1. The Home Affairs Uniformed Services (“HUS”) Superannuation (Amendment) Bill (“Bill”) was introduced for First Reading in Parliament today.
Background
2. The HUS Superannuation Act (“Act”) was enacted in October 2001 to establish a superannuation scheme – the INVEST Plan – for officers in the uniformed services under the Ministry of Home Affairs (“MHA”).
3. The INVEST Plan was established to help officers transit out of service into their second career and build up a superannuation fund as they have an earlier retirement age compared to the rest of the Civil Service.
4. Under the INVEST Plan, officers receive full CPF contributions and also additional contributions credited into the INVEST Plan to build up a superannuation fund. These additional contributions are pooled to form an investment fund known as the INVEST Fund (“Fund”).
5. The Fund invests in a diversified portfolio, managed by a Board of Trustees (“Board”) appointed by the Minister for Home Affairs. The Board comprises senior members from the Home Team and members with relevant experience from the finance industry.
Key Proposed Amendments
6. MHA has reviewed best practices in the investment management industry and has proposed a few amendments to the Act which seek to improve the management and governance of the Fund. The key proposed amendments are as follows:
Broaden the Range of Permissible Investments
7. Currently, the Board is empowered to invest in stocks, securities and funds. The Bill will expand the definition of “investments” to expressly allow for the use of other financial products such as derivatives. Derivatives are commonly used, even in conservative funds, to reduce overall risk and transaction costs. Examples include the use of options to hedge the Fund and the use of futures to invest in a cost-efficient manner. Such use is consistent with the Monetary Authority of Singapore’s Code on Collective Investment Schemes. [1]
8. These amendments will also facilitate the use of new financial products and investments which may arise in the future. We will be conservative in such use and put in place safeguards. The majority of the Fund will continue to be invested in stocks, securities and funds.
Enhance Effective Governance through Delegation of Powers
9. The amendments will also allow the Board to delegate its powers and functions for efficient and effective governance and administration of the Fund. Examples include delegating the selection of investment managers to managers with domain expertise and delegating the administration of benefits to appropriate staff.
10. The amendments for delegation are in line with industry practice and are consistent with the powers of delegation found in other legislation. Even as specific functions are delegated, the Board remains accountable to the Minister for Home Affairs for the management of the Fund.
[1] The Code on Collective Investment Schemes sets out the best practices that managers and approved trustees of collective investment schemes (an investment scheme where individuals pool their money to invest), that are offered to the retail public, are expected to observe regarding management, operation and marketing of the schemes.
