Central Provident Fund (Amendment) Bill

Order for Second Reading read.

12.06 pm

The Senior Minister of State for Manpower (Dr Koh Poh Koon) (for the Minister for Manpower): Mr Speaker, on behalf of the Minister for Manpower, I beg to move, "That the Bill be now read a Second time."

Sir, the Central Provident Fund (CPF) system is a key pillar of Singapore's social security system which helps residents with a long-term commitment to Singapore, such as Singapore Citizens (SCs) and Permanent Residents (PRs), set aside savings for retirement, housing and healthcare needs. This three-in-one feature is unique to our CPF system.

We regularly review and update the CPF system and the Bill brings into legal effect the following changes.

First, we had earlier announced in March this year that CPF accounts of non-residents will be closed from 1 April 2024. This Bill will give effect to this by ceasing non-residents' participation in CPF schemes. Second, the Bill introduces amendments to clarify and streamline the administration of CPF schemes for better service delivery to residents.

The first set of amendments brings us closer to the CPF system's core objective of helping residents meet their retirement, housing and healthcare needs.

As non-residents may choose to leave Singapore permanently at any point in time and are not expected to reside in Singapore in the long term, they are responsible for their own retirement and healthcare adequacy or home-ownership needs. We have gradually reduced the participation of non-residents in CPF schemes over the years. Non-residents have not been required to make CPF contributions since 1995. The option to make voluntary contributions was also removed in 2003. However, those who already had CPF accounts have been allowed to leave their past contributions in their accounts.

The amendments to completely cease the participation of non-residents in CPF schemes are the final steps that put the CPF system's core focus on supporting residents.

Non-residents should transfer their CPF savings to their bank accounts by 1 April 2024. CPF savings that are not transferred by this date will be transferred to the General Moneys of the Fund and will no longer earn the prevailing CPF interest.

As a transitionary measure, in the first three years from 1 April 2024, non-residents' monies in the General Moneys of the Fund will earn interest based on the three-month average of the three local banks' savings account interest rate, which is currently at 0.05% per annum. This is because non-residents can transfer their monies to their bank account at any time.

From 1 April 2027, three years after the change kicks in, non-residents' monies in the General Moneys of the Fund will no longer earn any interest. Non-residents are, therefore, encouraged to transfer these monies to their own bank accounts as soon as they can.

Non-residents' participation in CPF schemes, such as CPF LIFE, will also cease from 1 April 2024.

With these changes, the resources dedicated for the administration of CPF schemes will be better focused on supporting the needs of residents who have a long-term commitment to Singapore.

The second set of amendments clarifies as well as streamlines the administration of CPF schemes so as to improve service delivery.

Today, under the CPF Act, members need to explicitly authorise CPF Board to allow any person to access their CPF information after their demise. For those who were authorised by the deceased member, they still have to write in to CPF Board to obtain the deceased member's information. For those who are not authorised by the deceased to access the deceased member's CPF information, they would have to take the additional step of obtaining a Court order to access the information. Such processes complicate the handling of a deceased member's CPF account and add additional stress to families in bereavement. Just this year alone, CPF Board has already received more than 3,000 requests to access deceased members' CPF information, often from their family members who are trying to settle the members' post-death matters.

We will amend the CPF Act to make post-demise handling more convenient for the nominees and beneficiaries under the relevant intestacy laws of CPF members who have passed away. The amendments will allow nominees and beneficiaries under the relevant intestacy laws to access CPF information of deceased members, without members needing to explicitly authorise CPF Board to do so before they pass on. The CPF information that will be disclosed includes details, such as the deceased members' CPF balances, names of all the nominees and the proportion of CPF monies that the nominees will receive. It will also include details of the CPF schemes which the deceased members had participated in.

This is aligned to industry practices for wills and intestate distribution of assets by the Public Trustee where, generally, all beneficiaries are able to obtain information on the portion of the estate or assets each beneficiary will have.

Being able to access the deceased members' CPF information will also provide transparency to the nominees and beneficiaries under the relevant intestacy laws that the deceased members' CPF monies have been fully accounted for and disbursed accordingly.

The amendments will also clarify that CPF Board can process CPF transactions on or after a member's death.

Today, under the CPF Act, CPF Board should, generally, process CPF-related transactions up to the date of death of a member. The amendments will make clear that CPF Board is empowered to process certain transactions on or after the date of death of the member. These transactions typically arise or follow from obligations preceding the death of the member. They include inflows to the CPF accounts, such as refund of CareShield Life premiums to the member's MediSave account after death; and outflows from the CPF accounts, such as refunds to employers, if there were excess CPF contributions made.

