Back to the Future Enhancements
By ringisei on 16 Jun 2009 7:30 AM
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The Savings and Employee Retirement Plan, or Saver scheme, for commissioned SAF officers was launched with much fanfare in 1998. Two years later, the PREMIUM scheme, for warrant officers was launched. Last month, it was announced that the career schemes for officers and WOs will be 'enhanced' and that a third career track, the Military Domain Experts Scheme (MDES), was being created.

This post recalls some of Saver's backstory and how that might illuminate possible issues for EOCS, EWOCS and MDES. A caveat: as they like to say, especially regarding security and military affairs, those who know don't speak and those who speak don't know so readers are forewarned not to take the following as definitive. Corrections and clarifications are, as always, most welcome.

Too Little Too Early

One big gripe with Saver was that the retirement age (called Saver End Date, henceforth SED), 42-45, was too early. It's worth recalling that, more than 10 years ago, Saver was a bold experiment to replace and streamline manpower schemes such as Contract Service (CS), Pensionable Service (PS) and Full CPF (also to reduce the gahmen's long term entitlement spending by greatly reducing the pool of personnel entitled to final salary pensions).

It's also worth remembering that the retirement age for officers was 55 (with the retirement age for the rest of the population at 60 - now higher); promotion was often excruciatingly slow - not uncommon for officers to retire as CPT (whereas now MAJ2s seem to grow on trees). As such, 42-45 didn't seem too early plus it would give officers a head start in starting their second careers, cushioned by a gratuity-like payout of funds vested over the course of an officer's career upon reaching SED.

This might be fine if an officer was single and without dependents at 42-45. But that's not your average profile of an SAF officer. Let's assume if most of them married at 29 and had two children by 33, the kids would still only be in secondary school at SED. Not a great time for instability and uncertainty on (yes, malecentric) Daddy's (un)employment front. And imagine what the wife would say. With the perception and fear of widespread and growing ageism in the private sector, it looked rational to bail out in their 30s - a particular pool being those who had taken local scholarships (with less promising Routes of Advancement compared to Overseas scholars but who also do a lot of the necessary but unglamorous saikang) once they had completed serving their bonds.

The new age of 50 recalls the pre-Saver trend when officers could retire at 55 but tended to take early retirement not longer after they hit the big Five O. The additional five to eight years of salaried income and job security (rather than wondering whether SED will be 42, 43, 44 or 45) might persuade more to stay on until SED. And the timing seems about right to use some of that Saver payout towards the kids' tertiary education. Assuming some of it didn't get docked after some HBOI though.

Vesting Turns Into Exit Light

This early exodus of officers was not anticipated. Mainly because it had been anticipated. But the incentive of vested Saver funds was put in place to ensure officers stay until 42-45 may have become perverse and actually exacerbated the problem it was designed to solve.

Over the course of an officer's career, some of his pecuniary benefits are not paid out as his salary and to his CPF account but rather vested with the Saver fund (which would be invested - the less than stellar overall returns is another long story). The longer the officer remained in service, the more of that vested amount he would receive when he eventually left service. I don't know what the scale was like but apparently it seemed to reinforce the decision of officers to leave earlier (in their 30s) rather than stick it out to SED; a reason I heard a lot was: 'Percentage loss is bigger but absolute amount is smaller if I leave early. And can kena cong gong if suay suay tio charge.'

Leaving early also gave a sense of being able to 'lock-in' vested funds. Officers could be penalized, having a percentage of their Saver vesting withheld or confiscated, if they got into trouble over the course of their service. The super vague, catch-all offence under Sect 25 of the SAF Act was something that hung over those who served in a complex and demanding environment where, it seemed, sometimes, anything that could go wrong would go wrong. Those who, for whatever reasons, got 'stuck' and had to stick it out until SED went into what was jokingly called 'Saver Protection Mode'.

Sure, Saver didn't invent the Great Watermelon stance. But given Saver's earlier retirement age reducing the number of months of steady pay and the size of Saver payout at risk anticipated to be larger than a PS payout or CS gratuity, it's rational for an officer to become more risk adverse as a result, especially if he's superscale but not that superscale.

There's not been any mention about how vesting will work in EOCS or if it will changed substantially but one expects that at least the scale will be tinkered with to discourage early exit. Whether this will, once again, have unintended consequences is a completely speculative exercise at this point.

Both Eyes Open, Both Hands Tied

One of the things that made Saver different from previous schemes was that it had an investment component to sweeten the deal. Officers (and later WOs under the 2000 Premium plan) could opt for various combis: Dynamic (10% cash, 20% bonds, 70% equities), Balanced (10% cash, 40% bonds, 50% equities) or Stable (50% cash, 50% bonds). After a whole series of exogenous shocks, including SARS, DotCom, WorldCom/ENRON, this carrot didn't really come into fruition - I have no idea how much better or worse off officers' Saver pots were overall but it sounded ominous when officers were allowed to change their allocation to Stable two years prior to SED.

Although many officers knew the risks of a Dynamic allocation when they signed on the dotted line, not quite a few felt extremely unhappy when this dynamism took them into negative territory. In the aftermath of Lehman Minibombs, any new scheme that has an investment component will require additional transparency and disclosure by the fund manager, more effective financial education of the officer-investor and better due diligence to tie both ends in.

