Central Provident Fund (Amendment No 2) Bill

Order for Second Reading read.

The Minister for Manpower (Mr Lim Swee Say): Mdm Speaker, I beg to move, "That the Bill be now read a Second time."

This Bill will amend the Central Provident Fund Act, or CPF Act, in four areas.

First, provide CPF members with the flexibility to make advance applications for a lump-sum withdrawal from their Retirement Account upon reaching their Payout Eligibility Age (PEA). Second, allow payouts under the Retirement Sum Scheme to begin automatically upon the member reaching 70 years of age. Third, fully effect the MediSave changes relating to the introduction of the Basic Healthcare Sum (BHS) which took effect from 1 January 2016. Fourth, make various amendments to clarify and streamline the administration of some parts of the CPF system.

Madam, the first amendment is to implement the recommendation by the CPF Advisory Panel to allow members who turned age 55 in 2013 or later to make a lump-sum withdrawal of up to 20% from their Retirement Accounts when they reach PEA.

With this change, members will have three options on their lump-sum withdrawal. First, withdraw the lump sum starting from their PEA birthday. Second, defer withdrawing the lump sum beyond their payout start date for CPF LIFE or the Retirement Sum Scheme by transferring this lump sum to the Ordinary Account. Third, convert the lump sum into monthly payouts through CPF LIFE or the Retirement Sum Scheme.

The second amendment simplifies the activation of CPF payouts for members on the Retirement Sum Scheme.

Today, members who join the CPF LIFE scheme will receive payouts automatically when they reach age 70. However, members on the Retirement Sum Scheme have to apply to start their payouts. Some of them may not have done so despite receiving reminders from CPF Board around two months before their PEA.

We are, therefore, amending the CPF Act to allow for automatic starting of payouts at age 70 for members on the Retirement Sum Scheme. This approach is similar to that for CPF LIFE and will start in 2018. About one in three members are expected to benefit from the automatic starting of payouts under the Retirement Sum Scheme.

The third set of amendments updates the CPF Act to support the implementation of BHS which took effect on 1 January 2016.

The BHS was introduced by MOH for CPF members to meet their basic subsidised healthcare needs in old age. BHS is fixed for each cohort when they turn 65 years old. It is the maximum amount a member can set aside in his MediSave Account. Any additional MediSave contributions above BHS are transferred to the member's Special or Retirement Accounts to increase his retirement income. In addition, members aged 55 and above now no longer need to top up their MediSave Accounts, before withdrawing from their Ordinary and Special Accounts.

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To fully effect these changes, we are amending the CPF Act to remove obsolete provisions relating to the MediSave Minimum Sum and fix the BHS for each cohort when they turn 65 years old.

The fourth and last set of amendments provides greater clarity and efficiency in the administration of some parts of the CPF system and this includes replacing the Minimum Sum with the Retirement Sum, clarifying the administrative financial penalties framework, recovery of Government grants and other payments made in error and catering for members whose birthdays fall on 29 February. I will provide just one example on simplifying the MediSave top up process for family members.

Today, members aged 55 and above who have already set aside their cohort Full Retirement Sum have to withdraw the excess monies from their Ordinary and Special Accounts in cash before they can use it to top up the MediSave Account of certain family members aged 55 and above.

The amendment will enable members to make such top ups directly from their Ordinary and Special Accounts to the MediSave Accounts of these family members.

In conclusion, the Bill provides greater flexibility, healthcare assurance, as well as simplifies certain administrative procedures for greater convenience for CPF members. Mdm Speaker, I beg to move.

Question proposed.

4.31 pm

Er Dr Lee Bee Wah (Nee Soon): Mdm Speaker, I wholeheartedly welcome the changes to make the CPF system more friendly and flexible. It shows that our Government acts responsibly and responsively.

Firstly, fixing the Basic Healthcare Sum for each cohort is a great relief to Singaporeans. Many Singaporeans were worried that the Minimum Sum is a moving target and they will not be able to reach it when they retire. This change gives them some certainty. Offering different levels of savings on top of the sum also gives members flexibility and choice.

Second, members will now have the flexibility to make a lump-sum withdrawal of up to 20% of their Retirement Account after reaching their Payout Eligibility Age (PEA), 65 years old for most members. This is great news for members who need some extra cash to pursue their interest or dream upon retirement.

I share the Government's constant concern about making Retirement Account savings last. But I am equally concerned about members' immediate needs. Just to give one example. I have seen residents at my Meet-the-People Session, in particular, a resident who lives with her family members, her children's family, and are not happy with the situation and wanted to shift out and buy her own flat. She does not have cash but her money is in her CPF account. So, she says that ""我 只 可 以 看 , 不 可 以 动, 不 可 以 用 " and this is a situation where I feel that perhaps CPF can be more flexible.

There is another group of residents who wanted to downgrade, for example, from a 5-room flat to a 3-room flat when they are nearing 55 years old or after 55 years old, but they dare not make the move because they know that the moment they sell the flat, the money will go into CPF Retirement Accounts and that will lock their money up and they cannot buy a smaller flat. For situations like these, I hope CPF Board can be more flexible.

