PETALING JAYA: A private pension fund should be set up as a replacement if the government intends to do away with its pension scheme for civil servants.
Economist Prof Dr Barjoyai Bardai said for the new scheme to work, government servants need to be disciplined with their savings by making consistent contributions to the fund.
“The government needs to educate staff to be more disciplined,” he told theSun yesterday.
Barjoyai explained that unlike the existing Employees Provident Fund (EPF) scheme, that allows contributors to withdraw their money in large amounts, the private pension fund would see a steadier income for contributors for life.
“The problem with EPF forced savings is that the people will use up their entire savings in a matter of years and have nothing left. The pension fund would guarantee retirees a lifetime amount of about RM3,000 a month,” he said.
If introduced, such a scheme would be similar to the state pension scheme in the United Kingdom, where those who have contributed to its National Insurance are given regular payments upon retirement once they reach the state pension age.
Barjoyai suggested the fund be managed by an experienced firm that has been dealing with savings, such as the EPF or a private insurance company.
He was commenting on a recent announcement by Public Service Department Director-General Datuk Seri Borhan Dolah that beginning 2020, new appointments in the public service might no longer be made under the permanent and pensionable scheme, and would instead be done under a contractual scheme.
Borhan had said the move aims to trim the 1.7 million-strong civil service in phases, and to reduce the burden of pensions that now stands at RM28 billion annually.
However, Barjoyai cautioned that abolishing the existing pension scheme for civil servants comes with several drawbacks, including the government having to make EPF contributions.
“The government also won’t be able to use existing funds meant for pension for development purposes if they do away with it. In developed countries, this trust fund is the biggest fund used to stabilise the share market, among other things,” he said.
Meanwhile, Congress of Union of Employees in the Public and Civil Services Malaysia president Datuk Azih Muda said abolishing the permanent and pensionable scheme would only contribute to job insecurities among new civil servants.
“When you talk about a contract, it doesn’t provide any form of guarantee to our young Malaysians. This will affect their plans to have a family or purchase a house.”
Azih said instead of scrapping the pension scheme, it was the government’s responsibility to look for extra revenue for pension payments.