SINGAPORE - The outflow of monies from foreigners closing Central Provident Fund accounts “will not pose liquidity issues” or affect the stability of the CPF system, Senior Minister of State for Manpower Koh Poh Koon said on Monday.

Most of them have low balances in their CPF accounts, he told Parliament during a debate on proposed changes to the CPF Act, which were eventually passed.

The shift will see about 300,000 foreigners who are neither Singapore citizens nor permanent residents stop participating in CPF schemes, as announced in March. CPF accounts that belong to foreigners will be automatically closed from April 1, 2024.

Foreigners will have to take out their savings by then, or else the money will be transferred out of the CPF and will no longer earn the prevailing CPF interest rates.

“The amendments bring us closer to the CPF system’s core objective of helping residents meet their retirement, housing and healthcare needs,” Dr Koh said. 

Since 1995, foreigners have not been required by law to make CPF contributions. From 2003 onwards, they have also been disallowed from voluntarily topping up their CPF accounts. 

Addressing questions by Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) and Mr Yip Hon Weng (Yio Chu Kang) about the expected flow of monies out of the CPF, Dr Koh said that the median CPF balance for foreign members is $1,500.

About 70 per cent of these members have less than $5,000 in their CPF accounts.

In total, foreigners’ CPF balances comprise about 1 per cent of all members’ balances, which total around $556 billion in June 2023, according to the CPF Board.

Dr Koh said that the board has to maintain separate manual processes to manage service requests from foreigners, such as undertaking additional steps to verify their identity as these non-residents do not have access to Singpass. Hence, ceasing the participation of foreigners in the CPF will result in more efficiency.

Mr Saktiandi and Progress Singapore Party Non-Constituency MP Leong Mun Wai raised concerns that the move will make foreign workers more attractive than local workers, for whom employers must make CPF contributions.

Dr Koh said the Government has benchmarked the wages of Employment Pass (EP) and S Pass holders in such a way that “there is no wage cost advantage for employers to hire foreign professionals”. 

“Qualifying salaries are benchmarked against local wages, inclusive of employer CPF contributions,” he noted. 

The minimum qualifying salary for the youngest EP holders in the financial services sector is $5,500, for those aged 23 and below. The salary requirement increases progressively to $11,500 for those aged 45 or older.

EP holders in other sectors must be paid at least $5,000, with the minimum increasing progressively to $10,500 when they are 45 years old or older.

In another change to the CPF system, members will no longer need to explicitly authorise the CPF Board to disclose their CPF account information to family members or loved ones upon their death.

All nominees and, upon application, beneficiaries under the relevant intestacy laws will be allowed to access the dead member’s CPF information from Feb 1, 2024.

Information that will be disclosed includes CPF balances, names of all nominees, and the proportion of CPF monies that the nominees will receive. 

“For the vast majority of these members today, the amendments are in fact aligned with their intentions,” Dr Koh said, adding that nine in 10 members who make nominations today already authorise all their nominees to access their CPF information upon their death.

In 2023, the CPF Board received more than 3,000 requests to access dead members’ CPF information, often from family members who are trying to settle post-death matters, he said.

Dr Koh added that the intention is to make it more convenient for the late members’ nominees and beneficiaries to handle their affairs.

“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,” he noted.

Under other changes passed on Monday, the CPF Board can continue to process certain transactions even after a member’s death. These could be outstanding monies owed to third parties, or outstanding inflows, such as a refund of CareShield Life premiums to the dead member’s MediSave account.

Correction note: This story has been updated for clarity.