Debated in Parliament on 11 Nov 2013.
[(proc text) Order for Second Reading read.*
Mr Deputy Speaker, I beg to move, "That the Bill be now read a Second time."
It is important that employers fulfil their CPF obligations to their employees. This is especially so for lower wage and vulnerable workers to help them save up for their retirement needs, and ensure that they benefit from Government assistance schemes, such as Workfare, which are implemented via the CPF system. Hence, we view non-compliance by employers of the CPF Act seriously and will take firm action against errant employers. This Bill will amend the CPF Act to support enhanced enforcement of the Act. General penalties will be
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increased and powers of CPF Board inspectors will be strengthened to aid investigations.
Other amendments to the Act will provide some flexibility for the CPF Board to address appeals on withdrawal frequency by CPF members above the age of 55, update pledging rules for private property and close Minimum Sum-related schemes which are no longer relevant. Various technical amendments will also be made to streamline the administration of the CPF.
Let me first begin with the changes to enhance our enforcement of the CPF Act. Most employers comply with CPF obligations, with more than 97% of employers making their CPF contributions for their employees in a timely manner in a given month. However, while compliance is high, for those Singaporeans who have not received their due payments, it matters. I believe that non-compliance tends to impact the less educated and those who may be earning less, precisely for whom the CPF contributions will help more.
Since late 2012, the CPF Board has stepped up enforcement to deter errant employers who do not comply with the CPF Act. This has been complemented by outreach activities to raise awareness amongst employees and employers of their CPF rights and obligations.
The CPF Board and MOM will continue to step up efforts to bring about greater compliance with the CPF Act and Employment Act to better protect employees, including under the WorkRight initiative. The review in penalties under the CPF Act will ensure that the penalties have a stronger deterrent effect on recalcitrant employers.
For offences under the CPF Act for which no specific penalty is prescribed, which include non-payment and late payment of CPF contributions and providing false statements, general penalties are imposed on offenders upon conviction. Currently, for such penalties, the Act prescribes a maximum fine of $2,500 for first offences and a maximum fine of $10,000 for subsequent offences. There is, at present, no minimum fine.
We will increase general penalties to enhance their deterrent effect so that they are commensurate with the severity of the offences. As such, we will amend section 61 of the CPF Act to double the maximum fine for first offences to $5,000. For offences involving payment of CPF employee contributions, we will also introduce a minimum fine of $1,000 for first offences and $2,000 for subsequent offences. All these fines apply per charge. Employers who default
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on their CPF contributions for months or for more than one employee can face multiple charges, and the total fine will be considerable.
In conjunction with the increase in general penalties, we will also double composition amounts, which are collected for compoundable offences, from $500 per charge to $1,000 per charge. These refer to cases where CPF Board compounds the offence by accepting the composition amount instead of prosecuting the employer if the employer has met certain conditions, such as paying up CPF arrears.
Among the small group of recalcitrant employers who repeatedly default on their CPF contributions, there may be Directors or officers of incorporated companies who are not personally liable to pay the CPF arrears owed and, therefore, might not be deterred by the Court fines imposed. We will, therefore, introduce a jail term which can replace or accompany the increased fines. A jail term of up to six months will be applicable to the first offence, and this will be doubled for subsequent offences. The inclusion of a jail term aligns the CPF Act with the Employment Act which also provides for a jail term for labour-related offences.
The vast majority of employers comply with their legal obligations to pay CPF contributions. But for the minority of employers who take advantage of their employees by not paying their CPF contributions, these changes send a clear and strong signal.
Another enhancement we are making to strengthen our enforcement of the CPF Act is to better equip our CPF Board inspectors in their ability to carry out their duties.
With non-traditional work arrangements becoming more prevalent, our CPF Board inspectors are increasingly hampered by employers' complex HR practices. For instance, for cases of non-payment of CPF contributions for outsourced employees, the Board's inspectors may need to obtain relevant documents and records from the company where these employees are working, rather than from the employer of these employees. Such documents and records may include records of wages and attendance logbooks.
In view of this, it is necessary to equip our inspectors with the ability to obtain documents and records from persons other than the employer. Section 5(3) of the Act will be amended to empower the Board's inspectors to obtain documents or records from any person connected with the employment of the
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workers in the course of an inspection. Inspectors will also be empowered to obtain information, documents or records from any person in the course of an investigation into a specified offence under the new section 5(3A) of the Act. These amendments will aid CPF Board in its enforcement efforts and help the Board protect the interests of employees, particularly those in non-traditional work arrangements.
Sir, I will now move on to the next amendment that will give the Board flexibility in handling appeal cases related to withdrawal frequency made by CPF members above the age of 55. Currently, CPF members above the age of 55 are allowed to withdraw balances above their cohort Minimum Sum and the prevailing Medisave Required Amount once within each birthday year, subject to applicable withdrawal rules.