I am also glad that CPF payouts will start automatically when members reach age 70. Indeed, many CPF members were unaware that they previously had to apply for the payout and some were unaware when or how they should do it.

Actually, many elderly Singaporeans are oblivious to receiving their GST credits, even after the money had been deposited into their account. In spite of the letters of notification, some senior citizens are illiterate and do not have children to keep them informed.

In the spirit of enabling Singaporeans to make better use of their CPF, I hope CPF Board will make a greater effort to reach out to them. When we introduced MediShield Life, everyone could get free consultations at the Community Centres (CCs) with the help of volunteers from the Insurance and Financial Practitioners Association of Singapore (IFPAS). I would like to take this opportunity to thank them because many of my residents had gone to the CC to get their free consultation and they found it very useful.

CPF is going to change quite a bit, especially with the second round of recommendations that were released recently. When all the changes have been finalised, can we also provide such consultations? Mdm Speaker, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] : The CPF amendments will give Singaporeans better peace of mind and more choices as well.

Better peace of mind is because BHS for each cohort will be fixed, so that people do not have to worry about a constantly rising Minimum Sum ‒ a "moving target". In addition, when members reach age 70, they can receive payouts automatically without making an application.

The amendments will also allow Singaporeans to make a lump-sum withdrawal of up to 20% of their Retirement Account upon reaching 65 years old. I understand that the Government has always been concerned about people's livelihood after retirement and has been looking at ways to make Retirement Account savings last longer. This shows that our Government acts responsibly. But I am equally concerned about members' immediate needs.

Some residents have told me that they lived with their children but there were some unpleasant things going on in the family and they wanted to move out and buy their own flat. However, most of their money is in the CPF; they do not have cash. This means that they can only "see" the money but are unable to use it. Under the circumstances, I feel that CPF Board should meet people's needs and be more flexible.

Other residents have also told me that they wanted to downgrade, for example, to change to a 3-room flat from a 5-room one. However, they worry that once they sell the flat, the money will be locked up in their CPF account because they are approaching 55 or even older. I think housing is very important. If people have money in their CPF account and they need it to buy a flat, CPF Board could perhaps exercise more flexibility in this area to help these residents.

Another suggestion is for CPF Board to make a better effort at explaining to Singaporeans how to use their CPF. When we introduced MediShield Life, everyone can get free consultation at the CCs. The response was good. The CPF scheme will undergo major changes. I hope that after all the changes have been finalised, we can provide similar consultations so that Singaporeans can better understand how to make good use of their CPF monies.

4.38 pm

Mr Png Eng Huat (Hougang): Mdm Speaker, CPF has to evolve to stay relevant with the times. Members are living longer, medical expenses are rising and housing commitments and inflation are factors that may impact our retirement plans in more ways than one.

The latest amendments to the CPF Act are another work in progress to ensure retirement adequacy for members in a changing world. I hope the CPF Review Panel will continue to make enhancements to the compulsory savings scheme to keep up with the times, the aspirations of our younger workers and the retirement needs of our ageing society.

Madam, I have one clarification to seek in this amendment Bill. The new section 18D of the CPF Act is a short addition to the legislation but it carries a significant implication. The new section 18D allows the transfer of a member's monies standing in his Ordinary Account or Special Account to the MediSave Account of a related person.

The CPF Act, in its current form, already allows members to use their MediSave Account to make payments for medical expenses incurred by other relevant individuals subject to terms and conditions imposed by CPF Board. That being the case, what is the main purpose of introducing section 18D of the Bill to allow the topping up of a member's MediSave Account using the Ordinary or Special Account of related members?

Is it to address a concern that the financial adequacy of MediSave Accounts would deteriorate over time, if the same accounts are repeatedly being used to pay for the medical expenses of related persons? Would members, who are unable to tap on their MediSave Account to help their loved ones for whatever reason, be asked to use their Ordinary or Special Account instead, via a transfer made permissible under the new section?

There is not much detail specified in the new section 18D of the Bill, but, as it stands, such a move will affect the retirement adequacy of members, now that their Ordinary and Special accounts can also be used to top up the MediSave Accounts of their loved ones. I seek clarifications on the new section 18D of the Bill.

Mdm Speaker, I support the Bill. But before I end my speech, I wish to ask the Minister to look into enhancing the lump-sum withdrawal option of Retirement Account savings at the PEA in subsequent reviews of the CPF Act.

The CPF Review Panel, in its report in early 2015, said it recognises that many members may have short-term cash flow needs in retirement, and came up with the flexibility to allow members to withdraw up to 20% of their Retirement Account savings, but only at PEA. The decision to delay such withdrawal till PEA was premised on a belief that members would be clearer at that point in time to understand the trade-off between a lump-sum withdrawal of one's retirement savings and lower monthly payouts.

The illustrative table provided in the same CPF Review Report shows that members who opt for a 20% lump-sum withdrawal at PEA will stand to receive $10 to $100 lesser in monthly payouts depending on the amount standing in their Retirement Accounts. For members with about $80,000 in their Retirement Accounts, it is just a toss between receiving $680 a month or $580 a month with a lump-sum withdrawal of about $20,000.

