Friday, November 28, 2008

Government Pension Scheme

Friday November 28, 2008
Pak Lah: Civil servants can go back to pension scheme

PUTRAJAYA: Some 40,000 civil servants, who had opted for the Employees Provident Fund, can now revert to the pension scheme.

Prime Minister Datuk Seri Abdullah Ahmad Badawi said these civil servants can exercise their option to revert to the pension scheme in January.

“Their decision will take effect from Feb 1, and they will be able to enjoy all the facilities currently entitled to pensioners, such as free medical treatment. Parents of civil servants, who have passed away and were single at that time, will also receive ex-gratia payments.

“These are some of the decisions that were made following a recent meeting by the Cabinet committee on appointments and salaries for civil servants,” he said in his speech before presenting the Public Sector Quality Awards at the Putrajaya International Convention Centre here yesterday.

Other decisions taken by the committee included upgrading the salary schemes for investigating officers under the Anti-Corruption Agency and for senior, low-ranking officers and constables in the police force, and a 20% increase in pay for maritime officers.

“All these decisions will be effective from Jan 1,” he said, adding that the Government would work out the actual amount of financial allocation involved in the upgrading and salary increase later.

Cuepacs welcomed the move to allow civil servants on the EPF scheme to opt for the pension scheme, said its secretary-general Ahmad Shah Mohamad Zain.

Last week, Cuepacs president Omar Osman complained that civil servants who opted for EPF scheme did not enjoy benefits such as free medical treatment in government hospitals and gratuity payments upon their retirement.
The Star

The reason for allowing civil servants to choose the EPF sccheme was to reduce the government's long term liability for future pension payments. Now that all the civil servants who chose to be in the EPF scheme are allowed to go back to the pension scheme, has there been any calculation on how much more the government need to pay for the pensions? There should be some figures given on the long term liabilities calculated by qualified actuaries.

The idea of allowing civil servants to opt for the EPF scheme has many advantages. It allows for freer movements of civil servants to the private sector. It also protects civil servants who might run foul of the law and get their pensions cancelled. The retirees also will get one lump sum payment on retirement and if the money is managed properly will result in a prosperous retirement.

The disadvantages of the EPF scheme could be easily overcome to allow the civil servants who choose the EPF scheme to enjoy similar benefits to those who choose the pension scheme. The same medical benefits and other related benefits given to those who choose the pension scheme could be given to those who choose the EPF scheme.

The amount of money withdrawn at retirement could be increased if the contribution of the government to EPF for each employee could be increased from the current 12% to 17.5%. This would not increase the government's expenses because, as it is, the government has to contribute an amount equal to 17.5% of each employee's salary to the Kumpulan Wang Amanah Pencen for every employee who choose the pension scheme.

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