The Central Provident Fund (Amendment) Bill 2010, Second Reading Speech by Mr Gan Kim Yong, Minister for Manpower, 16 August 2010, 4.45pm, Parliament

1. Mr Speaker, I beg to move, “That the Bill be now read a Second time.”
2. Sir, this Bill will amend the CPF Act to provide for the full implementation of the CPF LIFE scheme in 2013, and to facilitate the disbursement of CPF assets to beneficiaries; as well as to streamline the administration of the CPF.
   
   CPF LIFE
3. CPF LIFE was made available in September last year to allow older members, in this case those who turn 55 before 2013, to opt in to the scheme. Younger members turning 55 from 2013 onwards with at least $40,000 in their Retirement Accounts will automatically be included into CPF LIFE. Members with lower balances will not be automatically included, but they can still opt-in.
4. Between age 55 and their CPF Draw-Down Age (or DDA), members’ CPF balances typically continue to grow due to property refunds, top-ups, interest income as well as employment contribution if the member continues to work. Members who are not auto-included at age 55 due to low balances may be able to increase their CPF savings significantly by the time they reach their DDA. I had announced at the COS Debate earlier this year that we will also auto-include those with $60,000 in their Retirement Account when they reach DDA. Section 27K of the CPF Act will be amended to provide for this.
5. For members who are already on CPF LIFE before DDA, we should similarly include any additional monies received in their Retirement Accounts between age 55 and their DDA for the members’ CPF LIFE, so as to provide for a higher monthly LIFE income. We are therefore amending Section 27L to do so.
   
   DISBURSEMENT OF CPF ASSETS TO BENEFICIARIES
   
   Refining Nomination Rules
6. We are also refining the disbursement of CPF assets of deceased members. Currently, CPF savings have to be disbursed directly to the nominees upon the death of a member. Some members have requested for their CPF savings to be transferred directly to their nominees’ CPF accounts instead so as to help provide for their healthcare and retirement needs. I think this is a sensible request. Therefore, Sections 15, 20 and 25 will be amended to offer members this option. This option will become available from 1 January 2011 onwards.
   
   Unclaimed CPF Assets
7. The next area of change concerns unclaimed CPF monies. This includes monies of deceased members which have not been claimed by the beneficiaries, which the CPF Board is currently required to hold indefinitely. This is not desirable as the assets should be disbursed to beneficiaries as far as possible.
8. We are therefore amending Sections 15 and 20 to allow CPF Board to automatically disburse a member’s CPF monies to his nominees, once it is notified of his demise. CPF Board will no longer need to wait for nominees to apply for the bequeathed monies before they can be disbursed.
9. Nevertheless, some CPF monies may continue to remain unclaimed for various reasons, for example, nominees with incomplete or inaccurate details on record may not be contactable. We will streamline how such CPF monies are managed. The amendment to Section 13 will allow CPF to transfer all unclaimed monies in the subsidiary accounts into the Ordinary Account (or OA) of the member 6 months after his death and they will earn the OA interest rate. Since the member has passed on, we should cease paying the higher interest rates of the Special, Medisave and Retirement Accounts and the extra 1% interest, which are meant to improve the member's retirement and healthcare savings adequacy. The deceased member’s CPF monies will be kept in their respective accounts to facilitate claims up to 6 months after his demise, as it is not unusual for such claims, such as hospital bills, to be made only after demise.
10. If monies are still left unclaimed 7 years after the member’s death, these monies will be transferred into the general moneys of the Fund, as unclaimed monies of deceased members should not accrue interest indefinitely. Section 6 will be amended to allow the cessation of interest on the unclaimed monies once they are transferred to the general moneys of the Fund.
11. A similar arrangement will also be applied to dormant CPF accounts. A CPF account is deemed dormant if a combination of factors is satisfied, including: firstly, if CPF’s records show that the member has attained a prescribed age; currently, that would be set at 100 years. Secondly, if the member does not respond to notices from CPF Board or advertisements placed in newspapers to satisfy the CPF Board that he is still alive. Thirdly, if there has been no account activity for the last 10 years. However, in the event that CPF Board learns that a dormant member is still alive, CPFB will restore the monies to the member’s original accounts with interest. The amendments to Section 13 enable CPF Board to do so.
12. Besides CPF monies, the CPF Board is also currently obliged to hold unclaimed Special Discounted Shares (or SDS) of members who died without nomination. The SDS programme was introduced under the National Share Ownership Scheme in 1993 to give Singaporeans a greater stake in the country. CPF members purchased these shares with their OA monies. We will also streamline the administration of unclaimed SDS by amending Section 26.
13. To reduce the number of unclaimed SDS cases, a new Section 26A will empower CPF Board to sell the SDS of members who died without nomination under the instruction of the legal representatives of the deceased’s estate, and to pay them the proceeds of the sale, along with any dividends and proceeds from capital reduction exercises accumulated following the members’ demise. These legal representatives refer to the representative appointed to administer the estate through the Grant of Probate or the Letter of Administration.
14. In the absence of such legal representatives, CPF Board may receive instruction from the next-of-kin¹ to sell the shares and pay him the proceeds. This will be less costly and more convenient for the beneficiaries as they no longer need to obtain the Grant of Probate or Letter of Administration in order to claim the SDS.
15. Upon a member’s death, dividends and proceeds from his unclaimed SDS will be held in a non-interest bearing account. Since these dividends and proceeds are received on assets held on behalf of beneficiaries as part of the member’s estate, they should not attract CPF interest. The same treatment will be applied to the SDS of members whose accounts have been deemed dormant.
16. Unclaimed SDS of members who have been deceased or dormant for 7 years will be sold with all proceeds and dividends transferred to the general moneys of the Fund to ease management and treated as unclaimed CPF monies as I explained earlier. I want to assure the House that valid claimants can approach CPF Board at any time to claim the monies that are due to them.
17. The changes relating to unclaimed CPF monies and SDS will come into effect on 1 January 2011.
    
    STREAMLINING THE ADMINISTRATION OF THE CPF ACT
18. Finally, this Bill clarifies and streamlines the administration of the CPF Act in a few areas.
19. First, it is a long standing practice of the Public Trustee, which disburses CPF monies of deceased members without nomination, to reimburse reasonable funeral expenses from the CPF monies to persons who would have been entitled to receive the CPF monies. Section 25 will be amended to formalise this administrative practice that PT has been carrying out as a service to members of the public.
20. Second, some Licensing Agencies (or LAs) currently assist the CPF Board in enforcing Medisave contributions by Self-Employed Persons (SEPs), by denying renewal of their licenses upon application should they default on their contributions. As LAs may move to an auto-renewal licensing regime, Section 13A(1) will be amended to empower such LAs to continue enforcing Medisave contributions when no application to renew a license is required.
21. Third, the Board allows the withdrawal of CPF monies of a member who is “mentally disordered and incapable of managing himself”. Sections 2 and 15 will be amended to allow the CPF Board to adopt the standard of “lack of capacity” within the meaning of section 4 of the Mental Capacity Act (MCA) to bring the CPF Act into alignment with MCA.
22. Lastly, Section 16(A)(1) will be amended to permit Medisave withdrawals with respect to psychiatric and other treatment or services approved by the Minister for Health. This will update the CPF Act and bring it in line with the current policy.
    
    Conclusion
23. We are constantly reviewing and refining the CPF system to better serve members. The amendments in the Bill will give effect to the proposed refinements.
24. I beg to move.