Court decision on pensions exposes a ‘time bomb’ | Free Malaysia Today (FMT)


As hundreds of thousands of pensioners are affected by the court decision, the total payout may run into tens of billions of ringgit, and the current monthly pension bill of RM700 million could probably soar to a billion in no time.

K. Parkaran – January 31, 2022 8:00 AM

A recent court decision has saddled the government with a huge pensions problem that could cost billions of ringgit in backdated claims, if implemented.

The nation’s annual pension bill, which has been growing every year, could, some day, become a burden too heavy for taxpayers to bear.

This is a result of a Court of Appeal ruling on Jan 13 which declared as unconstitutional a government amendment to the way the pensions scheme is adjusted from time to time.

From 2013, a new scheme was introduced based on a flat rate of a 2% annual increment. Those who retired before 2013 received pensions based on the salary grade of the time.

Those who retired after 2013 received a different amount, even for the same grade.In some cases, older retirees receive an amount that is half of what post-2013 pensioners get.

The government has not filed a notice of appeal to the court decision yet, but my guess is that it will, as it is a serious problem that must be tackled.

A group of retired judges and their dependents have already sued, saying their pensions should be based on current salaries of serving judges, and a group of former senior military officers are seeking similar redress for those who retired before 2013.

If the government does not appeal and the decision is implemented, the cost implication is mind boggling.

Nearly 50% of the government’s annual expenditure goes towards emoluments of civil servants and towards pensions. The amount has nearly doubled over 10 years.

In other words, half of Malaysia’s taxpayers are working hard to help the civil servants keep their jobs and to pay pensioners. The scary bit about this is that the figure is growing every year.

Pensions alone take up about 12% of the total federal budget for this year, up from only 6.9% ten years ago.

There are a total of 700,000 government retirees nationwide, including the police and armed forces

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