Debated in Parliament on 21 Mar 2023.
Mr Vikram Nair asked the Minister for Manpower (a) why do investments bought using the CPF Special Account or Ordinary Account of a deceased member go to his estate upon death and not to his CPF nominee; and (b) whether the CPF will consider allowing such investments to also go to the nominee rather than the estate.
The Central Provident Fund Investment Scheme, or CPFIS, investments are disbursed to the deceased member's estate. Doing so allows the beneficiaries of the estate to decide how best to manage these assets, including the preferred timing for the sale of assets, such as unit trusts and stocks. These decisions should be made by the beneficiaries, as these decisions could affect the value of the CPFIS investments.
CPF monies, on the other hand, under the CPF nomination scheme, can then be disbursed quickly without having to wait for the beneficiaries' decision on the CPFIS investments.
Members are informed upfront, when making their CPF nomination, that the nomination does not cover CPFIS investments. Hence, CPF members who want their CPFIS investments to go to the same beneficiaries as their CPF nominees, should do so through their will.
Mr Vikram Nair.
I thank the Minister for his reply. That is a helpful explanation. I think the issue arises particularly with vulnerable families or less-educated individuals and the CPF Nomination Scheme was meant to be an easy way to avoid people having to write wills if their only asset was CPF.
Two areas of complications arise.
One, is in the event of bankruptcy. So, for example, if an individual is bankrupt, his CPF monies would go to his nominee, which could be the wife. But if it were to go to the estate, it would all go to the creditors. I had a Meet-the-People Session (MPS) case, for example, where a bankrupt had CPF monies which could not be touched by the creditors, which he was hoping to go to the wife, but because they had gone into investments, they went to the creditors.
The second, is again bankruptcy, but, where one of the recipients is a bankrupt. In this case, the nominee was the wife, but, because the money were in investments, they went to the estate. There was no will, so half of it would go to a child, who happened to be a bankrupt; and the other half would go to the wife. But then, the creditors then come in to decide how to sell the assets.
Another solution may be, to have the assets go to the nominee and then the nominee can decide when to sell, because the beneficiary and the estate may be quite different from the nominee.
I thank the Member for his suggestion. I think it is something that we could potentially contemplate. But to the Member's first point about members who belong to low-income families, from our understanding, based on the statistics that we have been able to aggregate thus far, the main impact is actually on the Singtel discounted shares. Because, at the particular point in time, the Government took a stand at that time, as far as possible in terms of the growth, for the economy, we wanted to benefit a larger part of a group of Singaporeans.
Today, the Singtel discounted shares are treated as per what you have suggested.
When it comes to managing the investments, I think that it would not be prudent for CPF to manage the timing of the sale of these assets because, ostensibly for us, it is really to protect the member and his nominees to provide for financial retirement adequacy; and also to help them with the MediSave and also for housing. That was the construct of CPF.
If you try to manage and disburse the investment proceeds and time the sale of the investment that the member has made and you make a wrong timing or you make a wrong a decision to sell or, well, you made a decision to sell but at a wrong timing, it could have adverse impact on the savings.
Because of that, we left it to the beneficiaries according to the will. No, sorry, we left it to the estate to manage. But to the Member's point about some of the other potential improvements to the scheme, I am prepared to take them on board and consider.
PAPERCUTS