Lastly, we will amend the CPF Act to allow CPF Board to have greater flexibility determining the form of the Notice to Attend Court for greater ease of administration and adopt more convenient and efficient modes of sending documents.

Today, the Act requires CPF Board to prescribe the form of the Notice to Attend Court in subsidiary legislation. With the amendments, CPF Board can make changes to the notice without having to amend subsidiary legislation. This is aligned with legislation governing other public sector agencies and allows for greater ease of administration when changes to the notice are required. CPF Board will publish a sample copy of the Notice to Attend Court on CPF Board's website so that members of the public can easily access and verify the authenticity and legitimacy of any notice received.

The amendments will also allow CPF Board to serve certain documents through an electronic service platform instead of in hardcopy, as they are required to do so today. This means greater convenience for CPF members, employers and other persons as they will be able to access more documents from CPF Board electronically.

For a start, selected hardcopy documents, notifications, such as the Notice of Contributions issued by CPF Board to self-employed persons, will be served electronically. Self-employed persons will still have the option to receive a hardcopy notice, by simply going to the CPF website to indicate their preference.

Sir, this sums up the administrative amendments to the CPF Act.

Allow me to conclude. The CPF Amendment Bill will effect the cessation of non-residents' participation in CPF schemes. This will allow us to focus the CPF system on supporting the needs of residents who have a long-term commitment to Singapore. It also clarifies and streamlines the administration of CPF schemes, such as by aligning with industry practices, to benefit residents and provide them with greater convenience. Mr Speaker, Sir, I beg to move.

Question proposed.

Mr Speaker: Mr Saktiandi Supaat.

12.16 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, Sir, one of the key amendments in this Bill is to limit CPF schemes to SCs and PRs only. Following the amendment, foreigners who currently have CPF accounts will either have to withdraw all CPF monies standing to their credit or have their monies transferred to the General Moneys of the CPF Fund which would not bear interest on or after 1 April 2024.

How many such accounts will be affected and what percentage of all CPF accounts do they constitute? Is there any particular demographic of workers that is especially affected by this change? As these workers will be entitled to withdraw all existing monies once they lose their right to participate in the CPF scheme, are we doing anything special to brace ourselves for the expected rate of outflow of monies from the system?

While it is understandable that we want to ring-fence the benefits of the CPF system to Singaporeans only, I am sure there were also good reasons why we allowed foreigners working here to participate in the CPF scheme previously. Can the Government share how those considerations have changed today?

One reason that immediately comes to my mind is to ensure the relative competitiveness and employability of Singaporeans. By disapplying the CPF system to foreigners working here, would that cause businesses and employers to turn away from Singaporeans to foreign workers since they do not have to pay additional CPF contributions for the foreign workers?

As the CPF system becomes inapplicable to non-PR foreigners, related schemes, such as the Lifelong Income Scheme and the Home Protection Insurance Scheme, will naturally have to be terminated for such individuals. I am just curious why the Bill expressly provides that the time prescribed for terminating such schemes "may differ for different classes of members". Perhaps the Minister can provide some clarification on what the provision seeks to address.

Is the move to ring-fence the benefits of CPF to Singaporeans a sign that we will be seeing significant changes to the system? When many Members, including me, queried the relevance of the CPF interest rate pegs amidst soaring inflation and global interest rates, Minister Tan See Leng stated during the Committee of Supply 2023 that the Ministry is watching this interest rate environment very closely to ensure that the CPF interest rate pegs remain relevant in the prevailing operating environment. Are we about to see an increase in the 2.5% and 4% pegs for the CPF Ordinary Account (OA) and other accounts respectively?

I am glad that we are taking steps to make it even easier for a CPF member's monies to be disbursed to beneficiaries upon the member's death. When we last debated amendments to the CPF Act in 2021, this House was informed of how CPF Board already reaches out to nominees once it is notified of a member's death and it disburses the monies within a month.

The Bill now introduces a power for the CPF Board to disclose certain information about the deceased CPF member to his or her nominees or any persons who would be the member's beneficiaries if no nomination was made. This would enable nominees and beneficiaries to come forward and withdraw the member's leftover CPF monies even more quickly.

Since 2021, what percentage of deceased members' accounts was not disbursed and emptied within a month of the member's death being notified to CPF Board? And what percentage of deceased members' accounts still contained unclaimed CPF monies six months after CPF Board is notified of the member's death, such that the monies had to be transferred out into the general CPF fund and no further interest is payable on such monies?

