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


Economists on the other hand support 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,” said Mr Lee Heng Guie, an economist and executive director of the Socio-Economic Research Centre (SERC). 

Official data shows the life expectancy of Malaysians has increased from an average of 71.2 years in 1991 to 74.8 years in 2023. 

In Malaysia, part of the pension payments is funded by KWAP, which was established back in 2007 to assist in financing pension liabilities.

The government contributes 5 per cent of the total annual budgeted emolument (salaries and other returns from work) of Federal Government employees while statutory bodies, local authorities and agencies contribute 17.5 per cent of the basic salaries of their pensionable employees to KWAP monthly.

KWAP is an active investor in equities, fixed income securities, money market instruments and others.  

Its gross investment income in 2021 was RM6.33billion, while the total pensions and gratuities paid that year amounted to RM29.1bil.

As of July last year, KWAP had assets totalling RM184.5 billion.

“It is still a long way from being able to fund all the pension payments,” Mr Lee pointed out. 

Pension reforms are not unique to Malaysia, he added.

France, for instance, will raise the full-pension retirement age from 62 to 64 by 2030, and will require people to make social security contributions for 43 years to receive a full pension. The reforms ignited widespread protests last year.

“There will definitely be a lot of resistance from civil servants,” Mr Lee said.

The Malaysian government’s move has, so far, drawn a measured response from the opposition.

In a statement on Jan 24, Perikatan Nasional chairman Muhyiddin Yassin admitted that the growing cost of pension payments needed to be addressed but said that it must not come at the expense of government staff and their welfare.

“Any solution the government wants to implement cannot lead to the neglect of the welfare of civil servants or reducing the size of public services without taking into account the need to deliver services to the people efficiently, widely and effectively throughout the country,” he said. 


On whether someone would benefit more from a pension or an EPF plan, licensed financial planner Rajen Devadason told CNA it depends on how long the person 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 said. 

The scrapping of pensions for new civil servants could remove a barrier holding back some civil servants from giving the private or other sectors a try.

Policy consultant Liyana Marzuki, 43, who used to work in the government as a lawyer, chose the EPF system to give herself the flexibility to take her retirement savings with her if she switched jobs. 

She resigned after 10 years with the government to join the corporate 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 said. 

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