Madam, upon reaching age 55, members do not need another decade to think about this trade-off, especially when financial emergencies can come knocking at any time. And such lump-sum withdrawal by members may not relate to financial emergencies as well.

The CPF Review Panel has made the right recommendation to allow members the flexibility to withdraw up to 20% of their Retirement Account savings, but it has fallen short by restricting the option to exercise this flexibility only when members attain their PEA. There should be an option for members to exercise such withdrawal after age 55 and prior to reaching PEA.

Madam, at age 55, members will have their CPF savings locked up in their Retirement Accounts. For members who have set their minds on withdrawing 20% of their Retirement Account savings, what difference does it make to have them withdraw a portion of their CPF savings at age 60, 65, or whatever the PEA may be in the future? These members are already mentally prepared for a lower monthly retirement income to begin with, and the illustrative table provided by the CPF Review Report will give them a good gauge of the trade-off involved. What these members will stand to lose, however, is the compounded interest on the portion of the retirement savings they wish to take out before attaining PEA, and that may not amount to anything significant, depending on the amount withdrawn.

Life is unpredictable. We can be walking today and bedridden the next. So, using some of our own CPF savings to perform the Haj or fulfil our bucket list of visiting our ancestral village while we are still able to walk is certainly not a luxury but a treat well deserved and a reward well-earned after age 55.

The official Retirement Age does not equate actual retirement age. Likewise, the re-employment age does not guarantee employment. These uncertainties must be reflected in the option to allow members to make partial lump-sum withdrawal of their Retirement Account savings after age 55. Madam, I support the Bill.

4.43 pm

Mr Thomas Chua Kee Seng (Nominated Member): Madam, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Mdm Speaker, the CPF system is Singapore's important social security foundation. It has been successfully operating for more than 60 years. In order to ensure that this system keeps pace with changes, and continue to function effectively, I believe it is necessary to make amendments to the CPF Act. However, we need to take note of two fundamental principles in making amendments to the system.

Firstly, CPF is a retirement scheme which addresses housing, healthcare and children's education needs. Essentially, it safeguards the quality of the lifestyle of an individual and that of the household. From this perspective, CPF has to adopt a proper and stable management model that is not easily vulnerable to risks.

It is commonly said that "Investment always carries risks and one needs to proceed with caution." There is no business that only earns profits and suffers no losses. Even the most savvy investor may plunge into losses in a volatile and uncertain market. In July this year, Temasek Holdings announced that in the 2016 financial year, shareholder returns came in at a negative 9%, stirring up much public debate. But looking at the 10-year period, Temasek still performs very well overall. Investment is a specialised area of expertise. If even Temasek with its very professional team of researchers could also end up with losses, we cannot expect the small everyday investor to remain unscathed. Thus, it is critical for the investment of CPF monies to be handled with extreme caution, as this would have a great impact on retirement plans and social stability. From a business standpoint, we hope that our employees work very hard when they are young and that they could enjoy their twilight years after retirement. We do not wish to see our employees liberally use CPF funds to invest, and have this affect their mood and work should they suffer investment losses.

The second principle is that CPF is part of the worker's salary. Every worker needs to contribute CPF; the employer has to contribute CPF on behalf of his workers, too. Hence, whether you are a local employer or an overseas investor, CPF contributions should always be taken into account when computing business overheads.

I recall this saying: "The man without thought for the future will surely have trouble close at hand." Presently, Singapore is feeling the impact of a rapidly ageing population. If we introduce more flexibility into managing CPF funds and allow people to use their CPF funds for other investment purposes, they may even withdraw their CPF funds completely and spend them when they reach a certain age. If the elderly lose their means of financial protection which, in turn, affects social stability, this deviates from the original intention of setting up the CPF scheme.

We need money to sustain our livelihood as we age. However, due to inflation, some elderly people who have reached retirement age have insufficient funds in their CPF to maintain their basic living expenses. They have no choice but to continue working to avoid losing the source of income. This phenomenon should be brought to the attention of the public at large.

Of late, disputes on CPF have become very frequent. This is natural. Times have changed. Singaporeans have become more educated. Everyone is expressing concern about the CPF system and safeguards for the elderly. This is a good thing. CPF is very important to social harmony and stability, and, therefore, the tripartite partners need to review this earnestly. The Government needs to reflect on the reasons behind the public discontent and decide whether it needs to increase management transparency. Employers have to make timely contributions to CPF to ensure peace of mind for their employees to do their work. Employees should also not forget that CPF was set up to provide for their old age. Most of all, every good system needs to be time-tested. Having said this, I feel that amendments to the CPF Act should be handled with extreme prudence.

4.49 pm

Ms K Thanaletchimi (Nominated Member): Mdm Speaker, I stand in support of the Bill.

CPF is a compulsory comprehensive savings plan for working Singaporeans primarily to fund retirement, healthcare and housing needs. It has been a pivotal and integral part of our lives' financial sustainability.

