To help pensioners drawing low pensions cope with inflation, the government introduced an ex-gratia allowance called the Singapore Allowance in April 1974. This ex-gratia allowance is an additional payment over and above the pensions that the government pays to pensioners residing in Singapore.

The government has decided to increase the Singapore Allowance further by $10 to $150 per month, and raise the gross pension ceiling from the current $950 to $1,050 per month. The revision will give an additional $1.7 million a year to pensioners residing in Singapore, of which there are about 12,100. The change will take effect from 1 April 2001.