The following article was first published in 2007, amidst the debate on changes to the CPF scheme. With the current spotlight on the retirement issue and the government exhorting Singaporeans to “work longer to save for old age“, we thought it would be good to revisit the matter and consider the disparity between ministers and ordinary Singaporeans when it comes to funds for retirement. (See the exchange between then-NCMP Steve Chia and Prime Minister Lee Hsien Loong.)
By Andrew Loh
The current debate on the issues of retirement, compulsory annuities and the CPF shows up 2 stark contrasts.
For ordinary Singaporeans, the annuity scheme – to put it simply – is basically a “pool fund” where the old support the old when they retire. When they pass away, their contribution to the fund is used to support the ones who are living, those 85 and above.
For government ministers, their “retirement” scheme is something from way back in the past. I am talking about the Pension Scheme for the Administrative Service (AS). (This includes prime ministers, senior ministers, speakers, ministers of state, mayors, parliamentary secretaries and political secretaries.) (link)
Yes, the pension scheme is still being implemented today, for the AS.
Former Non-Constituency Member Of Parliament (NCMP) Steve Chia had asked then deputy prime minister, Lee Hsien Loong, about this – in Parliament, 2004:
“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 that?”
DPM Lee’s reply was that yes, Administrative Officers (AO) are on the pension scheme and that the government is “going on market terms”. He also added that:
“There is no free lunch.”
(See the exchange between Mr Chia and DPM Lee at the end of this article.)
“No Free Lunch”. Really?
The question which some of us have is: “Why are Singaporeans being asked to contribute to what is effectively a pool fund – through the proposed compulsory annuities scheme – so that surviving elderly Singaporeans can have “$250-$300” per month, while ministers’ retirement are taken care of by the pension scheme, funded again by taxpayers?
Does not the dictum “No Free Lunch” apply to ministers as well?
And: Why is the pension scheme retained for the Administrative Service when it was phased out for “majority of the civil service since 1986”? (link)
Another question is: Why are our ministers still on the pension scheme when they are already being paid the highest salaries in the world, in any government anywhere on earth?
According to the Prime Minister’s Office, in a letter to the press in April 2007:
“The maximum pension for a Minister drawing a total annual salary of $1.2 million is $176,500 per annum …” (link)
Elderly Singaporeans, aged 85 and above, can expect only $250 to $300 per month from the annuity scheme. As my colleague, Sze Hian said, assuming 1.5 per cent inflation, the $250 to $300 monthly annuity, is equivalent to $149 to $178 today.
This is more astounding when you consider that Singaporeans have one of the highest savings rate in the world!
What else do ministers get?
Paying government leaders an appropriate remuneration has been debated and the government, at least in the foreseeable future, is not going to budge. Indeed, their salaries will be “revised” upwards again at the end of this year and one more time next year. (link)
Further, the government also increased the GDP Bonus for ministers. According to Minister Teo Chee Hean:
“We will increase the bonus to a norm payment of 3 months if the economy grows by 5%. The minimum payment will remain at zero if the economy grows by 2% or less. The maximum will be increased to 8 months if the economy grows by 10% or more.” (link)
And the Performance Bonus (which all administrative service officers receive):
“We will increase the Performance Bonus by 2 months for officers at this level, to a norm of 7 months.” (link)
Making sense of it all
To summarise, ministers receive the highest salaries in the world, they also receive pensions (either after they leave the service or reach 55. There are also active ministers who are presently 55 or above 55 and who are also receiving pensions at the same time. See below exchange between Steve Chia and DPM Lee), they are given a GDP Bonus of anywhere from 3 months to 8 months (conditional on the GDP) and a Performance Bonus of 7 months.
Looking at all these dizzying numbers, should one begrudge the ministers such remuneration? Perhaps not, but as leaders elected by the people, leaders who are suppose to set the tone for society, much more is expected.
The Great Affective Divide – resurrected?
