Pension scheme for civil servants being studied

Govt is mulling ways to replace the current scheme with an improved contractual mechanics


THE new pension scheme for civil servants is still being studied and has not been discussed at the Cabinet level, said Deputy Prime Minister Datuk Seri Dr Wan Azizah Wan Ismail.

“The plan will be presented to the Cabinet for further debate and approval. We will go over it later,” Dr Wan Azizah said after officiating Bank Islam Malaysia Bhd’s Women in Business (WinBiz) programme in Kuala Lumpur yesterday.

Public Service Department DG Datuk Seri Borhan Dolah on Wednesday revealed plans to revamp the current pension scheme structure, which is costing the government about RM28 billion. Civil servants’ salary, remunerations and pensions account for a large portion of the government’s budget.

Last year, the government tabled a budget of RM314.5 billion with RM259.8 billion allocated for operating expenditure and RM54.7 billion for development.

Pension bills alone cost the government an estimated RM25.76 billion last year. The government’s expenditure for emoluments is estimated at RM81.33 billion last year and the figure is set to rise to RM82 billion this year.

The government is mulling ways to replace the current scheme with an improved contractual mechanics.

Borhan said the move would save the government RM5 billion annually. It is expected to be implemented as early as next year. At present, there are over 1.7 million civil workers.

“Contractual appointments may not enjoy the benefits of the existing permanent and pension schemes, such as housing and car loans, but these benefits may be translated into higher allowances,” Borhan said, as quoted by local news outlets.

He said the move was decided at a special public service reform committee meeting in October last year.

Borhan said contractual appointments would better serve the Generation Y (Gen Y) which is the fastest-growing segment of the workforce.

The scheme will give them the option to leave the public service after having served a certain period.

Gen Y, popularly known as the millennials, are often described as eager to grow, and are highly educated and competitive.

However, Congress of Union of Employees in the Public and Civil Services Malaysia (Cuepacs) president Datuk Azih Muda told The Malaysian Reserve that there should be no changes in the current pension scheme as it is in line with the Federal Constitution.

“The question is whether the clause contained in the Federal Constitution regarding civil servants and pensionable services will no longer be enforced in 2020,” Azih said.

“As such, we are hopeful that negotiations will continue between the government and Cuepacs in relation to this proposal and to ensure that the future of civil servants will not be in dispute in the future,” he added.

Earlier, Dr Wan Azizah lauded Bank Islam’s latest initiative called WinBiz, designed to help businesswomen obtain credit to spur their small and medium enterprises (SMEs). The country currently has nearly one million SMEs, of which 20.6% are owned or run by women.

“I urge financial institutions in Malaysia to follow Bank Islam’s lead and footsteps in introducing products and services that encourage women’s involvement in the field of entrepreneurship, particularly in SMEs,” said Dr Wan Azizah, who is also women and family development minister.

The programme offerings include business financing term-i facility with funding up to RM1 million, corporate Internet banking and payment terminal facility, as well as SME Al-Awfar Investment Account.

Bank Islam CEO Mohd Muazzam Mohamed expects its SME banking portfolio to increase by RM50 million over the next year following the launch of the WinBiz programme, which will be available next month.

“At the moment, our projection is RM50 million. We can allocate a bigger amount but that depends on how much the take-up will be. We expect the ticket size to range between RM100,000 and RM350,000. If there is demand, Bank Islam is well capitalised to increase it further,” he said.