ST - Pension about a tenth of minister's pay

May 14, 2011
Pension about a tenth of minister's pay
PMO writes letter to dispel rumours of seven-digit sums
By Elgin Toh

RETIRED ministers who serve 18 years or more receive annual pension payouts
approximately equal to one-tenth of their annual salaries, the Prime Minister's Office
(PMO) disclosed in a letter to The Straits Times Forum yesterday.

Annual salaries of ministers vary from year to year.

The latest available Public Service Division (PSD) figures are for 2009, when an
entry-grade minister received an annual salary of $1.57 million. The Prime Minister's
salary that year was $3.04 million.

Deputy Prime Minister Teo Chee Hean said the PMO saw the need to clarify the
'actual situation' because of the 'misinformation' that had been circulating on the
Internet after the May 7 election.

Online forum postings in recent days have been claiming that Mr George Yeo may
continue to receive a seven-digit sum as pension every year, even after stepping
down as Foreign Minister following his electoral defeat in Aljunied GRC.

'The actual position is quite different from the misinformation that has been going
around,' said Mr Teo, acknowledging that public 'consternation' may have resulted.

Mr Teo, who is the minister in charge of the civil service, was speaking to The Straits
Times on the sidelines of a public service awards ceremony.

According to the Parliamentary Pensions Act (PPA), political office-holders ranging
from parliamentary secretaries to the Prime Minister, including the Speaker of

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Parliament, are eligible to receive pensions from the state, as long as they have
served for a minimum of eight years and are at least aged 50 when they step down.

For every completed year of service, the annual pension amount is raised by 1/27 of
the 'pensionable component' of his salary. The final ratio, however, must not exceed
two-thirds.

This means that after 18 years of service, the final ratio used to compute a minister's
pension stops increasing.

A statement by the PSD in 2007 said that this 'pensionable component' was roughly
half the monthly salary of a minister then, and did not include bonuses, allowances
and annual salary components.

In 1994, when ministerial salaries were first pegged to the pay of top private sector
earners, the pensionable component of ministerial salaries was frozen at each
grade.

'All salary increases since 1994 have been added to the non-pensionable
component, to contain pension costs,' the PMO said in its letter, which was signed by
Mr Tan Kee Yong, Secretary to the Prime Minister.

The letter also pointed out that Members of Parliament elected after January 1995
are not eligible for MP pensions. However, ministers appointed after 1995 are
eligible for ministerial pensions.

Apart from political office-holders, civil servants from the elite Administrative Service
as well as intelligence service officers still receive pensions.

Administrative Service officers, for example, become eligible after 15 years of
service.

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Yesterday, Mr Teo reiterated the need for a pension scheme for senior public
servants, even though most junior public servants were taken off pensions and
placed on the Central Provident Fund scheme by 1986.

'There's a very specific reason for a small group of officers to still be on
pensions, because there is a premium in this case for long-term service in
order to provide consistency of policy and implementation,' he said.

He added that the value of the pension is 'fully taken into account as part of a
minister's total pay package' when comparisons are made with the private sector
benchmarks.

The pension that a minister is expected to receive in future is converted to present-
day terms, and this amount is taken into account when the benchmarking is done,
the PSD explained yesterday.

The Government is reviewing a provision in the PPA that allows a minister to
begin collecting his pension at age 55, even if he continues to hold office, the
PMO said.

Before 1982, office-holders had to step down before they could begin receiving
pensions. But the PPA was amended that year to allow office-holders to begin
collecting at 55, even if they were still holding office.

During the parliamentary debate on this amendment, then Finance Minister
Hon Sui Sen argued that without the amendment, office-holders who served
beyond 18 years - and whose pension ratios therefore stopped increasing -
would then have a financial disincentive to stay in office.

They would be financially better off joining the private sector, as they could
then begin collecting their pensions on top of their private sector salaries, Mr
Hon said.

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Mr Teo said yesterday that the review of this amendment was ongoing in the
light of the fact that 'employment and re-employment terms have been
changing over the years'.

elgintoh@sph.com.sg

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