CPF (Amendment) Bill 2023 Round-Up Speech by Senior Minister of State for Manpower Dr Koh Poh Koon
1. Mr Speaker, let me begin by thanking Members for their support for the CPF (Amendment) Bill.
A. Focusing the CPF system on residents – ceasing participation of non-residents in CPF schemes
Reiterating broad objective of the amendment
2. Let me first start by addressing questions related to the first set of amendments to cease the participation of non-residents such as non-Singapore Citizens and non-Permanent Residents in CPF schemes. Mr Saktiandi Supaat asked whether there are new considerations that led to these changes. Actually, we have been gradually moving towards ceasing the participation of non-residents in the CPF system across the years.
3. We have removed mandatory CPF contributions for non-residents since 1995 and disallowed voluntary CPF contributions by non-residents since 2003.
4. Hence, the amendments in this Bill are the final steps to ensure that the CPF system is focused on the core objective of supporting the retirement, housing and healthcare needs of residents in Singapore.
On perceived unfairness to residents
5. Mr Saktiandi Supaat also asked whether ceasing participation of foreign workers in the CPF system will cause businesses and employers to turn away from Singaporeans since employers do not have to pay additional CPF contributions for foreign workers. Mr Leong Mun Wai is similarly concerned about Singaporean workers being less competitive than foreign workers.
6. Let me explain that qualifying salaries for Employment Pass (EP) and S Pass holders are in place as a lever to ensure that non-residents are not under-cutting wages of residents. Qualifying salaries are benchmarked against local wages, inclusive of employer CPF contributions. The EP and S Pass qualifying salaries are benchmarked to the top one-third of local Professionals, Managers, Executives and Technicians (PMET) and Associate Professionals and Technicians (APT) respectively. Based on the way we benchmark the wages of EP and S Pass holders, there is no wage cost advantage for employers to hire foreign professionals. That is one area that Mr Leong has raised that I would like to dispel. This has been previously addressed in various PQs. Mr Leong’s characterisation of EP salaries being lower than local PMETs is also inaccurate as we have been raising it regularly and have now benchmarked it to the top one-third of local PMET wages. The $5,000 qualifying salary that Mr Leong cited is for a young EP holder at an age of 23, just joining the workforce. This increases progressively with age to $10,500 per month at age 45 and above. For the financial services sector, it is even higher to take into account the consideration that there are higher salary norms in these other sectors.
On outflows of CPF monies and stability of CPF system
7. Mr Saktiandi Supaat asked how many non-resident accounts will be affected and whether we are doing anything to prepare for the expected outflow of monies from the CPF system. Mr Yip Hon Weng and Mr Don Wee also asked about the size of CPF balances being transferred out of the CPF system.
8. There is approximately 300,000 non-residents who will cease participation in the CPF schemes.
9. Majority of these non-residents have low CPF balances, with approximately 70% of them having less than $5,000 in their CPF accounts. The median CPF balances is $1,500. Non-residents’ CPF balances is only about 1% of all CPF balances. The outflow of non-residents' CPF balances will not pose liquidity issues.
10. Mr Don Wee asked how much operational savings are expected as a result of these amendments.
11. To give Members some sense of the additional operational load on CPF Board to serve non-residents, the CPF Board has separate manual processes to manage service requests from non-residents, such as undertaking additional steps to verify their identity as these non-residents do not have access to Singpass. Hence, ceasing the participation of non-residents in CPF will result in more efficiency for CPF Board.
On details regarding ceasing non-resident’s participation of schemes
12. Mr Saktiandi Supaat asked why the timeline to cease non-resident’s participation in CPF schemes may differ for different groups of members.
13. There are broadly two different groups of members – first, existing non-residents such as those who have already left Singapore or who have not been working for some time here; and second, members who become non-residents after 1 April 2024.
a. For existing non-residents who are already known to us, we are able to process their accounts ahead of time so that their participation in CPF schemes will cease starting from 1 April 2024.
b. However, for current residents who become non-residents only after 1 April 2024, we can only cease their participation in CPF schemes from the date they renounce their Singapore Citizenship or Permanent Residency. Hence some time is required to wind up their participation in CPF schemes depending on their specific circumstances.