Before these amendments, what percentage of CPF members gave their consent to the CPF Board to disclose information after death, when making their nominations of the persons entitled to receive their CPF monies upon their death?

Under the new section 59(11), the information which CPF Board may disclose without consent includes the deceased member's CPF accounts, any nomination made by the member and "any other information as may be prescribed in regulations". So, the question I have is: will the prescribed information be broader than the scope of information that a member can presently consent to the CPF Board's disclosure? Mr Speaker, Sir, notwithstanding the clarifications sought, I support the Bill.

Mr Speaker: Mr Leong Mun Wai.

12.20 pm

Mr Leong Mun Wai (Non-Constituency Member): Mr Speaker, Sir, one of the main objectives of this Bill being debated today is to amend the CPF Act 1953, to limit CPF schemes to SCs and PRs only. This is the culmination of changes to CPF that began almost 30 years ago. Prior to August 1995, some categories of foreign workers, most notably, Employment Pass (EP) holders, had to make CPF contributions in line with the prevailing rates of Singaporeans and PRs. Similarly, their employers also had to make CPF contributions for these foreign workers. However, after 1 August 1995, all foreigners were exempted from CPF contributions. At that time, the Ministry of Labour, which is now the Ministry of Manpower, stated that the only reason for the change was to streamline the CPF rule for all foreign workers. But even in 1995, there was already concern that exempting foreign workers, especially EP holders, from CPF contributions would have negative impacts on Singaporean workers, especially the middle-ranking PMETs, because employers would benefit from lower wage cost when they employ new foreign staff.

An article in The Straits Times on 15 July 1995 noted that Singaporean workers would become less competitive against foreigners if employers do not make up for all or some of the CPF forgone by the foreign worker, especially if the foreigner was here on local terms. Even the then Menteri Besar of Johor, Mr Abdul Ghani bin Othman expressed his concern that the rule change would make Singapore a more attractive place to work for Malaysians, especially those from Johor.

Were these concerns without basis? We can now examine this with the benefit of the experience of the last 30 years. Since the rule change in 1995, the number of EP holders in Singapore has increased substantially. In the mid-1990s, there were only 50,000 EP holders in Singapore, accounting for less than 3% of the labour force at that time. Today, as of June 2023, there are almost 200,000 EP holders in Singapore, accounting for close to 6% of the labour force. I am not suggesting that the exemption of EP holders from CPF contributions has been the only reason driving the increase in the number and proportion of EP holders among the workforce in Singapore. But there is no doubt that this policy does make our local professionals less competitive against foreign professionals. A company can hire a foreign professional holding an EP at a monthly salary of $5,000. Same as Singaporeans. But the employer would have to pay an extra $850 in CPF contributions for the Singaporean worker. The Singaporean's wage bill for the employer is $5,850, but the Singaporean only gets to take home $4,000. As for the EP holder, the employer's wage bill remains as $5,000 and the EP holder gets to take home the whole $5,000. It is a win-win situation for both the employer and the EP.

It should be no wonder that the employers in Singapore have become more reliant on EP holders since the rules were changed almost 30 years ago. The Minister for Manpower has denied that several times in this House in response to my questioning, quoting other costs that the employers have to bear. However, the fact remains that the change of the law in 1995 has given an advantage to employers who employ foreign workers and PMETs. That advantage became a menace to Singaporean workers after the Government opened up the local job market to foreigners since the early 2000s. We are not calling for a return to the old days, where EP holders had to make CPF contributions, in line with Singaporean workers. However, we believe that, even until today, not enough has been done to mitigate the negative impacts caused by this policy, which has helped to make Singaporean workers less competitive against foreign workers and depress the wages of Singaporean workers. What can be done to mitigate these negative impacts?

PSP would like to put forth two suggestions.

Firstly, we need to level the playing field for Singaporean workers by imposing a $1,200 monthly levy on all EP holders immediately. We have made this call in this House before, during the Budget debates in 2021 and 2023. In March, the Minister said that I keep harping on this thing about imposing a levy. But I am going to repeat this again. This levy will take up a smaller portion of the high salaries of the true foreign talents and differentiate them from lower-wage foreign professionals who are being used as low-cost labour and depressing the wages of Singapore professionals. This way, we will be able to get the best, highest quality talent to come to Singapore from anywhere in the world.

