At this stage, we are not sure whether the contract scheme, as proposed, will affect security of tenure.
Rightly, all employment, whether contractual or permanent, should provide security of tenure unless employees violate their terms of employment. However, an EPF scheme would probably provide more flexibility since it allows employees to leave employment without losing their pension.
By right, there shouldn’t be much of a difference between a pension scheme and simply paying EPF. Employees on a pension scheme do not receive monthly EPF contributions from their employers. It is the responsibility of the employers (in the case of the civil service, the government) to earmark a certain amount to cater to the retirement needs of their employees when the time comes.
The problem with most governments, Malaysia’s included, is “unfunded pension liability”. They put their employees on a pension scheme but they do not provide periodic allocations to cater to their employees’ eventual retirement.
I remember KWAP (Retirement Fund Inc) was supposed to play this role – ie, periodically receive allocations from the government, and manage, invest, and grow the fund so that future pension payments are self-generating and sustainable.
The money in KWAP should be jealously guarded against pilferage and abuse. But we know by now the probable “history” of KWAP, and how money might have been conveniently siphoned off to finance fiscal deficits and dubious projects.
I think the government and the Public Service Department (PSD) must get their bearings right. A pension scheme is not more expensive than an EPF scheme unless the quantum of benefits is increased. Both systems require disciplined allocation and management by the government, KWAP and the PSD.
Governments have problems paying pensions because (i) it did not sufficiently provide for it; (ii) it abused the money in the pension fund; (iii) it increased the number of civil servants and their salaries indiscriminately, and (iv) it pays political retirees too lucratively.Politicians, I feel, get too much and too many pensions for doing very little.
A pension scheme per se is not the issue. It can’t be more or less expensive than EPF.
What we need are periodic allocations, proper management, and greater control of the size of the civil service and pension entitlements of politicians.
Know the cause to solve the problem, otherwise it is merely addressing symptoms.
What do you think of this article?