadening the risk pool to alleviate the premium burden on high-risk individuals? Doing so, we protect the potentially more vulnerable members of our society.

My fifth point is about tiered coverage options for greater flexibility. In other countries, such as the United States and New Zealand, tiered insurance options allow individuals to choose lower coverage levels at reduced premiums. This flexibility is especially beneficial for high-risk individuals who may struggle to afford full coverage. I would like to ask the Minister if the Ministry would introduce tiered coverage options within HPS. This will provide individuals with serious pre-existing conditions the opportunity to opt for a lower coverage level at a more manageable premium, thus ensuring they are still protected within their financial means.

Mr Speaker, Sir, I would also like to raise clarifications on other aspects of this Bill. This is with regard to Prime and Plus flat owners who purchase their flats from HDB. Under the sale of these flats, owners must return to HDB a percentage of the resale price or the flat’s valuation, whichever is higher. This subsidy recovery is proportionate to the extent of additional subsidies initially provided. The repayment will take priority after any outstanding property tax and before HDB or bank loans, resale levies and CPF housing refunds.

However, clarification is necessary on two fronts.

One, the recovery of subsidies is premised on the flat being sold at a higher price than its purchase price. We should clarify the formulation of this refund in relation to the valuation at the time of sale, accounting for factors, such as lease depreciation, inflation and current market conditions.

Two, in the event of a property market downturn, how will the recoverable subsidies be calculated? The real-term valuation which takes into account inflation at the point of sale may be lower than the original purchase price or the grant’s initial value. This could lead to complications in determining the appropriate amount of subsidy to recover.

Hence, I seek the Minister to provide clarifications on the calculations concerning these two points. A transparent and fair approach to subsidy recovery, especially in fluctuating markets, will benefit both flat owners and the Government in maintaining clarity and fairness in the system.

Mr Speaker Sir, in conclusion, the CPF scheme has always served the interest of Singaporeans to meet their needs, and this move to amend our CPF scheme is a timely response to evolving times. This is especially true in areas, such as the expansion of HPS. This is also an opportunity to make the scheme even more dynamic, inclusive and equitable, especially for those with pre-existing health conditions. I urge the Minister to consider the suggestions. Notwithstanding this, I reiterate my support for this Bill.

Mr Speaker: Minister for Manpower, Dr Tan.

4.55 pm

Dr Tan See Leng: Mr Speaker, let me begin by, first, thanking Members for the support of the CPF (Amendment) Bill. I will first address questions related to the amendments to effect the closure of the SA for members aged 55 and above, followed by the expansion of HPS. As I have shared earlier on, these amendments are part of the evolution of the CPF system to continue serving the needs of Singaporeans over the course of their lives.

With regard to the SA closure, Mr Neil Parekh asked about how affected CPF members will be notified of the SA closure and Mr Louis Ng also asked about the resources extended to CPF members. All affected CPF members will be notified via hard copy letters and email or SMS, where applicable, informing them of the amounts that have been transferred into their RA and OA after their SA has been closed. To help Members plan ahead, CPF Board has enhanced the Retirement Dashboard on their website.

The dashboard allows members to view the estimated amounts that will be transferred from their SA to their RA and OA. Information is also available on the CPF website and across CPF Board's communication channels. Members who need further assistance can contact CPF Board directly.

Mr Louis Ng asked about the circumstances under which a member's SA will not be closed upon reaching age 55. These circumstances relate mainly to CPF members who pass away shortly before turning 55. We will not close their SA to streamline the administrative process for transferring these monies out of the CPF, for example, as payments to the members' nominees. Mr Parekh also asked about how the SA closure affects the computation of interest as well as ongoing payments and contributions. These are questions which CPF members are also likely to have. There are frequently asked questions today on CPF Board's website on these topics to help members.

But let me summarise the key points. As CPF interest is computed monthly, the SA savings that are transferred to the RA up to the FRS will earn the RA interest for that month. The remaining SA savings which are withdrawable will be transferred to the OA to earn OA interest for that month. Members who wish to earn the RA interest and commit their savings for higher retirement payouts can opt to transfer their OA savings to their RA up to the ERS within the same month.

If there are incoming CPF contributions to the SA, these will be allocated to the RA up to the FRS, either in cash or with a mixture of cash and property, and any remaining contributions in excess of FRS will be allocated to the OA and can be withdrawn.

For ongoing payments, transition measures will be put in place after the SA has been closed to ensure that members aged 55 and above have sufficient time to make the necessary arrangements. Participating members will be notified by the CPF Board of the relevant changes to the schemes and their options moving forward.

Mr Louis Ng also asked about how many members are expected to reach the FRS, following the transfer from the SA and if the Government will regularly share the number of members expected to reach the Basic, Full and Enhanced Retirement Sums.