Continuous enhancements of the CPF Act only prove the point that we need to stay relevant to the needs and aspirations of Singaporeans with changing times and evolving lifestyles. Section 14, subsection 3A to 3D, and section 14, subsection 4A provide wide-ranging powers to the Board to recover cash grants or payments which were paid in error to the person's account.

I have the following concerns.

What are the safeguards to ensure that the recovery of payment or grant paid in error is also not erroneously done as no legal proceedings can be instituted on such recovery?

Will the individual or the next-of-kin be allowed an avenue to raise their objections and provide further evidence that it is not the case?

Madam, the new section 18D states that the Board may, on the application of a member and subject to such terms and conditions as the Board may impose, permit the member to transfer the whole or part of the amount standing to the credit of the member in either or both of the member's Ordinary Account and Special Account to the MediSave account of any person who is related to the member in a manner specified by the Board.

I have two questions in relation to this clause.

Who are the related persons that a member can transfer money from his/her Ordinary Account to? What are the bases/circumstances to allow a member to transfer the whole or part of the amount in this Ordinary Account? While making allowance for flexibility, how does MOM ensure that his/her retirement adequacy is not compromised?

Madam, section 67C seems to suggest that the Board may impose a financial penalty on medical institutions and approved insurers on wrong and unauthorised claims or when they do not comply with audits. The question is: how could we ensure that employees of such institutions and insurers are given the right understanding and training on the development of schemes, amidst the other schemes provided for the different classes of members? Even if the penalty is imposed on the institution, there must be safeguards to ensure that financial penalty should not be passed down to the employees who have committed the error.

Mdm Speaker, notwithstanding these concerns and questions, I still stand in support of the Bill.

4.52 pm

Mr Louis Ng Kok Kwang (Nee Soon): Madam, the CPF system has been lauded around the world as an effective method for the Government to help manage the financial needs of citizens throughout their lifetime. The amendments to the CPF in this Bill will further strengthen the system and have far-reaching implications.

I stand in support of this Bill for the following reasons.

Firstly, the greater discretion accorded to CPF Board will lead to greater efficiency. The board will now be allowed to start payouts for members on the Retirement Sum Scheme, without requiring members to make an application.

I understand that we are doing this, as the Minister has mentioned, because some members on the Retirement Sum Scheme may not have made these applications despite receiving repeated reminder letters from CPF Board around two months before their PEA. Can I ask if the Board has found out the reasons as to why members did not make these applications? Was there an increasing number of members who did not make these applications over the past few years? While this amendment will solve this issue on the surface, I wonder if there are other underlying reasons which we need to look into and address as well.

Secondly, I support the implementation of BHS and the amendments to remove the requirement to top up the MediSave Account. Withdrawal of CPF is often a much-awaited event for many retiring Singaporeans who have laboured hard throughout their lives. But the current policy causes a strain on members when they are required to top up their MediSave Accounts before withdrawing from their Ordinary or Special Accounts. This amendment is a step forward to help increase their retirement funds.

Lastly, on the proposed new section 18D, I commend the greater flexibility granted to family members, allowing them to transfer funds from their Ordinary and/or Special Accounts to the MediSave Accounts of their family members. In this period of rising medical costs for our senior citizens, there will be occasions when the balance in their MediSave Accounts runs low and a top up is required. The flexibility and freedom granted by this amendment will lighten the anxiety of members in need.

However, can the Minister clarify what exactly are the "terms and conditions as the Board may impose", as specified in section 18D?

In addition, this amendment applies to "any person who is related to the member in a manner specified by the Board".

"Related Person" is defined in the Act as:

(a) his spouse;

(b) a child of the member, including an adopted child or a step-child;

(c) a father or mother of the member;

(d) a brother or sister of the member;

(e) a grandchild of the member;

(f) a grandparent of the member; or

(g) any other person who, in the opinion of the Board, should be regarded as a related person for the purposes of this section.

When interacting with residents, I have encountered many cases of senior citizens being dependent on their sons- or daughters-in-law for their day-to-day needs and they are an integral part of the family. For some, they could even represent one of the closest members within the family.

Can the Minister clarify if sons- or daughters-in-law can be classified as a related person under "(g) any other person who in the opinion of the Board should be regarded as a related person for the purposes of this section"?

Madam, I believe including them will have the effect of knitting the family fabric even closer, bringing extended family members into circles of trust.

Madam, these comments notwithstanding, I believe that the proposed changes will strengthen the trust Singaporeans have in the CPF system. In this period of economic difficulties, Singaporeans will appreciate a more secure safety net for them and their families. Thus, I stand in support of this Bill.

4.55 pm

Assoc Prof Randolph Tan (Nominated Member): Mdm Speaker, I support the Bill. I would also like to point out some areas of concern where I feel we should proceed much more cautiously into the future.

Earlier this year, when the House debated the CPF (Amendment) Bill, there had already been significant discussion of the benefits of the changes then, especially enhanced insurance coverage under the Home Protection Scheme and the greater flexibility afforded by the reduction in requirement for account holders to keep the Full Retirement Sum and, instead, they only need to keep to the lower Basic Retirement Sum. Although the issue of retirement adequacy had been broached at the time, today's Bill brings the issue into sharper focus because it proposes a scheme for lump-sum withdrawals.