We have seen cases of CPF members who have made a withdrawal within their birthday year, but subsequently request to make another withdrawal before their next birthday for various reasons. At present, CPF Board already has discretion to allow for an additional withdrawal within a year, for example, where it is satisfied that the member has been unemployed for six months prior to his application. That said, there may be other cases where one more withdrawal within the year is merited.
We will, therefore, amend section 15(4) of the CPF Act to provide CPF Board with the flexibility to assess and allow a CPF member to make more than one withdrawal within the same birthday year. However, the amount of money that the member may withdraw will still be based on applicable withdrawal rules.
Let me move on to the next amendment that will update the pledging rules in relation to private property owned by a CPF member and one or more persons who are not related to the CPF member. CPF members who own property can choose to pledge their property up to half of the Minimum Sum upon reaching the age of 55, to withdraw cash from the Retirement Account. The CPF Act currently specifies that owners may only pledge their respective shares of their private property if they are related. However, this is incongruent with the policy where non-related singles are allowed to use their CPF savings to jointly purchase a private property under the CPF (Residential Properties Schemes) Regulations since July 2005.
We will, therefore, amend section 15(11A) of the Act to allow a CPF member to pledge a private property jointly owned by the CPF member and any other
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person.
Sir, I will now move on to the next amendment that will give effect to the closure of the Minimum Sum Bank Deposit Scheme (BDS) and the Minimum Sum Plus Scheme (MSPS). Both the BDS and MSPS were introduced in 1987 and 2000 respectively as an alternative to the Minimum Sum Scheme to encourage members to purchase annuities for more retirement income. However, with the introduction of the CPF LIFE scheme, lower bank interest rates and more annuity products granted tax exemption, members' participation in the BDS and MSPS has dropped very significantly over the years. All participating banks and insurers have actually also stopped accepting new deposits or annuity purchases under the BDS and MSPS.
Since both schemes have become defunct, amendments will be made to sections 15(6C) and 15B of the Act to cease the BDS and MSPS with effect from 1 January 2014. Members who are already on the BDS and MSPS can continue to remain on their respective schemes.
The other amendments in the Bill are to clarify and streamline the administration of the CPF Act. We will constantly refresh and update the CPF Act based on the feedback provided by the public, and these changes, like many over the years, have been a result of your inputs and suggestions. So, thank you very much and please do continue to let us know how to improve the system.
Sir, taken in total, the amendments in this Bill will strengthen the compliance with the CPF Act, and refine and update the CPF system for the benefit of members. Sir, I beg to move.
*Question proposed.*
Mr Deputy Speaker, the Central Provident Fund (CPF) is definitely one of the key pillars of our unique Singapore system. Over the years, it has gone through many changes and amendments to adapt to the ever-changing needs of our citizens and the labour force.
Though the current set of proposed amendments is primarily technical and administrative in nature, it is clearly a result of feedback received, the need to
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be current, continuous review and also for housekeeping purpose. I am happy to note that the Ministry has given considerable thought to the implementation aspects of the proposed amendments. I support the general thrust of the amendments and would like to raise a few key points stipulated in the proposed amendments for discussion and consideration.
Firstly, Sir, the amendment proposed to expand the scope of the inspectors' powers in obtaining information, documents or records in the course of an inspection or where the inspectors has reasonable cause to believe that a specified offence has been committed. This may sound reasonable and logical, Sir, but I would like to request the Minister to clarify and specify the level of expansion and define the term "reasonable cause", as stated. How would the Ministry ensure that there are no abuses by officers with these expanded powers? And what is the seniority level of the Inspectors at CPF – because the Minister mentioned about the difficulty faced by them – and how are the officers trained to face such challenges?
Sir, as an employee in Singapore, we are also generally familiar with the current rule with regard to the keeping or withdrawing of allowable funds from our CPF accounts once we reach the age of 55. Over the years, we have heard feedback and suggestions from workers for the rule to be more flexible and allow for some margin of discretion with regard to the amount and also to the timing. In this amendment exercise, there is a proposal to empower the CPF Board to determine the conditions for further withdrawals from the member's account when he has attained the age of 55. Sir, I welcome this and request the Ministry to make the process of the decision to be made by the Board to be transparent and properly articulated to the account holders who are affected. Similarly, I would request the Minister to continue to provide CPF Board account holders proper avenues to appeal to the Board, if necessary, or where it is relevant, due to the ever-changing circumstances of the CPF member's life.
