PETALING JAYA: A hybrid scheme, which combines the Employees Provident Fund (EPF) and the civil service pension scheme, would be the way to go, says an economic expert.
Prof Datuk Dr Nik Maheran Nik Muhammad (pic), who is also Universiti Malaysia Kelantan’s deputy vice-chancellor, said by adopting such a hybrid system, the government can offer retirees the security of a pension while maintaining the flexibility and growth potential of the EPF, benefiting both parties in the long run.
“By implementing a system that combines the EPF with a basic pension, employees can continue contributing to the fund, while making mandatory contributions to a government-managed pension scheme,” she explained when contacted yesterday.
“This would ensure a steady income during retirement, while still allowing for the flexibility and growth potential of the EPF.”
Yesterday, senior director of economics and finance in the Prime Minister’s Office Nurhisham Hussein said the government has no plans to introduce a universal pension scheme because of the costs involved.
Nurhisham told a BBC Radio 4 show that the country’s retirement system has significant gaps and that many Malaysians rely on their children for financial support in their retirement.
The former EPF chief strategy officer noted that as family sizes in Malaysia shrink, there are fewer working adults supporting those who have retired.
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“We still need to get public support for it and a full-scale national pension is off the cards,” he added.
On Tuesday, Finance Minister II Datuk Seri Amir Hamzah Azizan said details of the new civil service pension scheme were expected to be released by the end of the year.
Prof Nik Maheran further said that for existing employees, especially those closer to retirement, a gradual transition could be introduced, allowing them to opt into the hybrid scheme or stay with their current EPF-only or pension-only scheme.
Another economist, Dr Geoffrey Williams, the founder and director of Williams Business Consultancy, said that civil service pensions had cost an estimated RM32.4bil or 10.6% of government operational spending in 2023. This is projected to rise to over RM46bil by 2030.
“This is a huge burden. It means millions of Malaysians are paying for civil service pensions when they have no pension of their own,” he said.
Williams also said that switching to the EPF for new hires into the civil service will not solve this problem quickly because the existing civil servants will remain on the old scheme for decades.
“For new hires, the EPF option offers more flexibility, especially since the employees can take their retirement savings with them if they move out of the civil service.
“They also have voluntary top-ups and other benefits associated with EPF accounts,” he said.
On Jan 24, Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi confirmed that the pensions of current civil servants would remain “permanent and pensionable”.
The new policy on contributing to the EPF will apply only to future employees, with further details to be announced later by the Public Service Department director-general.
