Central Provident Fund (Amendment No. 2) 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, provide CPF members with the flexibility to make advance applications for a lump sum withdrawal from their Retirement Account upon reaching their Payout Eligibility Age.
- Second, allow payouts under the Retirement Sum Scheme to begin automatically upon the member reaching 70 years of age.
- Third, fully effect the Medisave changes relating to the introduction of the Basic Healthcare Sum which took effect from 1 Jan 2016.
- Fourth, make various amendments to clarify and streamline the administration of some parts of the CPF system.
Provide flexibility to make a lump sum withdrawal from the Payout Eligibility Age
- The first amendment is to implement the recommendation by the CPF Advisory Panel to allow members who turned age 55 in 2013 or later to make a lump sum withdrawal of up to 20% from their Retirement Accounts when they reach the Payout Eligibility Age, or PEA for short.
- Following this change, members will have 3 options on their lump sum withdrawal. First, withdraw the lump sum starting from their PEA birthday. Second, defer withdrawing the lump sum beyond their payout start date for CPF LIFE or the Retirement Sum Scheme by transferring this lump sum to the Ordinary Account. Third, convert the lump sum into monthly payouts through CPF LIFE or the Retirement Sum Scheme.
Automatically start payouts for members on the Retirement Sum Scheme from age 70
- The second amendment simplifies the activation of CPF payouts for members on the Retirement Sum Scheme.
- Today, members who join the CPF LIFE scheme will receive payouts automatically when they reach age 70. However, members on the Retirement Sum Scheme have to apply to start their payouts. Some of them may not have done so despite receiving reminder letters from CPF Board around two months before their PEA.
- We are therefore amending the CPF Act to allow for automatic starting of payouts at age 70 for members on the Retirement Sum Scheme. This approach is similar to that for CPF LIFE and will start in 2018. About 1 in 3 members are expected to benefit from the automatic starting of payouts under the Retirement Sum Scheme.
Support implementation of the Basic Healthcare Sum which took effect from 1 Jan 2016
- The third set of amendments updates the CPF Act to support the implementation of the Basic Healthcare Sum, or BHS for short, which took effect on 1 Jan 2016.
- The BHS was introduced by the Ministry of Health for CPF members to meet their basic subsidised healthcare needs in old age. The BHS is fixed for each cohort when they turn 65 years old. It is the maximum amount a member can set aside in his Medisave Account. Any additional Medisave contributions above the BHS are transferred to the member's Special or Retirement Accounts to increase his retirement income.
- In addition, members aged 55 and above now no longer need to top up their Medisave Accounts, before withdrawing from their Ordinary and Special Accounts.
- To fully effect these changes, we are amending the CPF Act to remove obsolete provisions relating to the Medisave Minimum Sum, and fix the BHS for each cohort when they turn 65 years old.
Other amendments to clarify and streamline the administration of some parts of the CPF Act
- The fourth and last set of amendments provide greater clarity and efficiency in the administration of some parts of the CPF system. This includes replacing Minimum Sum with Retirement Sum, clarifying administrative financial penalties framework, recovery of government grants and other payments made in error and catering for members whose birthday fall on 29 February. I will provide one example on simplifying the Medisave top-up process for family members.
Simplifying the Medisave top-up process for certain family members
- Today, members aged 55 and above who have already set aside their cohort Full Retirement Sum have to withdraw the excess monies in their Ordinary and Special Accounts in cash should they want to use it to top up the Medisave Account of certain family members aged 55 and above.
- The amendment will enable members to make such top-ups directly from their Ordinary and Special Accounts to the Medisave Accounts of these family members.
- In conclusion, this Bill provides greater flexibility, healthcare assurance, as well as simplifies certain administrative procedures for greater convenience for CPF members.
- Madam Speaker, I beg to move.