I certainly have no objections to being allowed to make lump-sum withdrawals as an individual. But I would like to ask what this will mean, first, for retirement adequacy and, more importantly, for individuals who are looking to such withdrawals possibly as a chance to enjoy a windfall.

General interest surrounding lump-sum withdrawals has been linked to the issue of individual control over their accounts. This is an area where I believe more can be done to distinguish between the individual and the collective when it comes to taking responsibility for retirement adequacy.

The natural inclination of individual account holders is to want greater flexibility in withdrawal. The challenge, however, is how we deal with the infrequent but inevitable lapses of the very small minority. Unfortunately, when such lapses occur, for instance, in the form of excessive early withdrawals, it could defeat the effectiveness of CPF for retirement savings.

The practice of requiring employers to contribute to the retirement security of their employees is an accepted norm globally, but so is the challenge of ensuring that the monies given over to the control of the beneficiaries are responsibly set aside by the receiving employee. According to the Melbourne Mercer Global Pension Index, the ranking of Singapore's CPF has weakened in recent years because of a decline in the rating for adequacy.

Whose responsibility is it to ensure retirement adequacy? The individual or the Government? Would allowing lump-sum withdrawals, however limited, from retirement accounts impact on such adequacy?

In recent years, the extra interest on the initial part of an account holder's combined balances, currently set at $60,000, as well as on the initial balances of those aged 55 and above, has significantly promoted better adequacy. But the financially weak remain vulnerable.

The challenge that whoever is responsible for retirement adequacy faces is that the concept itself is not as clearly defined any more, simply because retirement itself seems to be a shifting concept, with different types of workers looking at it differently.

While this Bill seeks to provide for account holders to make lump-sum withdrawals under strict conditions, I feel that it should be made clearer that it is not possible for CPF savings to be regarded as a personal bank account. Too much individual flexibility in handling CPF accounts will compromise its objective of providing blanket retirement adequacy.

We also recognise that CPF can only continue to excel in its core function if it is not loaded with multiple and, sometimes, possibly contradictory objectives.

The well-known trade-off between risks and returns is based on large sample averages. It should not be mistaken to imply that all individuals who take on higher risks will enjoy higher returns. In some cases, the risks will be converted into actual losses and, when these cases hit those who are financially weak, their retirement savings will suffer.

Lump-sum withdrawals are no doubt a popular feature, but is it a logical one and what is allowing lump-sum withdrawals meant to achieve? Will a lump-sum withdrawal be regarded as a windfall?

While such withdrawals will satisfy the individual, it is not necessarily true for the collective. Allowing CPF accounts to be treated as flexibly as personal bank accounts on one extreme will deplete the pool and reduce its capacity to achieve a good spread of risks. It will also directly compromise retirement adequacy and any move in that direction will, unfortunately and ultimately, weaken CPF as an institution in exchange for mere popularity.

Moving forward, I believe it would be more important to focus on de-popularising the notion that lump-sum withdrawals can be treated as a windfall, strengthening retirement adequacy, and enhance but also more narrowly target the support for those retirees who are most in need.

Even if we recognise that lump-sum withdrawals require astute management, those who request such a withdrawal will still face the challenge of matching the returns offered by CPF. This is not easy. Outperforming CPF returns is certainly not something individuals should lightly risk with their retirement funds.

Finally, I have two questions. First, I would like to clarify if the legislation allows for lump-sum withdrawals which have been incorrectly dispensed to be recovered. This is a potential new complication, especially since we are talking about limited withdrawals under certain eligibility conditions. Second, I would like to ask the Minister what the long-term vision of CPF Board is on managing individual and collective responsibility for retirement needs is. By allowing partial withdrawal of a lump sum, does today's Bill imply that the Government is aiming to promote a balance between the two?

5.01 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mdm Speaker, let me begin by first declaring that I was a member of the CPF Advisory Panel.

I applaud the efforts in this second amendment to automate CPF payouts. This will benefit those members who are not on the CPF LIFE scheme but are on the old Retirement Sum Scheme. This will also benefit those members who are illiterate and those who do not have children or someone to explain the process to them. With the amendments, it also means members in the Retirement Sum Scheme can defer the start of their payouts up to the age of 70, which would allow for a longer runway of payouts for their retirement.

Nonetheless, even with simplifications made to CPF, I have met some young people who themselves do not understand how CPF payouts work. I have met residents who came asking for financial help and bitter residents who bemoaned the Government taking their savings when their money was, in fact, sitting in their Retirement Account, waiting to be drawn on. I believe this new policy to simplify CPF payouts will be a welcome move.

On the topic of simplification, the current CPF scheme, though sound, comprehensive and intricate, can still be seen to be quite complicated. It is currently made up of three main accounts – Ordinary Account, Special Account, MediSave Account. Then, a fourth account, the Retirement Account, is created when the member is 55 years old. Each account has its own set of processes and benefits.

