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Second Reading Speech at CPF (Amendment) Bill 2024

Minister for Manpower, Dr Tan See Leng, Parliament House

A. Introduction of Bill

1. Mr Speaker Sir, I beg to move, "That the Bill be now read a second time."

2. The CPF system is a key pillar of Singapore’s social security system which helps CPF members set aside savings for their retirement, housing and healthcare needs.

3. We regularly review and update the CPF system. The Bill effects the following changes:

  1. First, the CPF Special Account, or SA, will be closed for those aged 55 and above from early 2025 onwards.    
  2. Second, the Bill expands the Home Protection Scheme, or HPS, to offer cover to CPF members with certain pre-existing conditions that are not so severe. Lastly, the Bill introduces amendments to clarify processes and streamline the administration of the CPF Board and CPF schemes. 

B. Evolving the CPF system to serve the needs of Singaporeans over the course of their lives

4. The first two sets of amendments in the Bill, which effect the closure of the SA for members aged 55 and above, and the expansion of the HPS, are part of the evolution of the CPF system to continue serving the needs of Singaporeans. 

  1. Closure of Special Account (SA) for members aged 55 and above

5. The closure of the SA has been discussed at length in this House since it was announced at Budget this year.

6. As I had earlier explained during the 2024 Committee of Supply debate for the Ministry of Manpower, the principle behind closing the SA for members aged 55 and above is to right-site CPF monies. Only CPF savings committed towards long-term retirement needs should earn the higher long-term interest rate.

  1. Today, members aged 55 and above have four CPF accounts – i) one, the Ordinary Account, or OA; ii) two, the MediSave Account, or MA; iii) three, the SA, and (iv) four, the Retirement Account, or RA. From the second half of January 2025 onwards, the SA of members aged 55 and above will be closed and they will have just three CPF accounts. CPF members will be notified when their SA is closed, through a hard copy notification, as well as an email or SMS where applicable.
  2. As per the current practice for members turning 55 today, members’ SA savings will be transferred to the RA, up to the Full Retirement Sum applicable to their cohort. The savings in the RA will continue to earn the higher long-term interest rate, which is currently 4.14%. With the closure of the SA, any remaining SA savings will be transferred to the OA and can be withdrawn.
  3. Members who wish to commit their withdrawable savings to their long-term retirement needs can opt to transfer their OA savings to their RA up to the Enhanced Retirement Sum, or ERS. With the ERS raised to four times the Basic Retirement Sum from 1 January 2025, more than 99% of CPF members aged 55 and above today would be able to transfer all their SA savings to their RA, if they wish to do so. As Members of the House would know, CPF members can then choose to start receiving their RA savings as monthly retirement payouts anytime from the age of 65 to 70.
  4. In gist, the SA closure will not prevent members from earning the higher long-term interest rate. They can do so by voluntarily transferring their savings to the RA, up to the prevailing ERS. But if members want to retain the flexibility to withdraw these savings at any time, then the savings can remain in the OA and earn the OA interest rate.

7. The Bill will permit the Board to implement the SA closure and the necessary related actions, such as transferring members’ SA savings into their RA and OA.  

ii. Expansion of Home Protection Scheme (HPS) to cover more members with pre-existing health conditions

8. Next, I will speak about the expansion of the Home Protection Scheme, or HPS.  

9. The HPS is an insurance scheme that protects CPF members and their loved ones from losing their HDB flats in the event of the member’s death, terminal illness or total permanent disability. Today, members are covered at a standard premium rate if they are assessed to be generally in good health, even if they have pre-existing health conditions. The vast majority of applications are approved. However, around 1.3% or about 1,400 HPS applicants are rejected annually due to pre-existing health conditions based on factors such as overall severity, prognosis, control of the health condition, and the member’s health risk profile. 

10. While we cannot cover all pre-existing health conditions, we will expand HPS from mid-2025 to cover those with certain pre-existing conditions that are not so severe, such as certain types of stroke and heart disorder. In line with industry practices, these members will pay higher premiums that are commensurate with their higher likelihood of claims. Even with this premium loading for such members, the HPS would provide coverage at one of the lowest premiums that such members would pay in the current market.

  1. For members who are eligible for coverage today, there will be no premium loading and no change to the standard premium rate. 

11. To ensure the HPS remains sustainable and affordable for the majority of members, the small minority of members with more severe health conditions, such as those currently receiving treatment for cancer, would not be able to participate in the HPS. This is also in line with industry practice.

  1. Nevertheless, CPF members who face financial difficulties in repaying their mortgage loans can approach the Housing & Development Board for further assistance.

12. The expansion of HPS will be implemented from mid-2025. For those offered coverage with premium loading, participation will be on an opt-in basis. We will assess any future developments to industry practice in our regular review of the CPF system.

13. Taken together, the closure of the SA and expansion of the HPS coverage to more members with pre-existing health conditions will evolve our CPF system to better serve the needs of Singaporeans over the course of their lives. 

