by Susan Tay Ting Lan
1.Problems with the Old Rules
Central Provident Fund (“CPF”) savings have traditionally been regarded by the Court as part of the matrimonial assets between a married couple. This means that like all the other matrimonial assets, they are subject to distribution between a divorced couple. This applies whether it is the husband’s or wife’s CPF.
The law governing distribution of matrimonial assets can be found in the Women’s Charter while the relevant legislation where CPF is concerned is the Central Provident Fund Act.
a)Distribution of CPF Savings
Before the above proposed amendments, a court order to divide a member’s CPF money between him/her and his/her ex-spouse is by way of a charge. This charge can be realised and money transferred to the ex-spouse only when the member is eligible to withdraw his/her CPF and has set aside his/her Minimum Sum and Medisave Minimum Sum.
This means that under these old rules, distribution of CPF savings will not alleviate some of the hardship faced by ex-spouses. The following are the difficulties some ex-spouses face under the old rules.
Firstly, for a young couple, it may mean waiting 20 over years before the ex-spouse can access these monies as the member must be eligible to withdraw his/her CPF, which means when he/she turns 55 years old.
Secondly, even if he/she is prepared to wait 20 over years, the ex-spouse may still not get the money as the member’s retirement needs comes first. Under the old laws, only the balance of funds after the member has set aside the prevailing CPF Minimum Sum and Medisave Minimum Sum when he/she turns 55 is available for distribution to the ex-spouse.
Thirdly, as the government’s policy on what is the Minimum Sum and Medical Minimum Sum raises from year to year, these sums, at the point of withdrawal in the future may also be very different from that when the court order was made. For instance, the Minimum Sum requirement in 1987 was S$30,000 but the Minimum Sum requirement in 2007 is now S$99,600.00. Medisave Minimum Sum requirement in 1987 is S$5,000.00 but this same sum is now S$28,500.00.
b)Transfer of Interest in a Property
The old law requires that the requisite CPF refunds be made to the member’s CPF account before the transfer can take place. This can cause tremendous hardship to the ex-spouse who has given up her work to be a full time housewife as she will not be able to keep the matrimonial flat if she cannot raise enough money to repay her ex-spouse’s CPF.
2.The New Rules
The principle underlying these amendments is that the CPF Act should facilitate the division of matrimonial assets under the Women’s Charter, provided there is no leakage of funds from the CPF system.
The following are the amendments:
a) 1st Amendment- Immediate transfer of CPF from member’s account to ex-spouse CPF Account (S27B)
This amendment allows an immediate transfer of CPF monies from the member’s CPF account to the ex-spouse’s CPF account if the ex-spouse is a citizen or Permanent Resident.
There will be no requirement that the Minimum Sum and Medisave Minimum Sum be set aside first once the court has ordered a distribution of CPF monies in a divorce. The CPF money to be distributed will then be transferred to the ex-spouse’s CPF accounts according to “”the accounts they originally resided in.”” This means that if the money is from the member’s “”ordinary account””, it will be transferred to the ex-spouse “”ordinary account””. Likewise, “”medisave account”” monies will be transferred to ex-spouse’s “”medisave account””.
There can be no immediate transfer if the ex-spouse is not a citizen or a PR. In that instance, a mixture of what are the old and new laws will apply. The Court can order that the Board pay the ex-spouse directly any CPF monies ordered to belong to him/her, when the member has died or becomes eligible to withdraw his/her CPF monies. The member however, will not be required to set aside the Minimum Sum and Medical Minimum Sum before the ex-spouse can receive her entitled share.
In most circumstances however, government cash grants and approved loan schemes will take priority over the amount awarded.
b) 2nd Amendment- Immediate Transfer of Ex-Spouse’s Interest in Immovable Property without refund to CPF Account (S27D-E)
In divorce proceedings, the transfer of one party’s interest in the immovable property to the ex-spouse refers to a transaction where there is no cash payment at fair market value other than the refund of CPF monies withdrawn for the purchase of the property.
The old law requires that the requisite CPF refunds be made to the member’s CPF account before the transfer can take place so that there is no leakage of CPF monies.
This set of amendments give the court the option of ordering the member to transfer the property to the ex-spouse without all or even any of the refunds being made to the member’s CPF account first. There must however be a fresh charge placed in the property to secure the refund of such CPF monies into the ex-spouse’s CPF account should he/she sell the property later. This means that eventually when the property is sold, the CPF used by the member, and the accrued interest on that CPF, will be refunded to the ex-spouse’s account.
Once again, this amendment applies only to parties who are a citizen or a PR.
Where there is a charge against a property to secure the payment of the minimum sum, similar orders can be made for repayment thereof.
c) Third Amendment-CPF Investment Account
This amendment enable the member’s CPF investments to be transferred to or be liquidated to allow the ex-spouse immediate access to CPF assets which she is entitled to. The transfer of CPF investments is only allowed for an ex-spouse who is a citizen or a PR.
3. Relevant Clauses
Clause 18 of the Act inserts new sections 27A to 27I to facilitate the smooth and equitable distribution of CPF monies arising from the division of matrimonial assets. In particular, section 27B provides for the immediate transfer of CPF monies to the CPF account of the ex-spouse. Sections 27C to 27F provide for the immediate transfer of property to the ex-spouse. Section 27G provides for the immediate transfer of CPF investments to the ex-spouse.
Other related amendments are Clauses 5, 6, 16 and 19. Clause 5 facilitates the transfers made under section 27B. Clause 6 exempts contributions to the ex-spouse’s CPF accounts made under sections 27B to 27H as a result of division of matrimonial assets from counting towards the Voluntary Contribution limit. Clause 16 amends section 24, which provides for the protection of CPF monies and investments from member’s creditors, to make it subject to sections 27B to 27H. Clause 19 makes consequential amendments to give priority to transfers of CPF monies in relation to matrimonial division under section 27B over the deduction of Home Protection Scheme (HPS) premium from the member’s CPF account.
4. Effective Date
The changes pertaining to the division of matrimonial assets will apply to court orders made on and after 1 October 2007.
In many cases, CPF monies form a large part of a person’s estate. It is commonly known that even bankrupts can sometime have substantial CPF in their CPF accounts. However, with the stringent rules imposed before the amendments, CPF is not a popular subject matter in matrimonial cases.
Now however, as ex-spouses no longer have to wait so long to see these monies, nor do they have to fulfil any minimum sum requirement, the reality of enjoying a substantial part of your ex-spouse’s assets have now become much more accessible.
We believe that CPF will now become a staple issue in matrimonial assets disputes. This will especially be so in cases where the wife is a homemaker who has given up her career to take care of the family. These wives usually do not have enough CPF in their accounts to purchase their own homes after their divorces.
On the reverse, the impact of the 2nd amendment may mean some hardship to the ex-spouse (whom I shall call “”A””) whose interest in the property (which is funded by his/her CPF savings) is ordered to be transferred to the other party. If there is no refund of the CPF until the property is sold and the ex-spouse refuses to sell the property in his/her lifetime, this may mean A will be deprived of his/her CPF indefinitely. The Court must therefore exercise their discretion very carefully in such a situation, given the policy concerns over the sufficiency of CPF savings for a greying population
The Central Provident Fund Act can be assessed at the link here: http://agcvldb4.agc.gov.sg/.