Because the entire scheme is not so simple and challenging to grasp by the layman, a quick search on the Internet reveals several Singaporean blogs and websites proffering help on understanding the whole scheme and advice on optimising the CPF scheme for financial benefit. Some of the advice is sound and others give incorrect information. Then there are some that exist to incite resentment towards the scheme. I believe most of us here are familiar with the "Return Our CPF" saga.

Reasonably, Singaporeans want more transparency about their hard-earned money, and the Government has done its best to make all the information available, even attempting to explain it through case studies, graphics and cartoons.

I am especially glad that CPF Board has started a series of roadshows and campaigns to help the people understand and start planning for retirement. I do hope the public will take advantage of these platforms. I also hope CPF Board could perhaps explore how it can be even more proactive on an ongoing basis in engaging the public so that the people are kept abreast of its good work and, hopefully, in a simplified way.

The amendments this time round also include the option for CPF members to make a lump-sum withdrawal from the Retirement Account. It offers greater flexibility in managing money and will be especially handy for those with necessary, large expenses in their old age. Madam, in Malay please.

(In Malay): [Please refer to Vernacular Speech.] The amendments to the Act this time round also include the option for CPF members to make a lump-sum withdrawal from the Retirement Account. It offers greater flexibility in managing money and will be especially useful for those who need some large expenses in their old age. Those who do not have health problems can use the money for self-improvement and learn constructive skills and hobbies that they were not able to learn when they were younger.

I note CPF Board's efforts to use cartoons to explain the CPF system to the public. This is commendable but I believe that the issue of cost had constrained CPF Board from placing more media advertisements.

For instance, the amendments to the CPF Act in the last round allowed transfers between married couples. I am not sure if many Singaporeans are aware that this can be done. We should remind CPF members whose spouses are homemakers that they need to do their best to enhance or top up the amount in their spouse's accounts. This will enable their housewife spouses to become more secure and more comfortable during their retirement. It is a good form of savings for old age and can also help the family.

Nonetheless, having such a huge amount of money in hand means there will be many temptations. I would like to urge those who choose a lump-sum withdrawal to be careful with their finances. It is reasonable, of course, to want to pamper yourself with a little reward after working hard for so many years. But expenses meant for enjoyment and comfort, for instance, taking a luxury cruise, buying a new car or renovating your homes – these expenses will build up and the money withdrawn will be gone in a flash.

For those who plan to invest, be it in the stock market, property or others, please do your research carefully. Refrain from making high-risk investments if these involve savings that you cannot afford to lose. Even when buying bonds, one should be careful because we have seen recently how companies are increasingly facing difficulties in fulfilling their obligations and requested for refinancing of payments and others. Worse still, there are companies that failed or had to close shop altogether.

(In English): A point to note is the proliferation of scams from various channels. To date, several people, including elderly Singaporeans, have fallen prey to such scams and lost huge sums of money, often equating to life savings.

With the lump-sum withdrawal now an option, I am concerned that senior citizens will become an even more prominent target for scams after the age of 65. Family members must make efforts to ensure that their elderly relatives, parents and grandparents are aware of these scams. I hope the Government would do more to reach out to this group of people and generate more awareness.

Singaporeans who have plans for the money they have withdrawn should then be prepared to cash in on their homes, with schemes like the Lease Buyback scheme or Silver Housing Bonus to fall back on to supplement their income for the rest of their life.

I know a resident who lives in a 4-room flat. She is a single mother and now her children have grown up and moved out of the home. She is now the only occupant of the home. She has the option to downgrade to a smaller flat and cash out. Instead, she chose to continue living in her 4-room flat. As a result, she has to continue working full-time to support her choice. Some, like her, have made a conscious choice. But there are many others who may not be aware of the options and they keep on struggling when they should retire and enjoy some quality of life.

For many Singaporeans who do not have excess money or assets, your property and retirement account would be what you live on in your twilight years, so you would have to be financially savvy and manage your money with caution. Above all, remember that you do not need a specific type of property or a certain number of rooms in your house to be happy.

In the end, I do hope that CPF Board would have some financial counselling or collaterals to advise members on the implications of making lump-sum withdrawals and what it means for the members' future payouts and what are the other options they can undertake to supplement their retirement income for the rest of their life. Madam, I support the Bill.

5.09 pm

Mr Chong Kee Hiong (Bishan-Toa Payoh): Mdm Speaker, I rise in support of this Bill.

A key amendment today is to allow a lump-sum withdrawal of up to 20% from eligible members' Retirement Accounts when they reach 65. This option will be available to those born in 1958 or later. Those who prefer to defer their withdrawals have the additional options of transferring the amounts to the Ordinary Account or converting them into monthly payouts through CPF LIFE or the Retirement Sum Scheme.

Many Singaporeans welcome this new flexibility. It is always good to have options to withdraw more and get lower monthly payouts or withdraw less and get higher monthly payouts to cater to different retirement needs. I would like to commend the Advisory Panel for its painstaking efforts in reviewing our CPF system. It is not easy to ensure retirement funding sufficiency while introducing more elements of flexibility in the use of CPF funds.