14. Mr Yip Hon Weng asked whether those in the process of applying for Singapore Citizenship or Permanent Residency can be allowed to continue participating in CPF schemes.
15. Those who already hold Permanent Residency and are applying for Singapore Citizenship will continue to participate in CPF schemes. For non-residents who are applying for Permanent Residency, the general application processing time is about six months and some applications may take longer to process. Hence, for those who still hold non-resident status as of 1 April 2024, their participation in CPF schemes will cease. Nonetheless, once they are granted Permanent Residency, they will then be part of the CPF system. CPF Board had also announced in March this year, how non-residents’ participation in CPF schemes will cease, which should give ample lead time for the transition.
16. Mr Don Wee also asked how CPF Board will return the CPF balances to account holders whose bank accounts are closed.
17. Non-residents can choose to transfer their CPF monies to their local or overseas bank accounts or via cheques.
18. Mr Don Wee asked about the deadline for the transfer of monies by the member or if they are deceased, by their beneficiaries who may not be in Singapore. He also asked what CPF Board would do with the unclaimed monies and whether it could be used, for example, as part of MOM’s budget.
19. There is no deadline for non-residents to transfer their CPF monies. They can do so at any time. If non-residents have passed on, there is also no deadline for their nominees or beneficiaries under the relevant intestacy laws to claim the monies. These unclaimed monies will continue to be held for the non-residents in the General Moneys of the Fund and cannot be used as part of MOM’s budget or for any other purposes.
20. Mr Louis Ng asked if new citizens and permanent residents will have sufficient savings to be self-reliant.
21. In general, new citizens and permanent residents are required to either be economically active or have the means to support themselves through employment or family support. CPF savings are not their only means to attain retirement adequacy. Many Singaporeans and Permanent Residents also tap on their personal savings and family support to meet retirement needs.
22. Mr Yip Hon Weng asked whether there are projections regarding the number of non-residents expected to sign up for the Supplementary Retirement Scheme, also known as SRS, and whether Government is in fact facilitating the growth of retirement funds of non-residents by providing them tax relief through SRS.
23. The member has linked SRS to CPF. Let me clarify this common misconception. The SRS is operated by the private sector where participation is voluntary and contributions are made through cash, not CPF monies. Contributions to SRS are separate from the CPF scheme. SRS is a mechanism for anyone who wishes to save more for retirement. SRS members are able to use savings in their SRS account to invest in commercial investment products in the market. The investment returns from these commercial products can complement CPF to support their retirement, but it is in fact separate from CPF. The only thing they have in common is that they help to add to the retirement adequacy of the individual. As SRS is voluntary, we are not able to predict the number of sign-ups.
24. Mr Saktiandi Supaat, Mr Louis Ng and Mr Leong Mun Wai asked about whether the interest rates and returns of CPF accounts will increase in the future. This is not relevant to the CPF Amendment Bill. Nevertheless, let me respond briefly by saying that the Ordinary, Special and MediSave Account interest rates are reviewed quarterly, while the Retirement Account interest rate is reviewed annually, according to the pegged rates. Despite the low interest rate environment in the last decade since the global financial crisis, the Government paid generous CPF interest rates due to the floor rates of 4% for the Special, MediSave and Retirement Accounts, and 2.5% for the Ordinary Account. When the pegged rates exceed the floor rates, members will correspondingly earn the high interest rates on their CPF savings. We will continue to review the CPF interest rates to ensure that returns remain relevant, while taking into consideration the longer-term outlook.
