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.
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.
Cartoon courtesy of My Sketchbook