Secondly, we need to ensure that Singaporeans earn higher returns on their CPF balances to compensate for the lower wages they earn as a result of the expansion of the foreign PMET intake in the last two decades. In a written answer to my colleague Ms Hazel Poa's question in September, Minister Tan See Leng revealed that the overall average CPF interest rate, including extra interest, across the different types of CPF accounts and balances, from 2018 to 2022, is close to 4% per annum, which means it is less than 4% per annum. As CPF balances are long-term retirement funds kept with CPF Board for 30 to 40 years, there is room for the returns on CPF accounts to be higher. Singaporeans currently have limited options to increase the returns on their CPF savings. They can only leave the money in their accounts and earn the fixed interest rates given by the Government, or invest savings above a threshold in the CPF Investment Scheme (CPFIS). Although the experience of the CPFIS, which is essentially a self-managed investment account is not encouraging, perhaps due to limited investor knowledge and lack of investment opportunities in the local capital markets, we should allow Singaporeans to put more of their CPF savings with professional managers.

In 2016, the CPF Advisory Board had recommended that a new lifetime retirement investment scheme, which is managed by professionals, be introduced. Under this scheme, CPF members will be allowed to invest some of their CPF savings in simple-to-understand, low-fee, well-diversified life-cycle investment products.

Such products will be passively managed and carefully selected by the CPF Board. The funds would most likely invest in higher-risk, higher-return assets such as equities when the CPF member is younger and lower-risk, lower-return assets such as bonds when they are closer to their retirement age.

Similar funds are offered by the Australian superannuation scheme or 401K scheme in America, which some Singaporeans may already be familiar with. This will be an additional option for most CPF members which may earn higher returns on their investable CPF savings.

According to statistics published by the US Department of Labor, 401K plans return about 6% to 10% per annum when we assess the rate of return over a five-year period.

While the returns each year will be much more volatile than a fixed interest rate from CPF, CPF members should be able to earn a higher return through the lifetime retirement investment scheme over 30 or 40 years.

On top of this, the lifetime retirement investment scheme can help grow our local fund management industry and preventing Singaporeans from being over-invested in property.

The Government had accepted the recommendation to set up the Lifetime Retirement Investment Scheme in 2016. However, it has still not yet been implemented. Why is this the case?

The Government should not stay silent on this issue and set up the Lifetime Retirement Investment Scheme so that Singaporeans have the option to increase the returns on their Ordinary Account and Special Account savings by investing them in low-fee, passively managed investment products.

If the Government is not prepared to allow Singaporeans to do this, then it should increase the interest rates that it pays to CPF members. This is possible because GIC returns more than 4% a year.

The Government should share with Singaporeans more of the differential between what it pays Singaporeans in CPF interest and what it earns from GIC in investment returns. This will go a long way in improving the retirement adequacy of Singaporeans whose wages have been depressed by the influx of lower-wage foreign workers over the last few decades.

Mr Speaker, notwithstanding what I have said, I support the Bill. For country, for people.

Mr Speaker: Mr Louis Ng.

12.34 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill updates the CPF rules to limit the CPF scheme to only SCs and PRs. The Bill also updates rules relating to the death of a CPF member.

CPF is one of Singapore's unique features. CPF plays an important role in our social stability by helping Singaporeans have a strong retirement nest egg set aside to age gracefully. I support this Bill as it represents a continued focus on this purpose.

I have three points of clarification to raise.

My first clarification is how we ensure that new citizens or PRs will have sufficient amounts set aside for their retirement.

The changes in this Bill reinforce that CPF is meant for the retirement needs of Singaporeans and PRs. However, Singapore remains an open economy. There are people who continue to take up citizenship or PR status. At the point that they take up citizenship or PR status, they may not have any CPF savings. Depending on their age, they may not have the time to build up their retirement reserves. If new citizens and PRs do not have sufficient retirement reserves, they too will have to rely on public infrastructure in their retirement years. How does the Government ensure that any new citizens and PRs have sufficient savings to be self-reliant in their retirement years?

My second clarification is on the change of timing when making computations for deceased members. The Bill changes this from the actual time of death to the time CPF is notified. Can the Minister elaborate what practical effect these changes will have for Singaporeans?

The CPF website states that there is no need for Singaporeans to notify the CPF Board. Can Singaporeans assume that notifications are made automatically to the CPF Board on the same day a death is reported? Is there any risk that this would adversely affect the accounts of a deceased member or payouts to their nominees?

CPF can appear complex to Singaporeans and making sure the rules are clear to Singaporeans will give them greater confidence in the system.

My third and final clarification is on the adjustment to CPF interest rates. We are in an environment of rising interest rates. Many Singaporeans save in and even voluntarily top up their CPF, knowing it is a safe vehicle for their retirement savings with an attractive interest rate.