B. Streamlining the administration of CPF schemes for better service delivery
25. Let me move on to clarifications regarding the second set of amendments to streamline the administration of CPF schemes for better service delivery.
i. Align disclosure practices upon member’s death to industry practices
26. On aligning disclosure practices upon member’s death to industry practices, Members have asked questions about:
a. who will receive the deceased member’s CPF information and
b. what information will be disclosed.
c. Some Members have also asked questions on the disbursement of CPF monies after member’s death.
On who will receive deceased member’s CPF information
27. On who will receive the deceased member’s CPF information, Mr Yip Hon Weng asked whether the disclosure of deceased member’s information is limited to one person or all of the next-of-kin, beneficiaries and nominees. Mr Don Wee also asked whether the information would be disclosed to a next-of-kin who is neither a nominee nor a beneficiary under the relevant intestacy laws.
28. All nominees and the deceased’s beneficiaries under the relevant intestacy laws will be allowed to access the deceased member’s CPF information. To be clear, if a family relation is not considered a next-of-kin under the relevant intestacy laws, they will not be allowed access to the deceased member’s CPF information.
29. Mr Saktiandi Supaat asked what percentage of CPF members gave consent to CPF Board to disclose information after death, when making their nominations of the persons entitled to receive their CPF monies upon their death. Mr Yip Hon Weng also asked whether the amendments entail information being accessed by those not intended by the deceased member.
30. Today, 9 in 10 members who make nominations have already authorised all their nominees to access their CPF information upon members’ demise. Hence, for the vast majority of these members today, the amendments are in in fact aligned with their intentions.
31. Being able to access the deceased member’s CPF information and nomination details without requiring explicit authorisation by deceased members is aligned to industry practice for wills and intestate distribution of assets by the Public Trustee. It is intended to provide convenience to settle deceased member’s post-demise matters. It also ensures transparency so that all nominees and beneficiaries under the relevant intestacy laws are assured that the deceased members’ CPF monies have been fully accounted for.
On what information will be disclosed
32. On what information will be disclosed, Mr Saktiandi Supaat asked whether the information that nominees and beneficiaries under the relevant intestacy laws can access is broader in scope than what authorised members can access today.
33. In general, only details that will help nominees or beneficiaries under relevant intestacy laws settle the deceased member’s post-demise matters will be disclosed. This will include details of the deceased’s participation in CPF schemes but exclude details of the relationships between nominee and the deceased, as well as information on the deceased’s witnesses to the nomination.
On the disbursement of CPF monies after member’s death
34. On the disbursement of CPF monies after member’s death, Mr Saktiandi Supaat asked what percentage of deceased members’ CPF monies were not disbursed within a month and remained unclaimed six months after the notification of death to CPF Board.
35. From 2021 to 2023, on average around 70% of deceased members’ CPF monies were disbursed by CPF Board or transferred to the Public Trustee for disbursement within five weeks upon notification of death. For the same period, on average only 5% of nominated monies remained unclaimed six months after notification of death.
36. Mr Don Wee asked whether in the event that the member and their spouse have passed on, would the children from the marriage be considered as next-of-kin and receive the same amount of CPF monies. Where the deceased member did not make a nomination for his CPF monies, the member’s children would be considered next-of-kin and receive equal portions based on the distribution rules under the Intestate Succession Act. However, if there is a valid nomination, it will go to the surviving nominees, which may or may not be the children depending on the nomination.
ii. Allow transactions to continue after member’s death
37. On allowing transactions to continue after member’s death, Mr Louis Ng asked what practical effect these amendments will have for Singaporeans.
38. As explained in my opening speech, the amendments seek to clarify the Board’s powers to process the necessary transactions after member’s date of death. Singaporeans will not experience any changes in the computation of the CPF balances to be paid out to the nominees and beneficiaries under the relevant intestacy laws.
39. In closing, I would again like to express my appreciation to Members of the House who expressed their support for the Bill. The Bill will allow us to continue to focus the CPF system on supporting residents’ retirement, housing and healthcare needs. Residents will also benefit from the streamlined administration of CPF schemes.
40. Mr Speaker, I beg to move.
41. Thank you.