Round-Up Speech at CPF (Amendment) Bill 2024
Minister for Manpower, Dr Tan See Leng, Parliament House
A. Introduction
1. Mr Speaker, let me begin by thanking Members for their support for the CPF (Amendment) Bill.
B. Evolving the CPF system to serve the needs of Singaporeans over the course of their lives
2. I will first address questions related to the amendments to effect the closure of the Special Account, or SA for members aged 55 and above, and the expansion of the Home Protection Scheme, or HPS. As I shared earlier, these amendments are part of the evolution of the CPF system to continue serving the needs of Singaporeans over the course of their lives.
Closure of Special Account for members aged 55 and above
3. With regard to the SA closure, Mr Neil Parekh asked when and how affected CPF members will be notified of the SA closure, and Mr Louis Ng asked about the resources extended to CPF members.
4. All affected CPF members will be notified via hard copy letters, and email or SMS where applicable, informing them of the amounts that have been transferred to their Retirement Account, or RA, and Ordinary Account, or OA, after their SA has been closed. To help members plan ahead, CPF Board has enhanced the Retirement Dashboard on their website. The dashboard allows members to view the estimated amounts that will be transferred from their SA to their RA and OA. Information is also available on the CPF website and across CPF Board’s communication channels. Members who need further assistance can contact CPF Board directly.
5. Mr Ng asked about the circumstances under which a member’s SA will not be closed upon reaching age 55. These circumstances relate mainly to CPF members who pass away shortly before turning 55. We will not close their SA to streamline the administrative process for transferring these monies out of the CPF, for example as payments to the members’ nominees.
6. Mr Parekh also asked about how SA closure affects the computation of interest, as well as ongoing payments and contributions. These are questions which CPF members are also likely to have. There are FAQs today on CPF Board’s website on these topics to help members. Let me summarise the key points.
7. As CPF interest is computed monthly, the SA savings that are transferred to the RA up to the Full Retirement Sum, or FRS, will earn the RA interest for that month. The remaining SA savings which are withdrawable, will be transferred to the OA to earn OA interest for that month. Members who wish to earn the RA interest and commit their savings for higher retirement payouts can opt to transfer their OA savings to their RA up to the Enhanced Retirement Sum, or ERS, within the same month.
8. If there are incoming CPF contributions to the SA, these will be allocated to the RA, up to the FRS, either in cash or with a mixture of cash and property. Any remaining contributions in excess of FRS, will be allocated to the OA and can be withdrawn.
9. For ongoing payments, transition measures will be put in place after the SA has been closed to ensure that members aged 55 and above have sufficient time to make the necessary arrangements. Participating members will be notified by CPF Board of the relevant changes to the schemes and their options moving forward.
10. Mr Ng asked about how many members are expected to reach the FRS, following the transfer from the SA, and if the Government will regularly share the number of members expected to reach the Basic, Full and Enhanced Retirement Sums.
11. As the transferred SA balances are not high, this is not expected to change FRS attainment by much.
12. The Basic and Full Retirement Sum attainment rates are published on the CPF website annually. We have also been sharing the Retirement Sum attainment rates with the House through recent Committee of Supply debates.
13. Associate Professor Jamus Lim asked about what happens to members’ SA investments after the SA closure. He has alluded to the fact that it runs contrary to having some form of commitment that members have been enjoying. After the SA has been closed, members can continue to hold their existing CPF Investment Scheme-Special Account (CPFIS-SA) investments until they decide to sell them or until they mature. Upon sale or maturity, the proceeds from members’ CPFIS-SA will be paid to their Retirement Account up to the FRS, with any remaining balance paid to their OA.
14. Members may continue to use their OA monies to invest under the CPF Investment Scheme-Ordinary Account (CPFIS-OA). This is consistent with the approach for CPFIS today. Members need to have set aside their FRS after turning 55 before they can invest under CPFIS. We will notify members in advance so that they are aware of the available options. Not providing any special treatment for CPFIS is also consistent with how we are not grandfathering older cohorts for SA closure.