There is a certain sense of unease among Singaporeans – when they compare what their leaders are earning and what they are struggling with.
The widening income gap is indeed well and truly upon us. And it is not just an income gap.
I would say there is also a moral gap. An affective divide, to borrow from Catherine Lim. A return of disaffection.
How do you explain to an 85 year old that he will only be receiving $250 to $300 per month when he stops working, even with an annuity scheme? (This sum is not much more than the $290 which those on Public Assistance receive from the government, which is for “subsistence”.)
And that when he passes away, he cannot delegate the money to his children or spouse (unless he opts to pay a higher premium) and that it will go into a “pool” to support other 85-year-olds and above who will also receive $250 to $300 per month? (link)
How do you explain to someone who would have worked some 40, 50, 60 years that he will only have $250 to $300 per month when he no longer is able to work?
Moral authority, moral leadership
As in this article published earlier, the question of moral authority or moral leadership re-surfaces.
The question of moral authority is something which some government ministers have denied or brushed aside. Minister in charge of the Civil Service Teo Chee Hean was quoted by Channelnewsasia as saying:
“It is wrong to think that a bigger pay would undermine the moral authority of the government.”(link)
But isn’t this happening right now? That people are questioning the government’s and the ministers’ moral authority? That there is this perception – real or otherwise – that the government (and ministers) are so well-paid that they can no longer empathise with the average Singaporean?
That ministers’ retirement needs are taken care of by tax payers money through the Pension Scheme while tax payers have to fend for themselves when they retire, if ever they do?
Annuities for Singaporeans, pension for ministers?
In the words of Catherine Lim, be mindful of the affective gap.
Additional note:
I do not wish to harp on the vast gap between what the rich deserve and what the average Singaporeans will get as retirement pay-outs. But, if we accept the premise that our leaders deserve such handsome retirement benefits, one still cannot help but ask: how can anyone, especially an aged person, make do with just $250 or $300 a month in Singapore?
This is not just a debate on equity, i.e. what is realistic and fair, but on what’s right by a caring government and those in high positions who have the power to decide what to give themselves as their old age nest egg and what to dole out to those without the power to demand something more.
Certainly, our leaders should not be so tight fisted with the people of Singapore. They should instead do something positive and right to reduce the misery of the lower income, who form a substantial number of Singaporeans.
Parliamentary exchange between NCMP Steve Chia and DPM Lee Hsien Loong, 16 June 2004:
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.
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 that?
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 a 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 your 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.
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.
Thanks to “Totally Confused” for recording the parliamentary exchanges quoted above. The Parliament Reports website no longer provides transcript to these past sittings.
You can read about the Parliamentary Pensions Act here and here.
Cartoon courtesy of My Sketchbook
it pays to contract the economy during a recession by 10% or more,
so that you can re-expand it back again like this year by the same 10% or more,
then you can get the 7-8 months bonus.
when in actual fact the economy didn’t go anywhere. we’re still at Khatib. Khatib.
Does THE “rule for the civil service” make sense? Why do we pay an idiot highly to follow rules blindly?
Pegging ministerial pay to GDP makes no sense if it cannot be demonstrated that GDP growth leads to at least a proportionately higher income for the average worker.
I believe that ministerial pay have increased at a rate much faster since independence, than that of the average singaporean, over the same period. Didn’t the prime minister get something like 4000 dollars a month in those days, between 10 to 20 times that of workers those days. Today’s PM is getting paid closer to 50+ times that of the average Singaporean.
It is not just pension they are getting but also medical benefits for themselves and their spouses after they retire.
Now I understand what it means by “some are more equal than others”.
We are truly living in an “animal farm”.
Cast off the slumber into which you have been led into for the last 50 years. Wake up to your rights as a human being, to your proper role as citizens of this country.”
- Mr JB Jeyaretnam, Founder of the Reform Party.
