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This Bill will amend the CPF Act in three areas:
i. First, it will allow more CPF members to make CPF transfers to their parents and grandparents.
ii. Second, it will update the payout benchmark for Retirement Sum exemption.
iii. Third, it will clarify and streamline the administration of some parts of the CPF Act.
Lower threshold for members to make CPF transfers to their parents & grandparents
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To encourage families to support one another in their retirement years, CPF members who have met their own retirement needs can transfer their CPF savings to their spouses, parents, grandparents, parents-in-law, grand-parents-in law or siblings.
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The first amendment will allow more members to make CPF transfers to their parents and grandparents. With your permission, Mr Speaker, may I ask the Clerks to distribute a table on CPF transfers to members of this House?
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Currently, when a CPF member below the age of 55 has sufficient savings in his Ordinary and Special Accounts (OA, SA) to meet the prevailing Full Retirement Sum (FRS), he can transfer part of his Ordinary Account (OA) savings to his parents and grandparents.
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For a member aged 55 and above to do likewise, the CPFB will look at his combined savings not just in his Ordinary and Special Accounts but also include his Retirement Account (OA, SA, RA) and if those combined savings are sufficient to meet the Full Retirement Sum of his cohort, he can transfer part of his OA savings.
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To explain the amendment, let me first talk about the property charge. Many CPF members own property. When CPF OA savings are used to finance the property purchase, a charge is placed on the property so that if the property is subsequently sold, proceeds from the sale will be used to refund the CPF OA principal sum previously withdrawn to buy the property, plus interest the member would have earned if it had not been withdrawn.
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The property charge thus helps to secure the member’s CPF savings. However, a member’s property charge is not currently taken into consideration when he applies to transfer part of his CPF savings to his loved ones.
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With this amendment, the property charge will be considered together with other CPF savings when assessing whether a member is eligible to make transfers to his parents and grandparents.
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A member below the age of 55 will be able to transfer part of OA savings above the BRS to his parents and grandparents, if he has sufficient OA and SA savings to meet the prevailing BRS, which together with property charge is sufficient to meet the prevailing FRS.
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For a member aged 55 and above to do likewise, the CPFB will look not just at his OA, and SA but include the RA as well. If he has sufficient savings to meet his cohort BRS, which together with his property charge is sufficient to meet his cohort FRS, he can transfer part of his OA, SA and RA savings above the BRS to his parents and grandparents.
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Whatever their ages, the members would have been required to set aside the BRS in CPF savings before they can make transfers to parents and grandparents. This ensures that these members have enough for their own basic retirement needs, and have added security through their property charges.
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About 20% of CPF members aged 30 to 70 meet the current thresholds to make transfers to their parents and grandparents. With the amendment, 30% of CPF members will be eligible. This means about 340,000 more members.
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This amendment will give members more options to strengthen their parents’ and grandparents’ retirement adequacy. In particular, it will help members who want to increase their parents’ or grandparents’ retirement savings but may not be able to do so through cash top-ups.
Update payout benchmark for Retirement Sum exemption
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The second amendment updates the payout benchmark for Retirement Sum exemption.
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Today, in addition to his CPF savings, a member may have lifelong payouts from a private annuity or pension which is higher than the monthly CPF payout that an age peer receives under the Retirement Sum Scheme (RSS).
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Such members have been allowed to apply to withdraw their CPF savings, without having to set aside their cohort Retirement Sum. Those with lower private annuity or pension payouts may apply for partial exemption from setting aside their cohort Retirement Sum.
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As CPF LIFE has replaced RSS as the default retirement payout scheme for members entering retirement, it is timely to update the benchmark used for Retirement Sum exemptions. Instead of the RSS payout, we will now use the monthly CPF LIFE payout that a member who has met the cohort FRS is expected to receive.
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Annually for the past few years, about 200 members have successfully applied for full or partial exemption. The effect of this amendment is that more members will qualify for full exemption.
Other amendments to clarify and streamline the administration of some parts of the CPF Act
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The third and last set of amendments provide greater clarity and efficiency in the administration of some parts of the CPF Act. I will provide one example.
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Simplifying the CPF Act by moving computational details for voluntary top-up limits to the CPF regulations
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Today, the top-up limit for transfers from the OA to the member’s own Special Account (SA) is prescribed in the CPF Act. However, all the other top-up limits, such as for CPF transfers to spouses, are prescribed in the regulations instead.
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The amendment will simplify the CPF Act such that all computational details for limits on voluntary top-ups to various CPF accounts will be specified in the CPF Regulations. There is no change to the top-up limits.
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In conclusion, this Bill provides greater flexibility for CPF members as well as simplifies and clarifies the administration of the CPF Act.
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Mr Speaker, I beg to move.