15. To Associate Professor Jamus Lim’s point about retirement planning and how the cost of inflation has affected members, and thus in a way, nudging them to consider stretching the CPF monies in terms of getting extra interest. I want to highlight that over the last five years, the Government has rolled out a significant number of packages to support many of our residents in terms of addressing some of the cost of living issues. So I won’t touch on that further. I want to highlight a point. Today there are about 8,400 members who are relatively high-income earners, representing less than 1% of all members aged 55 and above, who will not be able to fully transfer their SA savings to their RA even as we raise the Enhanced Retirement Sum (ERS). We have raised the ERS to four times, up from the current three times, of the BRS. Our members have the flexibility to either retain these savings in the OA for liquidity, or invest in safe instruments such as Singapore Government Securities through the CPF Investment Scheme. Financially-savvy members may also grow their savings outside the CPF system. In fact, those who are investment-savvy may prefer to consider relevant commercial investment products, or otherwise they can leave monies in their RA to continue earning the higher long-term interest rate and receive higher retirement payouts. Looking at the numbers, I don’t think this move was motivated because of SA shielding because only a minority of members, about 2% in 2021, could have chosen to do so.
16. We have extensively discussed this on several occasions in this House. As such, I seek Professor Jamus Lim’s and Members’ understanding that I will not repeat points which have been raised and addressed before.
Expansion of Home Protection Scheme to cover members with more serious pre-existing health conditions
17. Mr Speaker Sir and Members of the House, I am heartened with that the expansion of the Home Protection Scheme or HPS has been positively received. There were clarifications on the coverage of HPS, the necessity and impact of premium loading, and the process for HPS premium reviews. I will address these in turn.
i. Coverage
18. Mr Ng and Ms Jean See asked if HPS already covers members with pre-existing medical conditions and how they will be affected. Mr Ng, Mr Yip Hon Weng, Mr Parekh and Ms See asked for clarity on the types of conditions covered under the expanded HPS and how many additional members would benefit.
19. The vast majority of HPS applications are approved, including for members with pre-existing health conditions if they have been assessed to be generally in good health. This includes individuals who have fully recovered from a stroke for some time. It also covers those with early-stage cancer and have remained in remission for a period of time. Members who are already eligible today would pay the same standard premiums; they will not be affected by the expansion of HPS and premium loading.
20. With the proposed expansion, more members with pre-existing health conditions may be considered for coverage with premium loading. Examples include certain types of stroke and heart disorder. We estimate that this expansion will offer HPS coverage to approximately 100 more members each year.
21. However, some applicants will remain ineligible for HPS, because their conditions are too severe to be insurable. Over-extending HPS coverage for members with significantly higher claim risk could negatively affect the sustainability of the HPS. This is in line with industry best practices and ensures the sustainability of HPS for the general population.
22. Mr Parekh and Ms See also asked how premium loading for members with pre-existing conditions would be handled. As with industry practice, each application is assessed individually. This means that eligibility for HPS coverage is assessed based on each member’s personal health risk profile, taking into account overall severity, prognosis and control of all their medical conditions. Where required, the CPF Board obtains relevant information from medical professionals to gain a comprehensive understanding of the member’s health status.
23. Mr Ng and Ms See asked if previously rejected HPS applicants will be notified that they can submit a new application to be considered again. The CPF Board will reach out to such members that may be eligible for cover under the expanded HPS. In fact, the Board already conducts outreach to members whose health conditions might improve, to invite them to re-apply for HPS with a medical report on their current health condition.
24. Mr Edward Chia also asked if the Ministry would introduce tiered coverage options within the HPS.
25. Similar to other HPS members today, those subject to premium loading can choose the extent of coverage by adjusting their share of HPS cover, as long as the co-owners’ total cover add up to 100% of the outstanding housing loan. Participation for those subject to premium loading will also be on an opt-in basis. We regularly review HPS coverage and affordability, and will study Mr Chia’s suggestion.
ii. Sustainability, Financing and Government Support
26. Mr Yip asked about the rationale for HPS premium loading for members with higher health risks, and whether there are safeguards in place to prevent individuals from lower-income groups from being disproportionately affected. Instead of premium loading, Mr Chia asked if HPS can broaden the risk pool to reduce the premiums charged on higher-risk individuals.