A quote to share. Why are we fighting when it is the FT and so called SUPER GODS that is causing the probelms.We never asked to be treated as such. Come on folks you know better than this.Look inside and ask yourself did we come out with something together to make true blue Singaporeans come together. For starters, Know what is right for all.I am no graduate but I can think positive and negative at the same time. It happens in all of us. When we do something it has to be for all true blue Singaporeans. How do we ensure the goverment ensures true blue Singaporeans, affordable Housing, Health and Education? Let us get our basics before we step all over with the blue suede shoes. Keep smiling. Peace N Love.
Stand up and let us say no more cheap FT. Children of Singapore must be given top priority and nothing less. Past policies drew us to the grave. Singaporeans have sacrificed and the government must be thankful that they are there because of these sacrifices. The people comes first, once the issues of the people are taken care of go ahead and do better for the people. Don’t be a taker neither a giver. Be one to share equally the pie we baked together.
i was waiting for someone to write something about this issue,
A CLASSIC CASE OF WHAT COLOR ARE YOU WEARING, IS IT YELLOW OR RED !!!
singaporeans are REAL DAFT !!!
like someone said, the guinness book of records for daft and dumb should be given to singaporeans.
The time has come for every citizen who love thier country and their children to stand up and be counted….make the next GE the WATERLOO of the PAP.
The Incoming government must
1) Do away with the disgraceful obscene pay of Politicians
2) Provide Universal health Care
3) Improve funding for Education to University Level
4) Cut Defence Spending
5) Bring back and put back on tracks HDB objective of providing cheap and affordable housing for ALL citizens
6) Cut cost of Public Transportation
all citizens must exercise their vote at the Ballot Box. Vote in the Oppsotion regardless which opposition as long as an opposition to the current bunch of mercenary, money grabbing, haughty, bullying politicians.
Why are we so keen to measure GDP growth? But not so when thinking about GDP per capita.
Isn’t the per capita income levels the most important KPI for a caring government?
By using GDP on its own as a benchmark, we have led to the wrong path where one favours growth using cheap labout imports. Heck care the local poor.
The Chairman of the Public Commission complained we drag in high pay for public service performance.
You are paid world top-notch pay, we demand top-notch service in return.
There is no free lunch, dinner and supper, these are words from the horses’
mouths, we just copy to the T.
Simply, you’ve got to earn your stripes, man, no easy work for you.
Enlightening for those who missed this.
Quite amazing that when our govt always hints that politics are life and death matters that there are not transcripts available to public.
Talk abt the internet age!
I just can’t help but cringe at the irony of how “no free lunch” was used in the exchange…
Obviously animal farm laws apply here after all…sigh
I am so damn freaking glad that both my parents did not opt out of the pension scheme. They were just lower ranking civil servants. During the mid-1970s, the govt was practically waging psychological warfare on civil servants to convert to CPF. But my parents followed events in UK and decided to stay on the pension scheme — this may have cost them a little in terms of career promotion, as it affected the KPIs and performance of their bosses and ministry. In order to further punish such stubborn civil servants, the govt also forced those still on pension scheme to contribute to CPF at 1/2 employee rates, but with practically zero employer contribution.
Since 1999, my parents are finally reaping their rewards, with monthly pension payouts to pay for living expenses and simple holidays, together with free polyclinic treatment and free B1-class hospital treatment. They can also commute their pensions in one big lump sum, but are not doing so as they are not investment savvy and don’t want the headache of trying to find the best places to give higher interest rates etc.
At least my siblings and I don’t have to worry about providing financially for our parents.
The problem with cpf now is that it keeps changing the goal posts, keeps on increasing the drawdown age, keeps on increasing the minimum sum (you cannot take out anything if your cpf is less than the minimum sum), forcing those selling their property above 55 to return money to cpf in order to have the minimum sum, CPF Life (which has no guaranteed minimum payout — can be zero). It’s even trying to encourage people to agree not to have their leftover CPF money taken out, even after they die — by agreeing to let CPF transfer the remaining money to their childrens’ CPF accounts!