As it is today, our CPF funds are being used for housing, healthcare, education and investments to a point where, for some members, they do not have enough to fund their retirement expenses, which was the original intent of CPF in the first place.

And, yet, we continue to receive requests to further liberalise the use of CPF funds. Some argue that the older generation, many of whom are less educated, may need more help from the Government to manage their funds. On the other hand, they assert, those in the younger generation are more highly educated and should be empowered to save up for their retirement. I disagree.

There is a difference between being more highly educated and financially literate. It takes knowledge, skills and personal discipline to accumulate funds for the distant future, especially when there are already many current needs and wants. As years of data have shown, most investors who had used their CPF to invest would have been better off leaving them in the Ordinary Account. It may be better to err on the side of caution when considering the use of CPF funds for investments by members. CPF should remain a low-risk asset for members.

Instead, we should get all members, particularly those from the lower income groups, to focus on building up their CPF accounts. They should be educated on the power of steady accumulation and compounding, as well as the difference between the interest rates offered by CPF and the banks.

Those seeking employment, including the self-employed, should not be tempted to receive more cash payments upfront in lieu of CPF contributions. They stand to lose out on Government top ups, if they do not have active CPF accounts and the attractive CPF interest rates. They should be constantly reminded to contribute to their CPF. Without funds in their CPF, it would be difficult for them to plan ahead for important milestones, such as buying a home, funding their children's education or be able to afford unexpected medical expenses, let alone fulfil their retirement needs.

At this point, I would like to commend MOM's public education efforts to increase awareness among workers of their rights. The recent TV advertisements to inform workers of their entitlements to CPF contributions do a great job in reaching out to workers in an interesting and easy to understand format. MOM's acronym is particularly suitable for this message – if your employer is not treating you right, just call the hotline and tell MOM!

Lastly, I would like to voice my support for the amendments to simplify the MediSave top up process for family members. Currently, there are tax-based incentive schemes to encourage family members to top up the CPF accounts of their loved ones. By allowing the transfer of monies in either or both of the member's Ordinary Accounts and Special Accounts to the MediSave Accounts of their family members who have lower balances, the recipients can benefit from the extra interest on lower balances and enjoy a higher effective interest rate overall. In the long term, they will be closer to having their own CPF LIFE plans. This amendment will benefit family members who are not working or are engaged in lower paying jobs for a variety of reasons – to look after the family, illness or disability. The ease of fund transfers will facilitate the strengthening of bonds among family members. I would like to conclude with my support for the Bill.

Mdm Speaker: Minister Lim.

5.14 pm

Mr Lim Swee Say: Mdm Speaker, I would like to thank the Members for supporting these amendments. I would try to respond to the various points raised according to the four areas of amendments.

Firstly, providing the flexibility of a 20% lump-sum withdrawal from the Payout Eligibility Age (PEA). When the CPF Advisory Panel deliberated on this particular recommendation, the views werre divided. There were some panel members who felt that we have to continue to tighten on any early withdrawal; while there were others who felt we should provide for flexibility. So, it is a balance between flexibility for early withdrawal versus preserving as much as possible for retirement needs.

At the end of the day, the Advisory Panel's recommendation is a well-balanced one. They recognised that some people may need to withdraw the money earlier but there should be a cap of 20%, including the amount withdrawn at the age of 55. And we should provide for this early withdrawal not at 55 but at the PEA because, by then, the person would, at the age of 65, for most, be in a better position to look ahead and make the assessment whether he needs more money now or to keep more for retirement years.

The comments earlier by the various Members reflect these divided views. For example, Mr Png Eng Huat asked, "Why not bring forward to 55?" So, he belongs to the group that goes for flexible provision. We also have Mr Thomas Chua who reminded the House that we should try to preserve as much as possible for retirement. Prof Randolph Tan highlighted the same. Mr Saktiandi Supaat likewise called for the public to be cautious. And last, but not least, we heard the same from Mr Chong Kee Hiong.

CPF Board and MOM are mindful of these divided views. On balance, we felt that the recommendation by the Advisory Panel was probably the most appropriate one and that is the reason why we are amending the Act to support that.

Secondly, automatic payout for the Retirement Sum Scheme. Broadly, all Members supported this move. Mr Saktiandi Supaat and Mr Louis Ng asked why some members did not activate their Retirement Sum payouts even at the age of 70 and beyond. CPF Board has been talking to various members and these are the main reasons we have gathered so far.

Some of them are still gainfully employed. So, they said, "Look, I still have an income, I don't need the money now." They keep it in the Retirement Account. Some of them have been receiving adequate support from their children. So, they said, "Look, at this moment, I am comfortable with the support. I don't need to draw on the money." Some of them do not know that they have to activate their payouts under the Retirement Sum Scheme (RSS). So, they said, "Oh, you mean I have to activate it?"