There is another group of people who did not want to convert to Saver at all. They preferred the then relatively less lucrative but much more secure option of PS. I've heard from more than one officer that they were told by superiors that if they did not convert from PS to Saver, their promotion prospects would be adversely affected. Again, pure hearsay and no way to prove or disprove it (say, by looking at how many of the most senior officers are actually still on PS). Nonetheless, the repeated instances I have heard these stories point to one takeaway for future policy: It's important to have a good policy. But it's also important to implement it in a way that will not cause a lot of fear and resentment. Particularly when it's in sectors that you can't wave away manpower problems by importing foreigners. It remains to be seen if EOCS, EWOCS and MDES will be shoved down the throats of currently serving personnel.

Leadership By Example

Ho Shu Huang writing in the RSIS Commentary 56/2009, 'An About Face to the Future: The SAF's New Career Schemes' (PDF) bemoaned how:

Military service is now a career, as opposed to a calling, subjected to the expectations of the self-centred and self-confident Generation Me who ask not what they can do for the organisation, but what the organisation can do for them.

One could extend his tirade into the realm of politics. Ministers appointed after 1 Jan 1995 are no longer eligible for pensions. But I don't think any Minister who was already entitled to and/or receiving a pension already offered to convert or forego it, regardless on the economically long-term rational mass abolition of pension schemes (around 1986 except Admin Service, Intel Service). This is probably comparing apples and oranges (or mere mortals) but it's not surprising that many officers, and indeed many Singaporeans, don't see it that way.

Comments (5)

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Hi Ringisei

It comes full circle for the SAF. The wish to keep the army young was a nice one, and to cap the shelf life of officer lifers to 42-45. Especially with the (accurate?) stereotypes of the SAF and its civil servant cousins as jiakliaobee unproductive overstayers, the SAF managed to set the right tone that the military was no longer an iron rice bowl. Nevertheless, with the MDES, lifelong employment is back, but for some vocations only.

Lifelong employment is only for those lucky and smart enough to go into engineering, nursing and intelligence specialisations it seems. Intra-SAF and like in any human resource policy, there is bound to be resentment about this arbitrary lifeline to some vocations and not others. All depends now whether the SAF can package its apparently iron rice bowl MDES for those who perform and deliver i.e. using lifelong employment as an incentive particularly for those outside the MDES umbrella and to get onboard it in the later part of their career, one has to perform and perhaps must be prepared to be retrained in selected specialisations.

All sounds certainly good on paper, but so did the Saver scheme.

Hi, I agree that the removal of the iron rice bowl mentality was an important and positive development. But I'm not sure that MDES represents the return of lifelong employment - it seems to me that it was motivated more by upper management needing to stem the exodus and retain skilled personnel rather than a response to a desire for engineering, nursing and intel pple for greater job security in the SAF. After all, these sectors are the ones that are most easily transferable to the private sector.

What I suspect MDES aims to fix is more of the problem of ROA - the dilemma of technical experts being managed by ops pple e.g. engineers by pilots, nurses by Inf/Gds/Cdo and intel (G2) by ops (G3). We'll probably have a better idea of the dynamics between the old style ranks and ROA when the details of MDES are released. It's also not a completely new thing - MDES could turn out to be a uniformed version of the DXO scheme.


With the extension of the retirement age of regular army officers to 50, it means that SAF will have to pay more money to these people. Why should army regulars be given a hugh retirement fund? So what their retirement age is younger, 50 compared to 62 in the civilian sector? Which private or public organisation offer its people a retirement fund other than SAF? More wastage of taxpayers money. Later, who knows might lead to higher GST, etc. More tax burdens on Singaporeans again.

If you've thought about the answers to your own first two questions, you might have reasoned that:

1. Wah, 62 still can pass IPPT? Bash jungle? Heli-rappel?
(The job can be dangerous, the hours are not pretty and you can be sent anywhere anytime.)

2. Retire at 50, hard to find job after, how to survive?
(Even people who are passionate about defending the country need to think about providing for their families in the long term.)

3. Hypothetical opportunity cost of relatively early retirement: (62-50) x $5,000 x 12 = $700,000 which is roughly the amount of the Saver payout according to ST's 15 May 2009 article 'Officers fret about lump sum payment' for an LTC retiring at 45.

Let's link this last point to your last question (which I mentioned in my post already wrt public sector pensions) - how many years does a MAJ/LTC have to work to make one year of Minister's pay?


Based on FY 2008 budget, MINDEF contributes only $39 mil to government revenue but defence spending is $10.8 bil. In fact, MOE contributes more than MINDEF, with $42.8 mil. This is surprising since MINDEF also owns the defence industries and should thus, contribute more to government revenue. GST contributed $6.2 bil and personal income tax contributed $5.9 bil. Hence, the government revenue from our GST and income tax has all gone towards defence spending.

I'm not sure how much of our GST and personal income tax has really gone into improving the military capability for the defence of Singapore, or has they gone into the pockets of the SAF regulars? When MINDEF propose the SAVER scheme to the SAF regulars in 1998, it promised the SAF regulars a huge sum for their retirement upon their retirement at age of 42. However, a few mths ago it raised the retirement age of SAF regulars to 50 years old. This means that more of our GST and personal income tax will go into the pockets of the SAF regulars.

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1402 words | Categories: Defence, Policy

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