As the transferred SA balances are not high, this is not expected to change FRS attainment by much. The BRS and FRS attainment rates are published on the website of the CPF Board annually. We have also been sharing the retirement sum attainment rates with the House through the recent Committee of Supply debates.

Assoc Prof Jamus Lim asked about what happens to members' SA investments after the SA closure, because he has alluded to the fact that it runs contrary to having some form of commitment that our members have been enjoying. After the SA has been closed, members can continue to hold their existing CPF Investment Scheme (CPFIS)-SA investments, until they decide to sell them or until they mature. Upon sale or maturity, the proceeds from the member's CPFIS-SA will be paid to their RA up to the FRS, with any remaining balance paid to their OA.

Members may also continue to use their OA monies to invest under the CPFIS-OA and this is consistent with the approach for CPFIS today. Members need to have set aside their FRS after turning 55 before they can invest under CPFIS. We will notify members in advance so that they are aware of the available options. Not providing any special treatment for CPFIS is also consistent with how we are not grandfathering older cohorts for SA closure.

To Assoc Prof Lim's point about retirement planning and how the cost of inflation has affected members and, thus, in a way, nudging them to consider stretching the CPF monies in terms of getting extra interest, I want to highlight that over the last five years, the Government has rolled out significant numbers of packages to support many of our residents in terms of addressing some of the cost of living issues. So, I will not touch on that further.

I want to highlight a point that today, there are about 8,400 members who are relatively high-income earners, representing less than 1% of all members aged 55 and above, who will not be able to — So, it is just this 8,400 members, about less than 1% of all members aged 55 and above, who will not be able to fully transfer their SA savings to their RA, even as we raised the ERS. By the way, we have raised the ERS to four times up from the current three times of BRS. So, we have raised it to four times the BRS.

Our members have the flexibility to either retain these savings in the OA for liquidity or invest in safe instruments, such as Singapore Government Securities through the CPFIS. Financially savvy members may also grow their savings outside the CPF system. In fact, those who are investment savvy may prefer to consider relevant commercial investment products or otherwise they can leave their monies in their RA to continue earning the higher long-term interest rate and receive higher retirement payouts.

I find, in terms of the statistics, looking at the numbers, I do not think that this move was motivated because of this SA shielding, because only a minority of members and that statistics is also available, about 2% in 2021 could have chosen to do so. So, we have extensively discussed this on several occasions in this House. As such, I seek Assoc Prof Jamus Lim and also Members' understanding that I will not repeat the points that have been raised and addressed before.

I am also very heartened, Mr Speaker, Sir, and Members of the House, that with the expansion of the HPS, this has been positively received. There were clarifications on the coverage, the extent of the coverage of the HPS, the necessity and impact of premium loading and the process for HPS premium reviews. I will address these in turn.

Mr Louis Ng and Ms Jean See asked if HPS already covers members with pre-existing medical conditions and how they will be affected. Mr Ng, Mr Yip Hon Weng, Mr Neil Parekh and Ms See also asked for clarity on the types of conditions covered under the expanded HPS and how many additional members would benefit.

The vast majority of HPS applications are approved, including for members with pre-existing health conditions, if they have been assessed to be generally in good health. This includes individuals who have fully recovered from a stroke for some time. It also covers those with early-stage cancer and have remained in remission for a period of time.

Members who are already eligible today would pay the same standard premiums. So, let me reiterate that. Members who are already eligible today would pay the same standard premiums. They will not be affected by the expansion of the HPS and the premium loading.

With the proposed expansion, more members with pre-existing health conditions may be considered for coverage with premium loading. Examples would include certain types of strokes and heart disorders. We estimate that this expansion will offer HPS coverage to approximately 100 more members each year. However, some applicants will remain ineligible for HPS because their conditions are just too severe to be insurable.

Overextending HPS coverage for members with significantly higher claim risks could negatively affect the sustainability of the HPS. This is also in line with industry best practices and ensures the sustainability of HPS for the general population.

Mr Neil Parekh and Ms Jean See asked how premium loading for members with pre-existing conditions would be handled. As with industry practice, each application is assessed individually. This means that eligibility for HPS coverage is assessed based on each member's personal health risk profile, taking into account overall severity, prognosis and control of all of their medical conditions. Where required, CPF Board obtains relevant information from medical professionals to gain a comprehensive understanding of the members' health status.

Mr Louis Ng and Ms Jean See asked if previously rejected HPS applicants will be notified that they can submit a new application to be considered again. The CPF Board will reach out to such members that may be eligible for cover under the expanded HPS. In fact, the Board already conducts outreach to members whose health conditions might improve to invite them to reapply for HPS with a medical report on their current health condition.

