PENSIONS (AMENDMENT) BILL

Order for Second Reading read. 2.59 pm

The Minister for Finance and Minister for Trade and Industry (Dr Tony Tan Keng Yam): Mr Speaker, Sir, I beg to move, 'That the Bill be now read a Second time."

At present, the eligible dependants of a pensionable officer are granted a death gratuity in the event of his death. The death gratuity amounts to:

(i) one year's last-drawn salary; or

(ii) the commuted pension gratuity, if this is greater.

The commuted pension gratuity is equivalent to the retirement gratuity the officer would have received had he retired instead on the date of his death.

The Government feels that the quantum of death gratuity for pensionable officers needs to be enhanced in view of the current difference in the rate of employer's CPF contribution between pensionable and non-pensionable officers. The employer's rate of CPF contribution for pensionable officers is 15% whereas it is 25% for non-pensionable officers. At least for death benefits there should be some parity between pensionable and non-pensionable officers. It is thus proposed to pay to the dependants of a pensionable officer who dies in harness a gratuity based on 10% of his last-drawn monthly salary for each month of service, as 10% is the current difference in the employer's rate of CPF contribution between the pensionable and non-pensionable officers. For convenience, the proposed method of computing gratuity will be referred to as the "10% formula". The gratuity shall be subject to a maximum of three years' salary. It shall also, as at present, be no less than one year's salary.

Clause 2 of the Pensions (Amendment) Bill, 1984, provides for the death gratuity to be computed as proposed. Pension benefits computed based on the 10% formula amount to 1/10 of one month's salary for each complete month of service. However, in the Pensions Act pension benefits are reckoned in terms of annual and not monthly pensionable emoluments. Hence in the Bill the 10% formula has to be expressed as "1/120 of one year's pensionable emoluments" for each complete month of service.

Sir, I take this opportunity to inform the House of a consequential amendment to the -retirement gratuity. If improvement is made only to the death gratuity, there will be the anomaly of a person being worth more when he is dead than when he is alive since the proposed death gratuity based on the 10% formula will always be greater than the commuted pension gratuity, which is the retirement gratuity. To rectify the anomaly, the retirement gratuity should also be based on the 10% formula. The Pensions Regulations, 1956, will therefore be amended accordingly.

The retirement gratuity is, in fact, an advance against future monthly pension. At present, this gratuity is a lump sum payment equivalent to one-quarter of full pension for 12 1/2 years. The monthly pension is accordingly reduced to three-quarters of full pension for the first 12 1/2 years after retirement. After 12 1/2 years full pension will be paid. If the retirement gratuity is now enhanced by the 10% formula, the monthly pension for the first 12 1/2 years after retirement will consequently be reduced because of the increase in the sum advanced.

The amendment to the Pensions Regulaions, 1956, will take effect on the same date as the Pensions (Amendment) Bill, 1984.

Sir, I beg to move.

Question proposed.

Dr Augustine H.H. Tan (Whampoa): Mr Speaker, Sir, I wonder whether the 13th month payment is taken into account in his computation? It does not appear to be so. Therefore, there appears to be a slight discrepancy because the officer on CPF would have been paid 25% of this 13th month payment into his CPF as well.

Dr Tony Tan Keng Yam: Sir, there is no discrepancy. The 13th month payment is not pensionable.

Dr Augustine Tan: I know it is not pensionable. But if the object is to make it equivalent to the CPF contributor, then it should be incorporated for this purpose.

Dr Tony Tan Keng Yam: Mr Speaker, Sir, the object is to enhance the rate of death gratuity in the event of a civil servant dying in harness. The object is not to make a strict equivalence.

Question put, and agreed to.

Bill accordingly read a Second time and committed a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Tony Tan Keng Yam].

Bill considered in Committee; reported without amendment; read a Third time and passed.