CPF (Amendment) Bill 2016 Second Reading Speech at Parliament
Mr Lim Swee Say, Minister for Manpower, Parliament
- Madam Speaker, I beg to move, “That the Bill be now read a Second time.
- This Bill will amend the CPF Act in four broad areas:
- First, to implement previously announced policy changes related to Part One of the CPF Advisory Panel’s recommendations.
- Second, enhance the insurance coverage under the Home Protection Scheme (HPS) and Dependants’ Protection Scheme (DPS).
- Third, safeguard the Medisave monies claimed by medical institutions and approved insurers.
- Fourth, make various amendments to clarify and streamline the administration of the CPF system.
- Let me explain.
Implementing Part One of the CPF Advisory Panel’s Recommendations
- The first set of amendments pertains to Part One of the CPF Advisory Panel’s recommendations. The Government has implemented the Panel’s recommendations since January 2016 based on provisions within the current CPF Act. We are now amending the CPF Act to enable the CPF Board to implement these changes more directly.
- Let me recap some new flexibilities that CPF members can now enjoy.
Transfer CPF savings above the Basic Retirement Sum (BRS) to spouse
- We are amending the CPF Act to make it directly explicit that CPF members aged 55 and above can transfer savings from their CPF accounts, including their Retirement Account, to their spouses if they have set aside the Basic Retirement Sum, or BRS for short.
- Previously, members, including those less than 55, would have to set aside the Full Retirement Sum, which is twice the BRS, before they could make transfers to their spouses’ accounts.
- We agreed with the CPF Advisory Panel to reduce the requirement from FRS to BRS so that more CPF members can make top-ups to their spouses’ CPF savings. This flexibility will be useful for spouses who may not have enough CPF savings to join CPF LIFE for reasons such as leaving the workforce earlier to take care of their children.
- Both husband and wife can then have their own CPF LIFE plans and more secured retirement income for life. When one spouse passes away, the surviving spouse will still be assured of lifelong payouts. As a family unit, both husband and wife can also maximise the Extra Interest earned on their combined CPF savings.
- I encourage members to make full use of this flexibility to enhance their spouses’ retirement adequacy.
Remove the need to auto-include members into CPF LIFE at age 55
- We are also amending the CPF Act to state clearly that members will not need to be assessed for inclusion into the CPF LIFE scheme at age 55. This is because members now need to choose their CPF LIFE plan only when they reach their Payout Eligibility Age. Hence, the previous requirement to select their CPF LIFE plan at age 55, which could be about ten years before the start of payouts, is no longer necessary. Going forward, members will therefore need to be assessed for auto-inclusion into CPF LIFE only at their Payout Eligibility Age.
Enhancing the Insurance Coverage under HPS and DPS
- The second set of amendments relates to enhancing the insurance coverage under the CPF insurance schemes. These are the Home Protection Scheme and the Dependant’s Protection Scheme, or HPS and DPS for short.
Include Terminal Illness and Total Permanent Disability as grounds for claims under the HPS and DPS
- Today, members can only make a claim from HPS and DPS in the event of death or incapacity. By incapacity, it means that a member must not be able to ever continue in any form of employment. Currently, members with terminal illnesses or total permanent disability but can still do some form of work, do not fall within this definition of incapacity and hence do not qualify to make claims under HPS and DPS.
- We are amending the CPF Act to expand the definition of incapacity to include members with terminal illness and total permanent disability who may still be working or able to do some form of work, but in a diminished capacity. This change will benefit new and existing persons insured under HPS and DPS, subject to the exclusions in their individual insurance covers arising from pre-existing conditions.
- I hope that this broader protection from our CPF insurance schemes will provide CPF members with greater peace of mind.
Non-spouse co-owners can use CPF Ordinary Account monies to pay for HPS premiums
- Today, insured members who have run out of OA savings can use their spouses’ OA savings to pay for their HPS premiums if the spouse is a co-owner. We are now amending the CPF Act to allow such insured members to also use the OA savings of other co-owners including children, parents, or siblings to help pay for their HPS premiums.
- By allowing greater household support for the payment of HPS premiums, we can reduce the risk of lapsed insurance covers due to non-payment of HPS premiums. More CPF members and their families will therefore be protected from losing their homes in the unfortunate event of death, permanent incapacity, terminal illness or total permanent disability.
Safeguarding the Claim of Medisave Monies
- The third set of amendments pertains to strengthening safeguards for Medisave monies claimed by Medical Institutions and Approved Insurers.
- Today, Medical Institutions and Approved Insurers help to facilitate the withdrawals from CPF member’s Medisave Accounts for approved treatments and uses under the Medisave Scheme. In 2015, about $2.7 billion dollars of Medisave savings was withdrawn.
- Most Medical Institutions and Approved Insurers have made proper claims of Medisave monies and complied with our audit requirements. However, a small number of Medical Institutions and Approved Insurers still make errors in some of their claims. For example, in the past 3 years, we saw an average of about 40 cases a year of claims from wrong members’ accounts.
- To strengthen the safeguards over Medisave claims, this amendment will allow CPF Board to impose administrative penalties on Medical Institutions and Approved Insurers that:
a. Make wrong or unauthorised claims on members’ Medisave monies; or
b. Do not comply with audits ordered by CPF Board or other administrative requirements.
- These amendments will make Medical Institutions and Approved Insurers more accountable when they make claims of Medisave monies. The amended CPF Act will also mandate the recovery of any Medisave monies arising from unauthorised or wrongful deductions, or uncompleted prepaid treatment packages.
Other amendments to clarify and streamline the administration of the CPF Act
- The fourth and last set of amendments pertains to other amendments that provide greater clarity in the administration of the CPF system. I will provide two examples.
Revised method of estimating Additional Wage for CPF Contributions
- The first example is to revise the method of estimating the additional wages that attract CPF contributions. Today, employers are required to make an estimation based on previous year’s records. We are amending the CPF Act to allow employers to also make an estimation based on the projected wages in the current year.
- This amendment will improve efficiency as employers can estimate CPF liabilities more accurately, reducing the chances of employers over-paying CPF contributions. This will minimise the need for employers to apply for refunds for over-payments.
Crediting and withdrawal of unencashed payouts
- The second example is to allow CPF members to apply to withdraw cash payouts that were credited to their accounts under various Government schemes such as the GST-Voucher. This happens when the cheques were not encashed and subsequently expired. As these payouts are meant to support members’ daily needs, this amendment will allow members to withdraw these credited monies, without being subject to existing CPF withdrawal rules.
- Taken in total, the amendments in this Bill will enable CPF Board to implement policies aimed at providing greater flexibility while enhancing CPF members’ retirement adequacy, and also to enhance insurance coverage and improve the accountability of Medisave usage for CPF members.
- Madam Speaker, I beg to move.