All these actions by CPF is basically a technical default to restructure the terms & conditions of their financial obligations to the creditors, which is us the people. Dubai tried it in late 2009, to restructure their debts and to pay back later etc. Dubai almost went bankrupt if not for Abu Dhabi pumping in billions of dollars.
As for us, there is no truly independent 3rd party to open up and vet the accounts of CPF, what are the exact investments, what is the current mark-to-market value, what are the future liabilities, what are the projected returns, is it solvent? Show us the exact dollar amounts if we used the old CPF rules versus the new rules. Prove to us that the new rules are better. We only have a mostly silent govt except for a deaf frog minister who proudly proclaims that he feels very rich every month looking at his CPF statements.
They say people should retire at 68 and yet they collect their pension (paid by tax payers) when they are 55. They proposed yet another new retirement age but it has got nothing to do with them. It only applies to those under the CPF scheme where you can’t even get back your own money when you reach 68. They kept saying that you will live longer and would only pay you a bit at a time. It is so ridiculous! They should abolish the pension scheme, or at the least revise the pension age in line with their own recommendations. I would respect them if they walk the talk!
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.
===================
Correction: Civil servants do not collect any pension as long as they are still working. Pension is only paid to them from the day of retirement, not otherwise.
DPM Lee’s reply was that yes, Administrative Officers (AO) are on the pension scheme and that the government is “going on market terms”. He also added that:
“There is no free lunch.”
My, my, this is a CLASSIC CASE of SERFS, speaking and DAFTS, listening, or is it the great KIM speaking from north korea….
The PAP is arrogant. The PAP is deaf to feedbacks. The PAP is defiant. The PAP is taunting Singaporeans by saying:
“Yes, Ministers and Admind Service Officers are getting pension”.
So what are Singaporeans going to do abt it? As for me..my vote will be against the arrogant, deaf and defiant candidates.
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.
===========================
Correction: Civil servants start collecting their pensions from the day they retire, whether it be 55, 60, 62 or whatever age.
Ministers DO NOT FOLLOW THE CIVIL SERVICE RULES. They collect BOTH SALARY AND PENSION TOGETHER when they reach 55.
One of the rules changed by the pigs to fool the rest in the Animal Farm :
All animals are equal but some are more equal than others.
Our current situation in Singapore is so shockingly resemblance to that in the Animal Farm under those pigs. So shocking and disgusting.
We are lesser mortals, not greater mortals, so our lifespan is shorter, hence the defined contribution scheme.
The Papies are already drawing obscene pay and still get obscene ‘pension’ together will pay when they are 55. So LHL, and all those 55 and above(probably more then half the cabinet) and getting this ‘double free lunch’.
Please do not forget Papies are also given alot of perks in housing, transport, etc.
I think they don’t even have to pay a single cent for all their expenses.
These arseholes must be filthy rich!
@Denial Tan,
when the hell minister only need to pay $8 for his operation, is it any surprise how many extra goodies they are getting besides those obscene salary?
for you and me, a visit to the polyclinic will cost more than that.
Waiting On The World To Change
me and all my friends
we’re all misunderstood
they say we stand for nothing and
there’s no way we ever could
now we see everything that’s going wrong
with the world and those who lead it
we just feel like we don’t have the means to rise above and beat it
so we keep waiting
waiting on the world to change
we keep on waiting
waiting on the world to change
it’s hard to beat the system
when we’re standing at a distance
so we keep waiting
waiting on the world to change
One of the best written article I have read. Also up till now the postings and comments are positive and true reflection of the predicament in Singapore.
It is difficult to fathom a universe without limits. It is even more difficult to understand why our ministers are paid so much more any ministers of the world.
Opposition must buck up and stop this madness or will they?
“You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time-Abraham Lincoln”
Time to do something about it right?? Or still the fool hiding or standing on the fence people??