27. Today, all approved HPS applications are covered at a standard premium rate. With the expansion of HPS, premium loading will apply to members with certain pre-existing health conditions that are not so severe, who previously would not have been eligible for cover. The additional premiums will be commensurate with their higher claim likelihood. This is in line with industry practice and is necessary to keep the HPS scheme sustainable.
28. Without premium loading, HPS premiums may need to rise across the board for all members, including for those in the lower-income groups, in order to cross-subsidise the higher claim rates by members with more serious conditions. Doing so would not be equitable. Even with premium loading, HPS would provide coverage at one of the lowest premiums in the current market for all members.
29. For members facing financial hardship, their familial co-owners can help to pay outstanding premiums. CPF Board also extends the grace period for premium repayment, based on members’ circumstances.
30. Should members require help with their mortgage loans, HDB will assess each case and provide assistance. This includes allowing members to temporarily reduce or defer their loan instalments, or extend their loan tenure to reduce their monthly instalments.
iii. HPS Premium Review Process
31. Mr Parekh asked about the appeal process for members who disagree with their risk assessment. Mr Chia and Ms See asked about reviewing premiums for members in remission. Members subjected to premium loading who are looking to have their premiums revised may submit a medical report on their current health condition. CPF Board will then assess their requests and adjust premiums accordingly.
32. If members develop health conditions while under HPS cover, they will see no changes to their premium as a result. Their HPS cover can also be ported over if they are looking to purchase a new flat.
33. Mr Yip and Mr Chia also asked about the process to review HPS premiums. Mr Chia also asked if advancements in medical treatment are taken into account when revising premiums.
34. Members of the House, to ensure that HPS premiums remain affordable, the CPF Board conducts premium reviews annually. During the review, several factors are considered, including the market competitiveness of HPS premium rates so that HPS remains affordable to members. CPF Board also considers the sustainability of HPS premium rates by taking into account factors such as claims experience, projected investment returns as well as overall financial health of the Home Protection Fund. For example, when there is significant improvement in health outcomes among the general population due to advancements in medical treatments, this will be reflected in the claims experience and factored in during the review process. The underlying assumptions are also validated by an external actuarial consultant to ensure robustness of the premium review.
C. Clarifying processes and streamlining the administration of the CPF Board and CPF schemes
35. Let me move on to clarifications regarding the second set of amendments to streamline the administration of the CPF Board and CPF schemes for better service delivery.
i. Prioritise the recovery of the extent of additional HDB subsidies ahead of CPF housing refunds, upon disposal of flats priced with additional subsidies
36. Mr Chia asked for clarity on and Associate Professor Jamus Lim highlighted potential gaps that could happen from the calculation of the subsidy recovery amount when Prime and Plus flats are sold. As Mr Chia has rightly pointed out, the recovery rate will be applied to the flat’s resale price or prevailing market value (whichever is higher) at the point of sale. The subsidy recovery percentage will be commensurate with the extent of the initial additional subsidy provided. HDB informs flat buyers of the subsidy recovery rate upfront at the point of launch, and the recovery rate remains fixed at the point of resale, regardless of whether the flat was eventually sold at a profit or loss compared to the original launch price. This ensures fairness to other Standard flat buyers who did not enjoy the additional subsidies, who are likewise subjected to the vagaries of the market. The set of additional restrictions imposed on Plus and Prime flats helps to keep these flats in attractive locations affordable at the point of resale.
ii. Repeal provisions allowing CPF Board to share prospective employees’ employment history with employers upon request
37. Finally, Mr Parekh asked about support provided to SMEs to manage the change of internal systems to handle the new CPF procedures. The amendments are not expected to impact SMEs and employers. Nonetheless, there are existing channels for businesses and employers to provide feedback.
D. Conclusion
38. In conclusion, Mr Speaker Sir, the Bill will allow us to ensure that the CPF system evolves to continue to meet the needs of Singaporeans over the course of their lives. I would again like to express my appreciation to Members of the House who expressed their support for the Bill.
39. Mr Speaker, I beg to move.
40. Thank you.