However, this year we saw the pegged rate for the Special and MediSave accounts go above the floor rate. Various savings and investment products are also advertising rates above the Ordinary Account interest rate. Singaporeans may thus want to chase higher interest rates and through riskier products. Can the Minister elaborate on the Government's approach to adjusting the interest rate? Will the rates be reviewed in the near future so that our ageing population can have a larger retirement nest egg?

Sir, notwithstanding my clarifications, I stand in support of the Bill.

Mr Speaker: Mr Yip Hon Weng.

12.37 pm

Mr Yip Hon Weng (Yio Chu Kang): Mr Speaker, Sir, the amendments in the CPF Bill enhance our CPF system in two key aspects – prioritising Singaporean Citizens (SCs) and Permanent Residents (PRs) and streamlining the administration of CPF schemes for improved service delivery. I seek clarification on a few points.

First, Mr Speaker, Sir, I seek clarification on the policy intent behind the closure of CPF accounts for non-SC/PR individuals.

When was the requirement for CPF contributions by non-SC/PR members introduced? Despite the prohibition on contributions from foreigners since 2003, about 300,000 non-SC/PR individuals remain in the CPF system. Among them are those who received contributions or made voluntary contributions since 2003 as well as former SC/PRs who relinquished their citizenship or permanent residency.

Were active steps taken to encourage SC/PRs to close their accounts over the years? How much does CPF expect to pay out when these accounts are closed and how much of these payments are accrued interest? Can CPF share projections regarding the number of individuals expected to transition to the Supplementary Retirement Scheme (SRS)?

Regarding the impact of individuals transitioning to the SRS, SRS contributions are entitled to income tax relief. However, withdrawals are subject to income tax. Does this policy align with our broader economic goals? Do the economic benefits of this policy, such as potential tax revenues and investment funds, outweigh the incentives provided to foreigners to grow their retirement accounts in Singapore?

These questions reflect the concerns and curiosity of some Singaporeans who may perceive the policy as the Government simply facilitating the growth of retirement funds for foreigners.

Can the Government share more about the policy considerations on this matter? Will individuals in the process of applying for SC/PR status be allowed to retain their CPF accounts during this period or are they required to close their accounts and later re-establish them upon attaining SC/PR status?

Next, Mr Speaker, Sir, I have queries on the policy amendments on the disclosure of deceased members' CPF information. I would like to seek clarification on whether disclosure will be limited to one instance or if all next of kin, beneficiaries or nominees will be entitled to request such information.

What mechanisms will be in place to ensure that the requestors are likely beneficiaries when a member passes away without a will or Court order? Moreover, how does the Board determine that such information will be accessed by individuals whom the deceased member did not intend to be beneficiaries?

In conclusion, Mr Speaker, the changes in this Bill to focus the CPF system on Singaporeans and PRs are the right approach. The CPF system was set up as a compulsory savings plan for working Singaporeans and PRs primarily to fund their retirement, healthcare, education and housing needs. We should ensure that the system remains focused on its target beneficiaries. Additionally, we should strive for efficiency and resident-centric administration of CPF schemes for better service delivery. I support the Bill.

Mr Speaker: Mr Don Wee.

12.40 pm

Mr Don Wee (Chua Chu Kang): Mr Speaker, Sir, I support the proposed amendments to limit the CPF system to SCs and PRs. Much work and resources are required to administer CPF accounts and to pay interests on the funds. It is timely to close the roughly 300,000 accounts set up by non-SC/PRs from more than 20 years ago, before 2003.

May I ask the Minister what is the total amount in these accounts? How much operational savings is expected as a result of these amendments? With the closure of these accounts, the remaining savings will cease to earn the prevailing CPF interest rates. Would CPF consider to stop paying any interest at all? How will CPF Board return the funds to account holders whose bank accounts are closed? Mr Speaker, Sir, in Mandarin.

(In Mandarin): What is the deadline for the withdrawal of the monies? In the event of the death of account holders, what is the deadline for the family members or beneficiaries to claim the monies?

What happens if the account holder does not have any beneficiary in Singapore? What will CPF do with the unclaimed amount? Can the money, for example, be included as part of the Ministry of Manpower's budget and be used for purposes, such as helping SMEs to train and develop their Singaporean workers?

If both the account holder and the spouse had passed on and the account owner had few children, will all their children be classified as the next-of-kin and receive the same amounts?

Regarding the amendments to disclose deceased members' CPF information to nominees and beneficiaries without the need to obtain a Court order, what happens if the next-of-kin is neither a nominee nor beneficiary? Can he still get the deceased's CPF information?

