Gov’t scraps civil servants’ pension scheme, economist warns of socioeconomic impact

AN economist warned that the recent decision to abolish the pension scheme for new civil servants in Malaysia could have far-reaching consequences on government spending and the country’s socioeconomic landscape.

Tun Abdul Razak University scholar Barjoyai Bardai pointed out that the anticipated savings may take decades to materialise as the government will now bear the 13% contribution to the Employees Provident Fund (EPF).

Barjoyai expressed concern that the shift from a pension scheme to EPF contributions might dissuade professionals from joining the public sector especially in crucial areas like education, medicine and engineering.

He also argued that the absence of a pension may discourage potential candidates, potentially leading to a decline in the number of civil servants.

“For example, those in the education or medical sector, or engineers. They won’t be interested in working for the government anymore because they won’t have a pension. In the long run, there is a possibility that the productivity of the public sector will decline.

“This could have an impact on certain sectors of the economy that are dependent on projects implemented by this public service group.”

Meanwhile, Universiti Keusahawanan Koperasi Malaysia senior lecturer Abu Sofian Yaacob proposed that the government should consider increasing salaries and EPF contributions to ensure the financial security of civil servants who will no longer receive pensions.

“The government’s contribution to the EPF should be increased to 20% to help replace the pension these new civil servants will have lost,” he said.

Prior to that, Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi announced on Wednesday (Jan 24) that new civil servants would no longer receive pensions but would contribute to EPF and the Social Security Organisation (Socso).

The Bagan Datuk MP claimed that this move would reduce the government’s financial burden associated with pension payments. The new policy is set to be implemented later this year.

Presently, civil servants have the option to choose between the pension scheme and EPF contributions.

Under the proposed policy, the government will contribute to EPF for new civil servants, mirroring the private sector’s approach to workers’ retirement savings. – Jan 26, 2023

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