Think tank urges govt to revamp public sector pension scheme

KUALA LUMPUR: Socio-Economic Research Centre (SERC) executive director Lee Heng Guie has urged the government to revamp the public sector pension scheme as part of its efforts to cut operating expenditure.

The scheme is expected to cost RM19.5 billion for pensions and retirement charges in 2016 or 9.1% of the country’s operating expenditure.

According to Lee, pensions or retirement charges have been growing at a rapid rate of 10% a year over the 2007-2016 period. The rate of increase even accelerated from 2011 to 2015, which saw pensions and gratuities grow by 10.4% a year to RM18.8 billion in 2015 from RM13.6 billion in 2011.

“I propose that this (revamp) applies to new government servants only. It is time for us to reform it into a more sustainable and viable self-funded pension scheme, but given the big size of the public sector, it needs strong political will to do it,” he said.

Under the proposed revamp, government servants will be required to contribute to their future retirement scheme, very much like the Employees Provident Fund scheme.

Currently, both the government and employers of civil servants contribute to a defined benefit scheme, which funds the promised 50% last-drawn salary for life for ex-civil servants and, in the event of death, their spouses.

In an interview with SunBiz, Retirement Fund Inc CEO Datuk Wan Kamaruzaman Wan Ahmad had acknowledged the need to relook the defined benefit scheme, a fact which was also acknowledged by Prime Minister Datuk Seri Najib Abdul Razak during one of the budget consultation sessions.