There is yet another group. Their concern is, "But what if I outlive my Retirement Account savings?" RSS, typically, provides for up to 20 years of payouts. Therefore, they said, "Look, I would like to keep it. I don't know how long I will live. It is better to defer the RSS payouts to as late as possible, just in case I outlive my Retirement Account savings."

These are the reasons put forward by the members. What we are proposing is, basically, to set the automatic start for the payout at the age of 70.

For members who, for whatever reason, feel that they still want to defer the start of their payouts, they can do so. They can come to CPF Board and we will make sure that they understand how the RSS works, we make sure that they understand the trade-offs between starting their RSS payouts versus deferring it further. On a case-by-case basis, we would allow for further deferment, provided that we are convinced that the member knows what the trade-offs are.

In the third area of changes affecting the Basic Healthcare Sum, Ms Thanaletchimi expressed her concern about whether the employees of these medical institutions know what they are doing, after all, there are so many schemes. Madam, I understand that MOH conducts training for the employees of these medical institutions before they accredit them to be authorised institutions to claim MediSave on behalf of CPF members.

Notwithstanding, from time to time, we do discover that they still make mistakes, and this is the reason why we have included this administrative penalty framework, hopefully, to remind them what they have to be more conscious about in filing the claims on behalf of members.

Lastly, various amendments about recovering over-payment, payment in error by the Government agencies, I want to explain that members will be served the notice in advance. CPF Board would not just recover the payment in error without notifying the CPF members. They would be notified in advance and,if the members have any queries or any objections, they can raise these to CPF Board and then CPF Board will consult the relevant agencies. Most of these payments made in error did not originate from CPF Board. We are, basically, collecting and making these payments on behalf of the various Government agencies.

Most of these payments go directly to the households in the form of cheques and into bank accounts. But for cheque payments, if they are not encashed and the cheques expire, then the money is now put into their CPF accounts. It is only under these circumstances, if later on, the agencies involved discover that they have made the payment in error, then they will notify CPF Board to recover the money. As far as CPF recovery is concerned, if the money is still in members' CPF accounts, we will help them to recover. But if the money is already spent, then it will be beyond the scope of CPF Board. This is to assure Members that there are enough safeguards in place.

On the issue of the direct transfer of funds from the Ordinary Account and Special Account to the MediSave Account, Mr Louis Ng and Ms Thanaletchimi asked about who these family members are and who will qualify for this direct transfer to MediSave Account. The family members would include not just spouses but also siblings, parents, grandparents, parents-in-law and grandparents-in-law. A Member asked whether a son-in-law, daughter-in-law can do the transfer. The answer is yes. If a son-in-law or daughter-in-law wants to top up the parents-in-law's accounts, they are encouraged to do so.

If you ask me whether a father-in-law can directly top up the MediSave Account for the son-in-law this way, the answer is no. We have a general policy for the transfer of CPF savings where we would like to encourage the younger generations to top up the CPF account for the older generations and not the other way round. But if the father-in-law loves his son-in-law so much that he decides to withdraw the money in his CPF account in cash and then give the money to the son-in-law and the son-in-law then puts it back into his MediSave Account, obviously, CPF Board cannot stop it.

This particular amendment is to make it easier for, hopefully, the younger generations to top up the MediSave Accounts of certain family members of the older generations.

Last, but not least, a few Members – Assoc Prof Randolph Tan, Er Dr Lee Bee Wah, Mr Saktiandi Supaat and others – expressed concern that the CPF system is getting too complicated and sometimes members are finding it difficult to decide at which point in time to do what. I fully accept that. In fact, that is the reason why CPF Board is now mounting another exercise to try and explain the CPF system in a simpler way, in a way that, hopefully, more members will be able to have a better appreciation.

I did a trial run with a few hundred grassroots leaders just about two weeks ago, putting it in a very simple way. Based on feedback, about 90% of them found the simplified ways of explanation useful. Quite a number of them feel that they are now more confident to help us explain the CPF system to members of the public. We are going to conduct a few more sessions in Tamil, Malay and Mandarin. After this series of four sessions, we are going to take stock based on the feedback and see how can we refine it further and, beyond that, I want to go back to all the Grassroots Advisers to help us send out the message. So, your point is well accepted.

At the same time, I also want to add that one of the key concerns that we have is about retirement planning. In this regard, I am happy to say that CPF Board had, in the second half of last year, piloted a retirement planning service. They invited CPF members, just before they turn 55, to come to CPF Board for a one-to-one, face-to-face consultation where CPF Board staff will try to explain to them what are the options, what are the decisions and so on. The feedback has been very positive. Thus, starting from October this year, starting this month, CPF Board will send information pamphlets to all members at age 54. CPF Board will also send invites to a target group on this retirement planning service before they turn 55, so that they are aware of this optional service available to them.

CPF Board is also exploring the possibility of doing a similar exercise to reach out to members on a one-on-one basis upon reaching the PEA. In other words, we will step up our efforts of engagement broadly in the community and, at the same time, individually, at the key milestone of age 55 and the PEA of individual members.

Mdm Speaker, I hope I have addressed most of the concerns raised by the Members. With that, I beg to move.

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. – [Mr Lim Swee Say].

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