(In English): I support the Bill.

Mr Speaker: Senior Minister of State Koh.

12.43 pm

Dr Koh Poh Koon: Mr Speaker, let me begin by thanking Members for their support for the CPF (Amendment) Bill.

Let me first start by addressing questions related to the first set of amendments to cease participation of non-residents such as non-SC/PRs in CPF schemes.

Mr Saktiandi Supaat asked whether there are new considerations that led to these changes. Actually, we have been gradually moving towards ceasing the participation of non-residents in the CPF system across the years. We have removed mandatory CPF contributions for non-residents since 1995 and disallowed voluntary CPF contributions by non-residents since 2003.

Hence, the amendments in this Bill are the final steps to ensure that the CPF system is focused on the core objective of supporting the retirement, housing and healthcare needs of residents here in Singapore.

Mr Saktiandi Supaat also asked whether ceasing the participation of foreign workers in the CPF system will cause businesses and employers to turn away from Singaporeans since employers do not have to pay additional CPF contributions for foreign workers. Mr Leong Mun Wai is similarly concerned about Singaporean workers being less competitive than foreign workers.

Let me explain that Qualifying Salaries for Employment Pass (EP) and S Pass holders are in place as a lever to ensure that non-residents are not under-cutting wages of residents.

Qualifying Salaries are benchmarked against local wages, inclusive of employer CPF contributions. The EP and S Pass Qualifying Salaries are benchmarked to the top one-third of local professionals, managers, executives and technicians (PMETs) and associate professionals and technicians (APTs) respectively.

Based on the way that we benchmark the wages of EP and S Pass holders, there is no wage-cost advantage for employers to hire foreign professionals. That is one area that Mr Leong has raised that I would like to dispel.

And this has been previously addressed in various Parliamentary Questions (PQs). Mr Leong's characterisation of EP salaries being lower than local PMETs is also inaccurate as we have been raising it regularly and have now benchmarked it to the top one-third of local PMET wages. In fact, the $5,000 qualifying salary that Mr Leong cited is for a young EP – a young EP holder at the age of 23, just joining the workforce.

This increases progressively with age to $10,500 a month at age 45 and above. And for the financial services sector, it is even higher, to take into account the consideration that there are higher salary norms in these other sectors.

The rest of Mr Leong's obtuse and illogical argument to link this to CPF returns is outside the scope of this Bill and it is quite irrelevant to this discussion. So, I will not attempt to do mental gymnastics with Members here in this House.

Mr Saktiandi Supaat also asked how many non-resident accounts will be affected and whether we are going to do anything to prepare for the expected outflow of monies from the CPF system. Mr Yip Hon Weng and Mr Don Wee also asked about the size of CPF balances being transferred out of the CPF system.

There are approximately 300,000 non-residents who will cease participation in the CPF schemes. The majority of these non-residents have low CPF balances, with approximately 70% of them having less than S$5,000 in their CPF accounts. The median CPF balance is $1,500. Non-resident CPF balance is, in fact, only about 1% of all CPF balances. So, the outflow of non-resident CPF balances will not pose liquidity issues.

Mr Don Wee asked how much operational savings are expected as a result of these amendments. To give Members some sense of the additional operational load on CPF Board to serve non-residents, let me explain that CPF Board has separate manual processes to manage service requests from non-residents, such as undertaking additional steps to verify their identity, as these non-residents do not have access to Singpass. Hence, ceasing the participation of non-residents in CPF will result in more efficiency for CPF Board.

Mr Saktiandi Supaat asked why the timeline to cease non-residents' participation in CPF schemes may differ for different groups of members. There are broadly two different groups of members. The first are existing non-residents who have already left Singapore or have not been working for some time here in Singapore. The second are members who become non-residents after 1 April 2024.

For existing non-residents who are already known to us, we are able to process the accounts ahead of time so that their participation in CPF schemes will cease starting from 1 April 2024. However, for current residents who become non-residents only after 1 April 2024, we can only cease their participation in CPF schemes from the date that they renounce their Singapore Citizenship or their Permanent Residency. Hence, some time is required to wind up their participation in CPF schemes, depending on the specific circumstances.

Mr Yip Hon Weng asked whether those in the process of applying for Singapore Citizenship or Permanent Residency can be allowed to continue participating in CPF schemes.

Those who already hold Permanent Residency and are applying for Singapore Citizenship will continue to participate in CPF schemes. For non-residents who are applying for Permanent Residency, the general application processing time is about six months and some applications may take longer to process. Hence, for those who still hold non-resident status as of 1 April 2024, their participation in CPF schemes will cease.

