Use of CPF Retirement Account Savings for Diploma and Degree Courses

6 Miss Cheng Li Hui asked the Minister for Manpower whether the Ministry will consider allowing parents to use their Retirement Account savings for their children's full-time subsidised diploma/degree courses at Approved Educational Institutions.

The Minister for Manpower (Mr Lim Swee Say): Mdm Speaker, the CPF Education Scheme allows CPF members to use their CPF Ordinary Account (OA) savings to pay for their own, spouses' or children's tuition fees and this is restricted to full-time subsidised diploma and degree courses at Approved Educational Institutions.

When members turn 55, a Retirement Account (RA) is created and monies from the CPF OA and the Special Account (SA) are transferred to the RA up to the Full Retirement Sum. Members who own a property with sufficient charge or pledge on the property can withdraw their RA savings above the Basic Retirement Sum in cash for any purpose, including education. Members who continue to work and make CPF contributions after age 55 will also have fresh OA savings that can be used under the CPF Education Scheme.

CPF members with insufficient OA savings should consider other avenues to finance the tertiary education of their children, for example, savings in the Post-Secondary Education Account (PSEA), student bursaries and loans offered by MOE and CDC/CCC, or the Tuition Fee Loan Scheme and Study Loan Scheme offered by the Government. There are also various financial assistance schemes offered by the tertiary institutions, as well as other community organisations.

We recognise that some CPF members may have tried but do not qualify for these financial assistance schemes. CPF Board has, therefore, exercised some flexibility by allowing them to use their savings in their RA that originated from their OA for the purpose of the CPF Education Scheme. However, CPF members must recognise that they are compromising on their retirement adequacy, especially if their children do not or are unable to repay the loan after graduation.

Miss Cheng Li Hui (Tampines): I appreciate the Minister's reply and the fact that the RA is to fund the retirement of Singaporeans. Would the Minister agree that a significant number of our residents are marrying later and the children are entering tertiary or higher education just when they are retiring? Therefore, would it not be reasonable to allow them to use the RA, with the provision that the children will repay them when they graduate?

For the lower and middle income who may not have sufficient savings and who are unable to get loans and the bursaries may not cover the full cost of the fees, does it not make sense for them to want to give their children a good education and investment in their future?

Mr Lim Swee Say: Mdm Speaker, I agree with the Member that education is the best investment a parent can have for their children. Having said so, let me recap how the CPF Education Scheme came about when it was introduced in 1989.

At that time, the Minister for Labour, Mr Lee Yock Suan, at the introduction of the CPF Education Scheme said, "In drawing up the scheme, my Ministry was guided by one basic principle, namely, that the fundamental objective for the CPF Scheme should be safeguarded. CPF savings have to provide for the old-age needs of the CPF members themselves. Any investment of CPF in education must not violate these primary objectives".

I agree with the Member that education is very important and that is why the CPF Education Scheme was introduced. It needs to be guided by the fundamental principle that the retirement adequacy of the CPF member should not be compromised as a result of the additional scheme. I am also happy to remind the House that since 1989, the Government has introduced many more financial assistance schemes for education.

In response to the concerns expressed by the Member on what if the family is unable to secure sufficient loans to cover the tuition fees and so on, under the Tuition Fee Loan Scheme, diploma students can loan up to 75% and, for the remaining 25%, they can even apply for the Study Loan Scheme. The Tuition Fee Loan Scheme, together with the Study Loan Scheme, will be able to cover up to 100% of the tuition fees. On top of that, they will be able to apply for loans to cover part of the living allowances as well.

The same applies to undergraduate students. Under the Tuition Fee Loan Scheme, they can loan up to 90% of the tuition fees, plus 10% under the Study Loan Scheme. The two loan schemes together will be able to cover 100% of the tuition fees, as well as some amount of the cost of living allowances.