Yawning Bread. April 2007

Ministers get pensions too

    

  

 
The Parliamentary Pensions Act is worth a read. Despite its name, it doesn't now appear to provide pensions for any members of parliament after 1995. However, it does provide pensions "in respect of service as Prime Minister, Deputy Prime Minister, Speaker, Ministers and other office-holders." The computational formula is quite complex, based on the number of years of service, up to a maximum of "two-thirds of the highest annual salary of any office held by him."

On 15 June 2004, Steve Chia, then a Non-Constituency Member of Parliament, raised this question in the chamber.

 

My thanks to a reader who brought this issue up in a private email. I have spent the weekend digging out the exchange in Parliament that confirms what he remembered reading a few years back. 

 

8. Mr Steve Chia Kiah Hong asked the Deputy Prime Minister and Minister for Finance what is the justification for keeping ministers on the pension scheme when all other public and civil servants have been converted to the Central Provident Fund scheme.

The Deputy Prime Minister and Minister for Finance (Mr Lee Hsien Loong): Mr Speaker, Sir, when the civil service phased out pensions for most of the public sector in 1986, it consciously decided to retain the pension scheme for officers in a small number of key services, one of which is the Administrative Service. Administrative Officers need deep knowledge and long experience of policy issues. The service takes in some recruits mid-career, but it continues to rely heavily on officers who have joined at the entry level. For these reasons, the pension scheme remains relevant to them. 

As part of their overall package, pensionable officers receive lower CPF contributions than non-pensionable officers. 

Political appointees are also on pensions because their terms of service follow those of Administrative Officers.

 

  
Having a pension scheme for senior civil servants, as an incentive to permanence, may be understandable, but the same reasoning does not extend to political appointments. The expectation should be that political office-holders come and go, from alternating political parties. It is precisely because of the changeability of political office-holders in a democracy that there is a need for a stable, permanent civil service that can retain experience and institutional memory. That is why the senior-most civil servant in a ministry is titled "Permanent Secretary". He is supposed to be permanent when the minister is expected not to be. That being the case, why should political appointees enjoy the permanence-inducing pension scheme? 

 

Mr Steve Chia Kiah Hong: Sir, how does the Deputy Prime Minister expect citizens to take the uncertainty of retirement planning under the CPF, which is a defined contribution scheme, at their own cost, whereas ministers and public officers themselves are under a guaranteed and defined benefit pension scheme, using taxpayers' money? In other words, their CPF may run out before the citizens die whereas qualified ministers are taken care of by the taxpayers' money until they die. Am I right to say this?

Mr Lee Hsien Loong: Mr Speaker, Sir, it is an entire package. When we calculate the salary, we look into how much a person receives now, how much he receives in the CPF, and how much he can expect to save in pensions. And when a person retires, he has a choice of having a pension stream for the rest of his life or taking a commuted lump sum at the point of retirement. In fact, as a matter of fact, nearly everybody who retires prefers the commuted lump sum. Because you take the lump sum, you invest it, you do what you want. If it runs out, it runs out. There is no free lunch. If you do not have CPF, you have the pension. If you have the pension, you have less CPF. So it all adds up to a finite amount. 

The Member's implicit question is are the ministers enriching themselves again? And the answer is, we are going on market terms and, if anything, we are paying below what the market is.

 

 

 

Lee doesn't actually answer Chia's question

 

Mr Steve Chia Kiah Hong: Clarification from the Minister. Does any serving minister who turns 55 actually receive both salary and pension at the same time? If yes, should he be serving?

Mr Lee Hsien Loong: I believe the answer is yes. That is the rule for the civil service, and the ministers follow the civil service rules.

(Source: Parliamentary Debates, 2004)

 

 

 

This may be the "rule", but is it morally right?"

 
Steve Chia was referring to Section 5 of the Parliamentary Pensions Act, which says,

5. ­ (1) Where an office-holding Member has ­

(a) not less than 8 years’ reckonable service as an office-holding Member (whether continuously or not);

(b) attained the age of 55 years; and

(c) not previously been granted a pension under section 4,

he may be granted a pension under that section notwithstanding the fact that he has not ceased to hold office.

 
As at 31 March 2007, the following office holders, of cabinet level or equivalent, were 55 years or older:

Name Office Year of birth
Lee Kuan Yew Minister Mentor 1923
S Jayakumar Deputy Prime Minister 1939
Goh Chok Tong Senior Minister 1941
Abdullah Tarmugi Speaker of Parliament 1944
Wong Kan Seng Deputy Prime Minister 1946
Lee Boon Yang Minister for Information, Communication and the Arts 1947
Mah Bow Tan Minister for National Development 1948
Lee Hsien Loong Prime Minister Feb 1952

(Source: Parliament website) 

By the end of 2007, Khaw Boon Wan, the Minister for Health will also have turned 55.

Two cabinet ministers did not state their dates of birth on their government website CVs. They are Tharman Shanmugaratnam, the Education Minister and Lim Boon Heng, the Minister without Portfolio in the Prime Minister's Office. The latter's CV, however, mentioned that he obtained his bachelor's degree in 1970. This suggests that he was born before 1950, which would make him above 55 years old at this time.

© Yawning Bread 

 

Footnotes

None

Addenda

  1. After this article was written, the government revealed that ministers' pensions have been capped at around S$176,000 per annum since the 1990s.