Nonetheless, once they are granted Permanent Residency, they will then be part of the CPF system. CPF Board had also announced in March this year how non-residents' participation in CPF schemes will cease, which should give ample lead time for the transition of these members.

Mr Don Wee also asked how CPF Board will return the CPF balances to account holders whose bank accounts are closed. Non-residents can choose to transfer their CPF monies to their local or overseas bank accounts or via cheques.

Mr Don Wee also asked about the deadline for the transfer of monies by the member, or, if they are deceased, by their beneficiaries who may not be in Singapore. He also asked what CPF Board would do with the unclaimed monies and whether it could be used, for example, as part of the Ministry of Manpower (MOM)'s budget.

There is no deadline for non-residents to transfer their CPF monies. They can do so at any time. If non-residents have passed on, there is also no deadline for their nominees or beneficiaries under the relevant intestacy laws to claim the monies. These unclaimed monies will continue to be held for the non-residents in the General Money of the Fund. And while I would like to have additional budget for MOM's needs, we cannot use this money as part of MOM's operating budget or, for that matter, for any other purposes.

Mr Louis Ng asked if new citizens and PRs will have sufficient savings to be self-reliant. In general, new citizens and PRs are required to either be economically active or have the means to support themselves through employment or family support. CPF savings are not their only means to attain retirement adequacy. And, in fact, many Singaporeans and PRs also tap on their savings and family support to meet their own retirement needs.

Mr Yip Hon Weng asked whether there are projections regarding the number of non-residents expected to sign up for the Supplementary Retirement Scheme, also known as SRS, and whether the Government is, in fact, facilitating the growth of retirement funds of non-residents by providing them tax relief through SRS.

The Member has linked SRS to CPF. Let me clarify this very common misconception.

SRS is operated by the private sector, where participation is voluntary and contributions are made through cash, not CPF monies. Contributions to SRS are separate from the CPF scheme and SRS is a mechanism for anyone who wishes to save money for retirement. So, SRS members are able to use savings in their SRS account to invest in commercial investment products in the market and the investment returns from these commercial products can complement CPF to support their retirement. But it is, in fact, quite a separate thing from CPF.

The only thing they have in common, is that they help to add to the retirement adequacy needs of the individual. So, as SRS is voluntary, we are not able to predict the number of sign-ups.

Mr Saktiandi Supaat, Mr Louis Ng and Mr Leong Mun Wai asked about whether the interest rates and returns of CPF accounts will increase in the future. This is not relevant to today's CPF (Amendment) Bill, but nonetheless, let me respond briefly by saying that the Ordinary, Special and MediSave Account interest rates are reviewed quarterly while the Retirement Account interest rate is reviewed annually, according to the pegged rates.

Despite the low interest rate environment in the last decade since the global financial crisis, the Government paid generous CPF interest rates due to the floor rates of 4% for the Special, MediSave and Retirement Accounts and 2.5% for the Ordinary Account. When the pegged rates exceed the floor rates, members will correspondingly earn the higher interest rates on their CPF savings. So, we will continue to review the CPF interest rates to ensure that returns remain relevant while taking into consideration the longer-term outlook.

Let me move on to clarifications regarding the second set of amendments to streamline the administration of CPF schemes for better service delivery. On aligning disclosure practices upon a member's death to industry practices, Members have asked questions about who will receive the deceased member's CPF information and what information will be disclosed. Some Members have also asked questions on the disbursement of CPF monies after a member's death.

On who will receive the deceased member's CPF information, Mr Yip Hon Weng asked whether the disclosure of deceased member's information is limited to one person or all of the next-of-kin, beneficiaries and nominees. Mr Don Wee also asked whether the information would be disclosed to a next-of-kin who is neither a nominee nor a beneficiary under the relevant intestacy laws.

All nominees and the deceased's beneficiaries under the relevant intestacy laws will be allowed to access the deceased member's CPF information. To be clear, if a family relation is not considered a next-of-kin under the relevant intestacy laws, they will not be allowed access to the deceased member's CPF information.

Mr Saktiandi Supaat asked what percentage of CPF members gave consent to CPF Board to disclose information after death when making their nominations of the persons entitled to receive their CPF monies upon their death. Mr Yip Hon Weng also asked whether the amendments entail information being accessed by those not intended by the deceased member.

Today, nine in 10 members who make nominations have already authorised all their nominees to access their CPF information upon the members' demise. Hence, for the vast majority of those members today, the amendments are, in fact, aligned with their intentions.

