PARLIAMENTARY PENSIONS (AMENDMENT) BILL

Order for Second Reading read. 4.30 pm

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

In announcing the changes to the superannuation scheme for pensionable civil servants, Government stated that similar changes would also apply to MPs and Office-holders. The Parliamentary Pensions (Amendment) Bill 1995, therefore, seeks to make consequential changes to allow Parliamentary pensions to be fully commuted. The same principles used for the civil service apply, while some of the features peculiar to pensions for MPs and Office-holders are retained.

The Bill also proposes to emplace all new MPs, including ex-MPs who are re-elected or reappointed after the Bill is passed, on the full CPF scheme. Serving elected MPs may choose to remain on pensionable terms or go on to full CPF.

I will now explain the changes which the Bill will make to the Act.

Putting MPs on Full CPF Scheme.

The Government has decided to put all new MPs on the full CPF scheme. There are several reasons for making the change. Firstly, MPs qualify for pensions only if they have served a total of nine years, which is nearly two full terms of office. MPs who step down or fail to be re-elected before completing nine years receive no pension benefits whatsoever. Such a minimum qualifying threshold for pensions is carried over from the civil service, and does not fit the circumstances of service as an MP, for whom the concept of a "golden handcuff" is irrelevant.

Secondly, increasingly MPs will be persons with careers and professions of their own. Such persons will not depend on their MPs' pensions to provide a flow of income after their retirement. It is better for them to be paid their allowance, including full CPF, while they are serving as MPs, rather than to structure part of this allowance as a pension scheme payable after they step down.

Thirdly, the full CPF scheme is the national superannuation scheme. All public officers, except those in the Designated Services, are appointed on the CPF scheme.

It would therefore be appropriate to place new MPs on full CPF. Similarly, former MPs who may be re-elected or re-appointed to office after 1st January 1995, like new MPs, will be placed on the full CPF scheme. Clauses 2 and 3 of the Bill will exclude the new MPs from pension benefits.

Nominated MPs and Non-Constituency MPs will also be placed on full CPF. In practice, serving Nominated MPs have been paid full CPF since September 1994. NMPs are unlikely to serve long enough to qualify for pensions. It is not in their interest to be on the pension scheme which pays only partial CPF contributions. Clauses 2 and 3 of the Bill will exclude these MPs from pension benefits.

Allowing serving elected MPs to opt for full CPF

Serving elected MPs will also have the option to switch to full CPF from 1st January 1995, or to remain on the Parliamentary Pension Scheme. Like in the civil service, if they opt for CPF, any pension benefits they have already qualified for will be frozen. Those with insufficient service to qualify for pensions will not be compensated for converting to CPF. Clause 9 of the Bill will allow the President to make Regulations for the exercise of the options.

Retaining the Pension Scheme for Office-Holders

The Government is not changing the pension scheme for Office-holders. Office-holders, whether serving or appointed after 1st January 1995, will continue to be pensionable. This was the basis on which the Government worked out the salary benchmarks for comparing public and private sector salaries. This will also maintain consistency and relativities between political appointments and the salary grades in the Administrative Service and the other four Designated Services, which remain pensionable. The other four Designated Services are the Administrative Service (Foreign Service Branch), the SAF (Senior) Service, the Police (Senior) Service and the Intelligence Service.

New Office-holders, like new pensionable civil servants, will only have two options: they can either receive a full pension or commute that pension in full. Clauses 5 and 6 of the Bill provide for the new option, of the full commutation of Parliamentary pensions. Disallowing aggregation of pensionable periods of service

At present, MPs who serve several separate terms as Members of Parliament can aggregate their service periods for the purpose of computing their pension. Since new MPs will henceforth be on the full CPF scheme, only serving MPs who are re-elected without a break in service and Office-holders can continue to aggregate service periods for computing their pension. Clauses 2 and 3 of the Bill provide for this change.

Allowing Office-holders already drawing pensions to commute their pensions in full

Separate pensions are currently payable in respect of MP and Office-holding service. Office-holders currently may elect one pension option in respect of his MP service and another for his Office-holding pensions. When an ex-Office-holder who is already drawing pensions is re-appointed for a further term after 1st January 1995, he may opt for straight pensions or fully commuted pensions, but only for the further period of service. Clause 5 of the Bill provides for this arrangement.

Keeping status quo on pension drawing age

Civil servants who retire before their pension drawing age will be able to draw their commuted pensions immediately, but the pension will be discounted by the number of years to go until the pension drawing age. Government has decided against doing the same for MPs and Office-holders. The pension or commuted pension drawing age will remain at 50 for MPs and 55 for Office-holders. This is because the Parliamentary Pensions Scheme is different from the civil service pensions scheme, and in other respects, it is more favourable than civil service pensions. For example, the pension factor for Parliamentary pensions is higher than for civil service pensions. The minimum service period qualifying for a Parliamentary pension is shorter than that for civil servants. MPs and Office-holders can aggregate their service during different periods, but civil servants cannot. Taken as a whole, the Parliamentary pensions package is comparable to the civil service pensions package, even though civil servants who retire early can draw their pensions immediately, whereas MPs and Office-holders who step down early must wait till 50 or 55 respectively to start drawing their pensions.

Changing the death gratuity formula for MPs

Currently, the death gratuity payable to the estate of an MP is based on one year's salary as a Member of Parliament, or the partial (one-third) commuted pension gratuity, whichever is the greater, less any pension or gratuity already received. In future, the death gratuity will be changed to the fully commuted pension, if the pensionable MP was more than 50 years old at death. It will be discounted from age 50 if he was not yet 50, subject to a minimum of one year's MP's salary. Clause 8 of the Bill provides for the changes in the death gratuity formula.

Allowing full commutation of pensions on medical grounds

At present, MPs or Office-holders who cease to hold office on medical reasons, and ex-MPs or Office-holders who are subsequently incapacitated, may draw pensions immediately regardless of age, if they have the qualifying service. Clause 8 of the Bill will allow them to opt for full commutation of their pensions, without further discount because of age.

Sir, I beg to move.

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.