Can Malaysia keep up with government pensions any longer?

Free Malaysia Today

Putrajaya’s annual retirement charge has increased five-fold since 2005.  Read More: https://www.freemalaysiatoday.com/category/nation/2024/02/12/can-malaysia-keep-up-with-government-pensions-any-longer/    Free Malaysia Today is an independent, bi-lingual news portal with a focus on Malaysian current affairs.    Subscribe to our channel - http://bit.ly/2Qo08ry   ------------------------------------------------------------------------------------------------------------------------------------------------------ Check us out at https://www.freemalaysiatoday.com Follow FMT on Facebook: http://bit.ly/2Rn6xEV Follow FMT on Dailymotion: https://bit.ly/2WGITHM Follow FMT on Twitter: http://bit.ly/2OCwH8a  Follow FMT on Instagram: https://bit.ly/2OKJbc6 Follow FMT on TikTok : https://bit.ly/3cpbWKK Follow FMT Telegram - https://bit.ly/2VUfOrv Follow FMT LinkedIn - https://bit.ly/3B1e8lN Follow FMT Lifestyle on Instagram: https://bit.ly/39dBDbe ------------------------------------------------------------------------------------------------------------------------------------------------------ Download FMT News App: Google Play – http://bit.ly/2YSuV46 App Store – https://apple.co/2HNH7gZ Huawei AppGallery - https://bit.ly/2D2OpNP  #FMTNews #GovernmentPensions #Retirement

Transcript

00:00 RM32 billion. That's how much the country is expected to spend on civil service pensions in 2024.

00:07 That accounts for more than 10% of the government's projected operating expenditure, or OPEX,

00:13 estimated at RM303.8 billion this year. The Malaysian civil service has a RM1.3 million

00:20 strong workforce. With many retiring every year, pension commitments have always been a budgetary

00:26 concern, but now it is becoming a ticking financial time bomb. Over the last two decades,

00:32 the government's pension bill has increased five-fold. Costing some RM6 billion in 2005,

00:38 it went past the RM20 billion mark in 2016 and then climbed to RM30 billion in 2022.

00:45 It is expected to rise to a staggering RM40 billion by 2030. That is because the number

00:52 of government retirees is also on the rise, going from 590,000 in 2010 to potentially 936,000 this

01:01 year. With the number of government retirees growing year on year, can the government sustain

01:06 these pension payouts? Economist Ye Kim Leng of Sunil University says to do so, the government

01:12 must either earn additional revenue or reallocate funds from other sectors. But the second option

01:18 comes with a downside. Then of course there has to be some form of cutbacks in other sectors of

01:25 the economy, especially the health, education and even military spending and all that will have to

01:33 be reduced in order to channel some of these funds to provide for the pension payment.

01:45 The more prudent longer-term solution, according to Deputy Prime Minister Ahmad Zayed Hamidi,

01:50 is to scrap the pension scheme for new recruits and replace it with mandatory

01:54 contributions to EPF and SOCSO, as practised in the private sector. Ye agrees, but says the shift

02:00 should be gradual with a phased contribution process to help civil servants adjust to the

02:05 new system. That can be coupled with some kind of a graduate fee or other benefits to make it

02:12 more attractive for those joining the government so that there is no

02:15 the benefits are comparable to what they will receive if they are in the private sector.

02:21 However, not everyone agrees with Zayed's proposal. Civil Service Union QPAC says

02:28 civil servants are already saddled with low salaries despite decades of service.

02:32 QPAC's Secretary-General Abdul Rahman Mohamad Nordin hopes the government will seek input

02:38 from labour unions as he believes EPF will not guarantee the future of retirees.

02:42 Trimming the civil service to mitigate future pension liabilities is another potential solution,

02:48 but Ye believes that it comes with repercussions.

02:50 Too aggressive downsizing will have a negative impact on the economy because you are more

02:57 unemployed. You also have the challenge of creating, providing jobs for the, especially for

03:04 the new graduates and those entering the workforce. Clearly the government faces some tough

03:11 decisions ahead as it looks towards financial sustainability. Natasha Bust and Lenel Tham, FMT News.

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