Being able to access the deceased member's CPF information and nomination details without requiring explicit authorisation by deceased members is aligned to industry practice for wills and intestate distribution of assets by the Public Trustee. It is intended to provide convenience to settle deceased member's post-demise matters. It also ensures transparency so that all nominees and beneficiaries under the relevant intestacy laws are assured that the deceased members' CPF monies have been fully accounted for.

On what information will be disclosed, Mr Saktiandi Supaat asked whether the information that nominees and beneficiaries under the relevant intestacy laws can access is broader in scope than what authorised members can access today.

In general, only details that will help nominees or beneficiaries under relevant intestacy laws settle the deceased member's post-demise matters will be disclosed. This will include details of the deceased's participation in CPF schemes, but exclude details of the relationships between nominee and the deceased, as well as information on the deceased's witnesses to the nomination.

On the disbursement of CPF monies after a member's death, Mr Saktiandi Supaat asked what percentage of deceased members' CPF monies was not disbursed within a month and remained unclaimed six months after the notification of death to CPF Board.

From 2021 to 2023, on average, around 70% of deceased members' CPF monies were disbursed by CPF Board or transferred to the Public Trustee for disbursement within five weeks upon notification of death. For the same period, on average, only 5% of nominated monies remained unclaimed six months after notification of death.

Mr Don Wee asked whether in the event that the member and their spouse have passed on, would the children from the marriage be considered as next-of-kin and receive the same amount of CPF monies. Now, where the deceased member did not make a nomination for his CPF monies, the member's children would be considered next-of-kin and receive equal portions based on the distribution rules under the Intestate Succession Act. However, if there is a valid nomination, it will go to the surviving nominees, which may or may not be the children, depending on the nomination.

On allowing transactions to continue after a member's death, Mr Louis Ng asked what practical effect these amendments will have for Singaporeans. As explained in my opening speech, the amendments seek to clarify the Board's powers to process the necessary transactions after a member's date of death. Singaporeans will not experience any changes in the computation of the CPF balances to be paid out to the nominees and beneficiaries under the relevant intestacy laws.

Mr Speaker, in closing, I would again like to express my appreciation to Members of the House who have expressed their support for the Bill. The Bill will allow us to continue to focus the CPF system on supporting residents' retirement, housing and healthcare needs. Residents will also benefit from the streamlined administration of CPF schemes. Mr Speaker, I beg to move.

Mr Speaker: Do Members have any clarifications for the Senior Minister of State? Mr Leong Mun Wai.

1.00 pm

Mr Leong Mun Wai: Mr Speaker, I would like to clarify with the Senior Minister of State on the impact of the CPF contribution on the Singaporean workers vis-à-vis the EP.

I have discussed or debated about this several times with the Minister and also the Senior Minister of State, over the course of the last few years in this House. And the reasons that the Minister and the Senior Minister of State have given, are the same as what he had said today – that that disadvantage for the Singaporean workers has been mitigated through adjusting the minimum Qualifying Salary.

But what I would like to clarify and like to say is that one, there are two things about the minimum Qualifying Salary. One is that the Minister and the Senior Minister of State has said that the minimum Qualifying Salary will be adjusted according to the age of the EP. But that adjustment is not totally transparent to the public or to all of us. We need more information as to how they adjust that and then that would negate the negative impact on Singaporeans.

Secondly, the minimum Qualifying Salary has been adjusted over the years. However, I think I would also like to point out that it is only in recent years that a minimum Qualifying Salary has been adjusted upwards many times. For the longest time, since 2000, when we opened the flood gates for foreign workers, the minimum Qualifying Salaries has actually remained at very low levels. In fact, I think until December 2020, the minimum Qualifying Salary was only $3,900. I cannot remember all —

Mr Speaker: Mr Leong, your clarification please.

Mr Leong Mun Wai: So, I would like the Senior Minister of State to explain how adjusting the minimum Qualifying Salaries can totally negate the negative impact of Singaporeans workers having to pay CPF but EPs do not have to pay CPF.

Dr Koh Poh Koon: Mr Speaker, how we derive the Qualifying Salary is a methodology we adopt from wage data that we get and it has all been published. This question that Mr Leong has asked has also been answered several times in the PQs. It is irrelevant to today's amendment Bill and I think if he wants to really have even more PQs answered on this, he should file PQs in subsequent Sittings. I do not want to waste Members' time arguing about something that has been answered before, that is irrelevant to today's administrative amendment of two particular aspects of the CPF.

Mr Speaker: Anyone else? Any clarifications to seek from Senior Minister of State Koh? No.

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 Koh Poh Koon].

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