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A challenge to pay rising civil service pension bill

KUALA LUMPUR: The government is finding it challenging to pay the civil service’s retirement expenditure each year, as the annual total rose to RM23.87 billion in 2018 from RM5.86 billion in 2006, according to Prime Minister Tun Dr Mahathir Mohamad.

“In addition, the previous government increased civil service salaries for a few times at a relatively high percentage, which increased the government’s pension liabilities,” he told Dewan Rakyat yesterday.

“To handle this issue, the government is studying several new mechanisms. We hope the new mechanism will not burden the government, while civil servants will not face any losses after they end their civil service,” he said.

Dr Mahathir was responding to a question from Datuk Seri Dr Ismail Mohamed Said (BN-Kuala Krau), who asked the government to state the current status of the proposal to implement an improved contractual scheme to replace the permanent and pensionable appointment scheme in the public service.

“The retirement benefits represent the government’s appreciation and recognition of civil servants in the public service. The retirement benefits are protected under the Federal Constitution, Item 147 on Pension Rights, regulated under the Pensions Act 1980 and the Statutory and Local Authorities Pensions Act 1980,” he said.

As such, civil servants registered as pensioners will continue to receive their retirement benefits under the current pension scheme.

In a follow-up question, Khairy Jamaluddin (BN-Rembau) asked for an assurance from the government that the new mechanism will not affect the existing civil servant pension scheme.

In response, Dr Mahathir said the government will adhere to all employment contracts signed with existing civil servants.

“When they enter the civil service, the government enters into an employment agreement with them. The government will adhere to the terms stated in the agreement for existing civil servants,” he added.

Ismail, in a follow-up question, asked whether the government is able to absorb contract staff in the civil service into permanent employment with pensions as there are more than 50,000 contract staff today.

Ismail also said the majority of the civil service are Malays and urged Dr Mahathir to maintain its hiring policy to support the development of the ethnic group.

Dr Mahathir, however, said there is a limit in terms of the government’s capability in hiring a higher number of permanent staff and bearing their pensions due to limited tax collection and economic growth.

“Tax collection is not sufficient to bear [the] increasing expenditure of pensions, which is growing at a rate higher than government tax and economic growth. When we extend the retirement age, there are fewer vacancies, resulting in higher unemployment.

“Indeed, the majority of the civil service are Malays. This is a policy we [have] implemented since independence. But the Malays must remember that the government cannot afford to provide jobs to all of them because today we emphasise using their own efforts.

“We will provide more training, and business opportunities and job opportunities in the private sector. When they enhance their competitiveness, their reliance on the government and pensions will be reduced. This is how we govern based on our financial capability to avoid incurring substantial debts,” he said.

The move to revamp the public pension scheme into an improved contractual scheme was recommended in a special Public Service Reform Committee meeting in October last year.

Under Budget 2020, the government proposed an allocation of RM27.06 billion for retirement charges, making up 11.23% of the total operating expenditure.

Source: TheEdgeMarkets