Next point, Sir. One of the allowable uses of the CPF savings is withdrawal under the Education Scheme. This scheme has helped many Singaporeans to benefit from the savings of their parents for their education. It has always been seen as a positive use of a member's CPF savings. It is obviously seen as an investment for their children and also for the future. Nevertheless, I notice there is an amendment proposed that requires the provision for an undertaking or a guarantee to cover reasonable expenses incurred by the Board in recovering any sum withdrawn under the Education Scheme. So, is there serious difficulty to recover the funds withdrawn under the Education Scheme? That is my first question. And what is the amount that is outstanding? Who is to pay for the
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cost, as mentioned in this amendment?
Sir, we recently saw the report in the media of some 600 employers who committed illegal acts by violating the basic rights of employees. These illegal acts also included the non-payment of CPF contributions to workers and, of course, other violations. So, I welcome the proposed amendment to provide for increased penalties for offences and also to provide for an enhanced penalty for repeat offenders. Honestly, I am exasperated when I hear the excuses given by employers of ignorance of the CPF. The reality is that the CPF has been around for years and it is a very important component of our workers' income. Thus, I find it difficult to accept the ignorance excuse. I would further request the CPF Board to name and shame the recalcitrant employers and even blacklist them from becoming future employers.
On the subject of the primary role of the CPF Board, I wish to reiterate that CPF savings should be seen primarily as savings for retirement. While there is some merit in tapping on CPF savings for housing, investment and education purposes, we must constantly remind CPF members that, for the majority, it is their CPF savings that will support them in their retirement. While there may be temptations to invest CPF savings through various schemes, as a result, we all know, sometimes these are not consistent, and certainly nowhere near what the Board can provide in terms of returns through the CPF savings. I would like to also appeal for the CPF Board to consider looking at ways to improve the returns for our members so that they can also feel that it is good for them to keep the CPF savings for their future.
In conclusion, Sir, I think it is worthwhile for us to continue to remind members to think carefully, before taking any step of using their CPF savings – it is after all their nest egg that they are painstakingly building to finance their retirement years. Sir, I support the Bill.
Mr Deputy Speaker, Sir, the Central Provident Fund is a unique implementation of a national pension and social security system, and plays a critical role in boosting the confidence of Singaporeans in their own financial security, both after retirement and even before. Measures to strengthen the CPF, particularly from the standpoint of compliance by employers, are always timely and welcomed.
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In recent weeks, MOM has revealed disturbing trends of non-compliance by employers over the past few years. Although these breaches have not been overwhelming in absolute terms, they have, nonetheless, been significant and increasing.
The figures do not make for pleasant reading. In 2010, S$9.5 million were owed to about 6,000 workers from 2,600 companies. In 2011, about the same amount was recovered for about 10,000 workers from 3,700 companies. And just last year, S$9.4 million was recuperated for close to 7,000 workers from 4,000 companies while a further S$238.7 million was recovered from over 3,000 employers who were guilty of late contributions.
In a reply to my recent Parliamentary Question on how many employers had been found to have violated the CPF Act over the past three years by illegally deducting from their employees' salaries to pay for the employers' contributions, such errant employers were thankfully few and numbered less than 20, but the amount recovered was still close to a quarter of a million Singapore dollars.
It is the right of every Singaporean worker to be paid a fair wage, and it is the responsibility of every employer to ensure that this is so, and it is the duty of the Government to enforce this compliance. CPF monies comprise a significant portion of the wage package, and CPF monies can variously be used during a worker's working life to help pay for housing and education, and also medical expenses. Hence, failure to properly make CPF contributions is actually no different from failure to pay wages, and should, perhaps, be addressed in a similar manner. As the Minister has just mentioned, the jail terms for both the CPF and Employment Act infringements are already becoming increasingly aligned.
I hope that the Ministry will continue to review the penalties for such offences, and calibrate the fines to reflect rising wages, and also to be commensurate with the sums involved and the number of workers affected, so as to send a strong signal of deterrence.
With regard to the expanded powers of enforcement and the WorkRight programme, I hope that both investigation and enforcement activities continue
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to be improved through continued investments in both manpower expansion and training. I have received good feedback from constituents regarding the WorkRight programme, and it has proved to be a good touchstone for dialogue on both CPF issues and employment rights.
Finally, like many in this House and many Singaporeans, I am happy with the amendment which allows increased flexibility with respect to CPF withdrawals by account holders over the age of 55. This is a request which has been raised by more than a few of my constituents over the past few years and I believe that by allowing multiple withdrawals within the same year, while still maintaining the same constraints with regard to Minimum Sums, would encourage more prudent drawouts, as there would be less pressure on the account holder to withdraw more than he might require for the year.
These amendments strengthen a sound and comprehensive social security savings plan for citizens, and I fully support the Bill.
PAPERCUTS