Recently, the issue of appointing new public servants without retirement benefits has become a significant topic of debate and discussion among various segments of the society. Some agree with it, while many others do not. A local media outlet conducted a survey on their Facebook account, and the findings indicated that 70 percent of the participating respondents disagreed with the idea of abolishing the pension scheme for future public servants.
Previously, it was reported that the Cabinet had agreed to make permanent appointments for new public servants without retirement benefits. Based on the projected estimates, by the year 2040, the government would incur a pension liability of RM120 billion if this new system is not implemented. At the same time, the Public Service Department (JPA) also stated that the contractual appointments in the civil service are an interim measure towards strengthening the public service remuneration system. With no pension for new public servants, all new recruits have no choice but to contribute to the Employees’ Provident Fund (EPF). Previously, all permanent public servants had the option to choose between the Pension Scheme or the EPF Scheme.
At the same time, the President of the Congress of Union of Employees in the Public Service (CUEPACS) expressed disagreement with the government’s decision to abolish the pension scheme for new permanent public servants. He believed that any government action should be taken without reducing the benefits currently delivered to the public servants.
The question that arises is whether the appointment of new permanent public servants without retirement benefits is the most feasible one. The issue of pensions is highly significant and sensitive, requiring careful and thorough analysis. This matter needs more time for comprehensive research of the proposal to abolish the pension scheme for new permanent public servants. It necessitates discussions with various stakeholders, including CUEPACS. In the current context, it is important to consider that the nation has previously faced the Covid-19 health crisis, which has placed immense pressure on people’s lives, and the recovery process is still ongoing to date.
Several factors need to be considered, especially the current salaries of public servants, which are, in some cases, inadequate in relation to the rising cost of living, placing significant pressure on their livelihoods. Additionally, there exists a disparity between the salaries of public servants and some private sector employees who receive higher salaries, substantial salary increases, and bonuses that are often much larger than those in the public sector.
Nevertheless, public servants remain loyal to the public sector because they perceive pensions as a crucial element in securing their livelihoods after retirement. If pensions are abolished for new public servants, will the salaries they receive in the future be nearly equal to or higher than those of some private sector employees?
Another aspect that requires attention is how the financial management of the new retired public servants without pensions will be handled to ensure that their savings are sufficient and protected from potential scams, especially given the substantial amounts in the Employees’ Provident Fund (EPF). The advantage of the pension scheme is the assurance of a steady monthly income after retirement, and in the event of one’s passing, it will be disbursed to their spouses. This aspect contributes significantly to the family’s well-being, ensuring financial stability post retirement.
It is imperative to reevaluate the appointment of new permanent public servants without pensions, and engaging in discussions with all relevant parties. It requires a delicate and cautious approach, much like treading on eggshells.
Assoc. Prof. Dr. Anuar Shah Bali Mahomed
Deputy Dean, School of Business & Economics
UPM/The Future Research
27 January 2024