C. Clarifying processes and streamlining the administration of the CPF Board and CPF schemes

14. The remaining four amendments are to streamline the administration of the CPF Board and CPF schemes. 

iii. Simplify the CPF Board structure to comprise a Chairperson, six tripartite representatives, and eight other persons 

15. Firstly, we will amend the CPF Act to simplify the CPF Board structure. 

16. The amendments give the Minister the discretion to appoint a Deputy Chairperson from among the Board members. This is in line with common practices across other statutory boards. There will be no change to the maximum number of 15 Board members. The Board currently comprises a Chairperson, a Deputy Chairperson, six tripartite representatives and seven other persons. After the amendments, the Board will comprise a Chairperson, six tripartite representatives, and eight other persons. Excluding the Chairperson and CEO of CPF Board, the Minister may now appoint a Deputy Chairperson from any of the remaining Board members with the President’s concurrence. CPF Board will continue to operate efficiently with this change.

iv. Prioritise the recovery of the subsidy recovery amount of additional HDB subsidies ahead of CPF housing refunds, upon disposal of flats priced with additional subsidies

17. I will now move on to the next amendment. Currently, when members sell their property, their sales proceeds are distributed in a specific order. For example, a member with an HDB loan would have to repay any ou­­tstanding property tax, outstanding HDB loan and resale levies, before refunding the amount of CPF savings used in the purchase of the property including accrued interest.

18. As implemented by MND and HDB starting from the October 2024 BTO exercise, there is a New Flat Classification Framework which will classify new flats as Standard, Plus, and Prime based on locational attributes. This new framework will help to achieve three important objectives. 

  1. One, it keeps home ownership affordable. Two, it maintains a good social mix. And three, it keeps the system of public housing subsidies fair for everyone.
  2. To ensure affordability, Plus and Prime flats come with additional subsidies to enable a wider range of Singaporeans to purchase them. This is on top of significant market discounts that are applied to all Build-To-Order (or BTO) flats today.
  3. And to ensure fairness for everyone, these additional subsidies will be recovered upon the sale of the flats. Plus and Prime flats will also come with additional restrictions such as 10-year Minimum Occupancy Period (or MOP), to discourage quick flipping and support genuine homebuyers. 

19. This set of amendments will allow HDB to recover a percentage of the resale price or market valuation of the flat, whichever is higher, that is commensurate with the extent of additional subsidies provided. The recovery of additional subsidies will be done before the required CPF housing refund is made to the member’s CPF account. This maintains parity with other flat buyers who did not receive these additional subsidies, and is important to preserve the fairness of public housing subsidies.  

v. Clarify the requirement for CPF housing refunds upon disposal of property that had undergone a Retained Ownership Transaction or had new co-owners added

20. We will also amend the Act to clarify that the CPF Board requires CPF refunds only upon property disposal, and not at the point of transactions which involve the issuance of a new lease or title without any changes to the ownership of the property. Such transactions include the purchase of recess areas outside of one’s HDB flat and lease extensions.

21. Some members today also provide undertakings to pledge their property to CPF Board, to access more funds in their Retirement Account for immediate use. In some cases, new co-owners could be added after the existing owner had pledged the property. The amendments clarify that CPF Board also requires new co-owners to refund the pledged monies to the existing owner’s CPF accounts, upon disposal of the property. 

vi. Repeal provisions allowing CPF Board to share prospective employees’ employment history with employers upon request

22. Lastly, we will remove provisions that were previously included to support the CPF Job Record Scheme and which are no longer relevant today.

23. In the past, employers could request for CPF Board to share prospective employees’ employment history under the CPF Job Record Scheme.  

24. The scheme was terminated in 1983, and CPF Board has not shared any prospective employees’ employment history with employers since then. As such, we will amend the CPF Act to remove this provision. 

25. Mr Speaker Sir, allow me to say a few words in Mandarin.

26. 政府定期检讨与更新公积金制度，确保能够继续满足国人在不同人生阶段的需求。

27. 之前，我们宣布关闭55 岁及以上公积金会员的特别户头（SA）。这是为了确保只有长期的公积金存款能享有较高的长期利率。这将从2025年一月的下半月起效。我们会通过信件通知受影响的会员。同时，会员也会收到电邮或短信。

28. 受影响的会员不必担心。特别户头关闭之后，里面的存款将转入退休户头（RA），直到填满他们的全额存款 (FRS)。这些存款将继续赚取较高的长期利率。会员的退休户头如果已达到全额存款，特别户头里的剩余存款将转入普通户头（OA），并且可以随时提取。

29. 会员也可以选择将普通户头的存款转入退休户头，直到超额存款顶限（ERS)。这样，会员就能赚取更高利息，并获得更高的退休入息。从2025年起，超额存款顶限也将调高至基本存款的四倍。这表示目前有超过百分之九十九受影响的会员能把所有特别户头存款转入退休户头。

30. 政府也将从 2025 年中旬扩大家庭保障计划（HPS）的保障范围。如果会员已患的疾病不极度严重，比如某些类型的中风和心脏疾病，他们将能获得保障。即使需要支付更高的保费，这也是当前市场上的最低之一。我们在定期检讨公积金制度时会评估行业标准的发展。

31. 我们也会简化公积金局的内部管理和公积金政策。整体的修订将确保公积金制度，身为我国社会保障的重要支柱，能继续满足国人的需求。

D. Conclusion

32. Sir, let me conclude. The CPF (Amendment) Bill will give effect to the closure of the SA for members aged 55 and above from second half of January 2025 onwards, as well as the expansion of the HPS to cover more CPF members with pre-existing health conditions from mid-2025 onwards. It also clarifies processes and streamlines the administration of CPF Board and CPF schemes.

33. All in all, this ensures that the CPF system continues to serve the needs of Singaporeans over the course of their lives and remains effective as a key pillar of Singapore’s social security system.

34. Mr Speaker, I beg to move.