PENSIONS (AMENDMENT) BILL

Order for Second Reading read.

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Government announced in December 1994 the following changes to superannuation benefits for pensionable officers:

(a) To allow retiring pensionable officers to commute all their expected pensions into a gratuity, instead of only 40% of their expected pensions over a period of 12 1/2 years, as was the case; and

(b) Consequentially to amend the death gratuity formula to bring it in line with full pension commutation.

The option for full commutation has been effected by amendments to the Pensions Regulations. The provisions for death gratuities are, however, set out in the Pensions Act.

The Pensions (Amendment) Bill, 1995 will therefore amend the Pensions Act as follows:

(a) To stipulate the commutation factor to be used in the full commutation of pensions; and

(b) To amend the formula for the computation of death gratuity to bring it in line with the full commutation of pensions.

In addition, the Government is taking the opportunity of this Bill to effect two other changes to the Act -

(a) To correct an anomaly in paying death gratuity to officers who retire before the minimum age for drawing pensions; and

(b) To insert references to the Legal Service Commission and other Service Commissions, which had been omitted.

I shall now elaborate on each of these amendments.

The Full Commutation of Pensions

Pensions will be fully commuted in the following manner. First, it shall be assumed that pensions will be paid for a period of 26 years, which is the average of life expectancies at the age 50 (28.2 years) and age 55 (23.9 years). The pensions stream will then be fully commuted by taking its net present value, using a discount rate of 5% per annum. Using this formula, $1 of monthly pensions paid for 26 years will be equivalent to $175.14 of gratuity. Clause 4 of the Bill provides for this full commutation factor.

The Death Gratuity Formula

The new formula for computing death gratuity will be such that if the officer dies after attaining the minimum age to draw pension, then his death gratuity will be equal to the full amount of the fully commuted pension. In other words, you will lose nothing if you die after the age when you could have started drawing pension. If he dies before the pension-drawing age, his gratuity will be the fully commuted pension, but discounted by the number of years to go from the age of death to the minimum age for drawing pensions, subject to a minimum death gratuity of one year's pensionable emoluments. Clause 4 of the Bill provides for this revised formula for computing death gratuities, which will be more advantageous to the estates of the officers. The Anomaly in Death Gratuity Provisions

Currently, when an officer is retired early, his pension benefits will be suspended until he reached the minimum pensions drawing age. If he dies within one year of retiring without drawing his pension, a death gratuity of one year's pensionable emoluments would be paid to his estate. For instance, if an officer retires at 45 with his pensions suspended, and he dies before reaching 46, then his estate will receive a death gratuity. But if he dies after 46, but before 50, when he could start drawing pensions, his estate will not get a death gratuity. This is an anomaly. Clause 4 of the Bill will rectify this, by providing for a death gratuity which is equal to the fully commuted pension, but discounted by the number of years between the minimum pension-drawing age and the age of death, subject to a minimum death gratuity of one year's pensionable emoluments.

References to the Legal and other Service Commissions

Finally, the Government is taking the opportunity to correct an omission in the Act. Section 7 of the Act deals with the retirement of officers in the public interest after disciplinary action. It refers to the Public Service Commission, but it does not refer to the Legal Service Commission, the Education Service Commission and Police and Civil Defence Services Commission. Clause 3 of the Bill will correct this.

The Bill will take effect from the 1st January 1995. This has not caused any problem because the new death gratuity formula will be more favourable to pensionable officers. Also, the various Service Commissions already have disciplinary powers, and there are no pending cases which will be adversely affected by the amendments.

Sir, I beg to move.

Question proposed.

Mr Chew Heng Ching (Eunos GRC): Mr Speaker, Sir, we are proud to have a civil service of the highest integrity matched by unsurpassed efficiency. It is timely, therefore, that civil servants' gratuities be revised, especially so when they had contributed in no small measure to a strong and vibrant economy.

Sir, whilst the present serving officers of the civil service can be likened to the hardworking gardeners who continue the good work of pruning and maintaining a beautiful garden, should we not spare a thought for the planters who cut through the forest to create this garden? Yes, without the pioneers who took over the colonial civil service by clearly charting out its mission, improved on it and set high standards, we might not have a bureaucracy that is so clean, so honest and so incorruptible. These pioneers had retired at a time when their salaries were relatively paltry compared to what the civil servants earn today and so is their pension which is a percentage of their last drawn salaries.

It is, therefore, our responsibility and moral duty to them to ensure that they would today still enjoy a standard of living that is not too lavish but yet comfortable enough to get by. We owe it to them for nurturing a civil service that is now the envy of many a government and the people. It will be nice if this Government could show once again that it cares and that it never forgets about the persons who had contributed to the well-being of Singapore and to Singaporeans. Just as the serving civil servants will be pleased to learn that their commitment and contribution to duty is amply rewarded, the retired guardians of yesterday should also share the fruits of a buoyant economy for which they had laid the foundation.

I would, therefore, appeal to the Deputy Prime Minister to also consider revising the pensions and gratuities of retired civil servants. This gesture cannot be more timely, especially when the country celebrates its 30th Birthday this year.

Sir, I support the Bill.

BG Lee Hsien Loong: Mr Speaker, Sir, the point raised by Mr Chew had been addressed by the Prime Minister when he spoke, I believe, a few months' ago, during the debate on the White Paper on Competitive Salaries for Competent and Honest Government. The Prime Minister had said that it would be appropriate for us to make a gesture to recognise the contributions of the civil servants who had retired before substantial adjustments were made to public sector salaries.

I think it would be difficult for us to revise the pensions and gratuities of those who have already retired, because pensions and gratuities are settled as part of the terms of service. To change them retrospectively will open a very dangerous precedent, because it will commit us to future revisions which we may or may not be in a position to make. However, a one-off gesture will be entirely justified and reasonable and feasible. A committee of civil servants has been studying this question for the last few months. They have made certain recommendations to the Cabinet. I believe we will be ready to make an announcement within the next few months.

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. - [BG Lee Hsien Loong].

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