Malaysia's plan to scrap pensions sparks backlash, calls to raise salaries of civil servants

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KUALA LUMPUR: When Aminah (not her real name) joined the civil service over a decade ago, many of her friends questioned her decision as the pay was considered low compared to the private sector.

But the 39-year-old mother of two was unswayed. She was drawn to the pension scheme, having seen how her grandmother was able to survive on it after her grandfather, who worked in the public works department, died.

In Malaysia, spouses and children under the age of 21 are entitled to benefits should a civil servant on the pension scheme die while in service.

“It was definitely one of the main reasons for me to sign up (with) the government although I knew that I would earn much less compared to my friends,” said Aminah, who requested anonymity as government servants are not authorised to speak to the media. The accountant estimates that in the private sector, she could be earning double her current salary. 

Pensions, however, are set to be scrapped for new civil servants from this year as the government buckles under the ballooning financial burden caused by an increasing number of retirees and longer life expectancy.

Last month, Malaysia’s deputy prime minister Ahmad Zahid Hamidi announced the traditional pension system would be abolished moving forward, and that new civil service hires would instead contribute to the Employers Provident Fund (EPF).

Civil servants currently have a choice between the pension scheme and the EPF.

Under the EPF, a compulsory savings and retirement scheme, workers contribute 11 per cent of their monthly salaries while employers chip in with a minimum of 12 per cent of the workers’ salaries.

Workers may fully withdraw from the EPF from the age of 55.  

The scrapping of pensions for new civil servants as well as politicians will help the government avoid bankruptcy in future, said Prime Minister Anwar Ibrahim.

Pension payouts have spiked in the last 15 years and are projected to grow. Pensions payments amounted to RM11.5 billion (US$2.2 billion) in 2010, and nearly tripled to RM31 billion last year.

In 2040, the government would have to spend an estimated RM120 billlion (US$25.2 billion), Mr Ahmad Zahid said. 

The government’s announcement, which will have to be debated in Parliament and will entail constitutional amendments, will not affect existing civil servants.

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