WHY REFORMS ARE NEEDED
Economists alternatively help the proposal.
“Obviously there is fiscal pressure and a demographic trend where life expectancy is expected to increase. Pension reform is one part of it to mitigate any future possible economic outcomes,” mentioned Mr Lee Heng Guie, an economist and government director of the Socio-Economic Research Centre (SERC).
Official knowledge reveals the life expectancy of Malaysians has elevated from a mean of 71.2 years in 1991 to 74.8 years in 2023.
In Malaysia, a part of the pension funds is funded by KWAP, which was established again in 2007 to help in financing pension liabilities.
The authorities contributes 5 per cent of the full annual budgeted emolument (salaries and different returns from work) of Federal Government workers whereas statutory our bodies, native authorities and businesses contribute 17.5 per cent of the fundamental salaries of their pensionable workers to KWAP month-to-month.
KWAP is an lively investor in equities, mounted revenue securities, cash market devices and others.
Its gross funding revenue in 2021 was RM6.33billion, whereas the full pensions and gratuities paid that yr amounted to RM29.1bil.
As of July final yr, KWAP had property totalling RM184.5 billion.
“It is still a long way from being able to fund all the pension payments,” Mr Lee identified.
Pension reforms usually are not distinctive to Malaysia, he added.
France, as an illustration, will elevate the full-pension retirement age from 62 to 64 by 2030, and would require individuals to make social safety contributions for 43 years to obtain a full pension. The reforms ignited widespread protests final yr.
“There will definitely be a lot of resistance from civil servants,” Mr Lee mentioned.
The Malaysian authorities’s transfer has, to this point, drawn a measured response from the opposition.
In a press release on Jan 24, Perikatan Nasional chairman Muhyiddin Yassin admitted that the rising value of pension funds wanted to be addressed however mentioned that it should not come on the expense of presidency employees and their welfare.
“Any resolution the federal government needs to implement can not result in the neglect of the welfare of civil servants or decreasing the scale of public providers with out bearing in mind the necessity to ship providers to the individuals effectively, broadly and successfully all through the nation,” he mentioned.
‘A DOUBLE-EDGED SWORD’
On whether or not somebody would profit extra from a pension or an EPF plan, licensed monetary planner Rajen Devadason informed CNA it is determined by how lengthy the individual lives.
“With Malaysia’s current official retirement age set at a relatively early 60, a person who dies early, say, before age 70 would see his estate end up better off with the EPF option, while a person who lives a long time, say past 85, would end up benefiting from the steady government pension,” he mentioned.
The scrapping of pensions for brand new civil servants may take away a barrier holding again some civil servants from giving the personal or different sectors a attempt.
Policy advisor Liyana Marzuki, 43, who used to work within the authorities as a lawyer, selected the EPF system to present herself the pliability to take her retirement financial savings along with her if she switched jobs.
She resigned after 10 years with the federal government to hitch the company sector in 2015.
“Should I have chosen the pension scheme, I wouldn’t have been eligible for it once I resigned from government service,” she mentioned.