Mr Edward Chia also asked if the Ministry would introduce tiered coverage options within HPS. Similar to other HPS members today, those subject to premium loading can choose the extent of coverage by adjusting their share of HPS cover, as long as the co-owners' total cover add up to 100% of the outstanding housing loan. Participation for those subject to premium loading will also be on an opt-in basis. We regularly review HPS coverage and affordability and we will also study Mr Chia's suggestion.

Mr Yip Hon Weng asked about the rationale for HPS premium loading for members with higher health risks and whether there are safeguards in place to prevent individuals from lower-income groups from being disproportionately affected. Instead of premium loading, Mr Chia asked if HPS can broaden the risk pool to reduce the premiums charged on higher-risk individuals.

Today, all approved HPS applications are covered at a standard premium rate. With the expansion of HPS, the premium loading will apply to members with certain pre-existing health conditions that are not so severe and who previously would not have been eligible for cover. And the additional premiums will be commensurate with their higher claims likelihood. This is in line with industry practice and is necessary to keep the HPS scheme sustainable. Without premium loading, HPS premiums may need to rise across the board for all members, including for those in the lower-income groups, in order to cross-subsidise the higher claim rates by members with more serious conditions. Doing so would not be equitable.

Even with premium loading, HPS would provide coverage at one of the lowest premiums in the current market for all members. For members facing financial hardship, their familial co-owners can help to pay outstanding premiums. CPF Board also extends the grace period for premium repayment based on member's circumstances. Should members require help with their mortgage loans, HDB will assess each case and provide assistance. This can include allowing members to temporarily reduce or defer their loan instalments or extend their loan tenure to reduce their monthly instalments. Mr Neil Parekh asked about the appeal process for members who disagree with their risk assessments.

Mr Edward Chia and Ms Jean See asked about reviewing premiums for members in remission. Members subjected to premium loading who are looking to have their premiums revised, can submit a medical report on their current health condition. CPF Board will then assess their requests and adjust premiums accordingly.

For members who have signed on and they are under the HPS cover, if they develop health conditions after they have already signed up for the coverage, they will see no changes to their premium as a result. The HPS cover can also be ported over if they are looking to purchase a new flat.

Mr Yip Hon Weng and Mr Chia also asked about the process to review HPS premiums and Mr Chia also asked if advancements in medical treatment are taken into account when revising premiums.

Members of the House, to ensure that HPS premiums remain affordable, the CPF Board conducts premium reviews annually. During the review, several factors are considered, including the market competitiveness of HPS premium rates so that HPS remains affordable to members. CPF Board also considers the sustainability of HPS premium rates by taking into account factors, such as the claims experience, projected investment returns as well as the overall financial health of the Home Protection Fund.

For example, when there is significant improvement in health outcomes among the general population due to advancements in medical treatments, this will be reflected in the claims experience and factored in during the review process. The underlying assumptions are also validated by an external actuarial consultant to ensure robustness of the premium review.

Let me move on to clarifications regarding the second set of amendments to streamline the administration of the CPF Board and CPF schemes for better service delivery.

Mr Edward Chia asked for clarity and Assoc Prof Jamus Lim highlighted on potential gaps that could happen from the calculation of the subsidy recovery amounts when Prime and Plus flats are sold. As Mr Chia has rightly pointed out, the recovery rate will be applied to the flats' resale price or prevailing market value, whichever is the higher at the point of sale. The subsidy recovery percentage will be commensurate with the extent of the initial additional subsidy provided. HDB informs flat buyers of the subsidy recovery rate up front at the point of launch and the recovery rate remains fixed at the point of resale, regardless of whether the flat was eventually sold at a profit or loss compared to the original launch price.

This ensures fairness to other Standard flat buyers who did not enjoy the additional subsidies, who are, likewise, subjected to the vagaries of the market. The set of additional restrictions imposed on Plus and Prime flats helps to keep these flats in attractive locations affordable at the point of resale.

Finally, Mr Neil Parekh asked about the support provided to SMEs to manage the change of the internal systems to handle the new CPF procedures. The amendments are not expected to impact SMEs and employers. Nonetheless, there are existing channels for businesses and employers to provide feedback.

In conclusion, Mr Speaker, Sir, the Bill will allow us to ensure that the CPF system evolves to continue to meet the needs of Singaporeans over the course of their lives. I would like to, again, express my appreciation to Members of the House who expressed their support for the Bill. Mr Speaker, I beg to move.

5.16 pm

Mr Speaker: Are there any clarifications for Minister? Looks like there are no clarifications for Dr Tan.

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 Tan See Leng].

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