PENSION FUND BILL

Order for Second Reading read.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

This Bill seeks to establish a new Government Fund called the Pension Fund. The Fund would meet payments of pensions, gratuities, allowances and other retirement benefits (including medical benefits) of the President, political office-holders, Members of Parliament and public officers (both civilian and military) on their retirement, discharge or death.

The setting up of the Pension Fund is in line with Government's desire to recognise pensions as a future liability and to make explicit financial provisions for this. Such an arrangement should reassure pensioners and pensionable public officers that their pensions would continue to be paid. It would at the same time relieve future taxpayers of the burden of paying for the services rendered by current and past public officers.

For administrative expediency, the Fund would also meet some payments that are not strictly in the nature of retirement benefits but which are currently paid from the Pensions Head of Expenditure and which can, for the same reason, be paid from the Pension Fund. These are insignificant compared to pension payments and include compensation payments for injuries sustained in service, top-up CPF for officers converting from pensionable service to full CPF, service gratuities, top-up CPF under the Special Resignation Scheme, amongst others. The Bill does not include any payment that is not already currently being made from the Pensions Head.

The Bill provides for moneys to be appropriated from the Consolidated Fund and paid into the Pension Fund to enable it to meet its liabilities. These liabilities would be determined on an actuarial basis so that the Pension Fund can be self-sustaining. An examination of the liabilities and balances in the Fund will be carried out not less than once every five years. However, should the Government decide to improve pension terms or add new ones or include new groups of pensionable officers, the Bill requires an examination of the Fund to be carried out to determine the additional liabilities and corresponding funding requirements. At the end of such examination, a report of the Pension Fund status and balances would be submitted to Parliament.

Article 114 of the Constitution provides that pensions, gratuities and other like allowances granted for public service shall be charged on and paid out of the Consolidated Fund. Such protection of pension payments under the Constitution shall continue to be preserved in the Bill. In the event that the Pension Fund has insufficient balances to meet its liabilities under written law, the Bill provides for payments of pensions, gratuities or allowances to be charged on and paid out of the Consolidated Fund. A consequential amendment to Article 114 of the Constitution for this purpose is taken up in a separate Bill, the Constitution of the Republic of Singapore (Amendment) Bill 1995.

The Pension Fund Bill 1995 also seeks to make consequential amendments to the Civil Defence Act, the Civil List and Pension Act, the Parliamentary Pensions Act, the Pensions Act, the Personal Injuries (Emergency Provisions) Act, the Singapore Armed Forces Act and the Widows' and Orphans' Pension Act to provide for the charging on the Pension Fund of pensions, gratuities, compensation and allowances payable under those Acts.

The Bill also contains provisions for the accounting and audit of the Pension Fund on an annual basis.

The Pension Fund is to be established on 1st April 1995, to coincide with the new financial year.

To meet the service and medical liabilities of both pensioners and serving pensionable officers prior to 1st April 1995, a sum of $9.61 billion would be appropriated from the Consolidated Fund and paid into the Pension Fund. The provision for this transfer has been included in the FY95 Supply Bill which has just been tabled in Parliament this afternoon.

In addition, an annual contribution amounting to 17% of pensionable emoluments has to be made in recognition of the on-going service liabilities of serving pensionable officers from 1st April 1995 onwards. Beginning in the new financial year, this contribution, estimated at $125 million, would henceforth form part of the Expenditure on Manpower. Against this, Pensions expenditure will no longer appear as part of Operating Expenditure in the annual Government budget. These changes have been incorporated in the FY95 Supply Bill.

Sir, I beg to move.

Question proposed.

Mr Chay Wai Chuen (Brickworks GRC): Mr Speaker, Sir, I rise to speak in support of the Pension Fund Bill.

Up to now, all payments for pensions or gratuities and allowances related to it are paid out of the Consolidated Fund, which is being approved yearly in Parliament. This Bill is to establish a Pension Fund separate from it. It is not mentioned so far what is the size value of this Pension Fund or the target set by the Government for it. At the same time, a provision is made in the Bill to allow all shortfalls in the yearly payments to be made out of the Consolidated Fund under clause 8(1). Also, under clause 9, the Minister may, by warrant, authorise the transfer to the Consolidated Fund any moneys in the Pension Fund which, in the opinion of the Minister, are not required to meet the liabilities of the Pension Fund. Perhaps the Minister can elaborate to the House the rationale for this. Has there been any study to work out the amount for the establishment value of the Pension Fund, considering the total amount of moneys to be paid out as allowances within a certain time frame? What is the target for this Fund in order for it to be meaningful as a fund body that public servants retiring or retired on pensionable service will feel assured of his pension amount? Is there any plan by the Government to build up the Pension Fund to a certain amount in order to meet the liabilities by a certain year?

This Bill also allows for accounts and financial statements of the Fund to be audited and examined. There is also a provision in clause 13(1) for periodic examination of the Pension Fund and for its report to be made to Parliament. However, as it is, there is no provision for the Pension Fund size to be reviewed and for its fund to be adjusted accordingly. Perhaps the Minister can clarify on this.

I suggest that it may be a good idea to target some size value to the Pension Fund just as what the Government did for the Edusave Fund. That way may give a better assurance to retiring and retired public servants and make the institution of the Pension Fund a permanent value of their contribution.

Dr Richard Hu Tsu Tau: Sir, the total liability - in fact, I mentioned this - stands at $9.61 billion, and it will be transferred from the Consolidated Fund in a single lump sum. The amount will be reviewed periodically, every five years, to make the necessary adjustments, and it will be done on an actuarial basis.

Question put, and agreed to.

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

The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau].

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