Welfare state, not pensions

  • Letters
  • Friday, 13 Sep 2019

THE government’s decision to consider changes to the pension scheme for civil servants is a timely and positive move.

The 1.6 million government employees and the more than half a million pensioners are a severe drain on the government’s resources and coffers. About 40% of the budget is allocated to these two categories, leaving the remainder 60% to fund increasing needs for development and other expenditure.

The pension scheme, which was started by the British, has long out-lived its purpose of attracting and retaining employees for the government. Today, the private sector attracts the best and most qualified.

The government now has to grapple with the legacy left by the British employment scheme: longevity of pensioners, hefty medical bills, derivative pensions for dependants, and security of tenure that has encouraged dereliction of duty, corruption and disciplinary problems. Additionally, there are other incentives such as bonuses, cheaper housing and pension increments yearly to keep pace with inflation that the government has to provide.

The pension scheme is basically discriminatory, as it is confined only to civil servants, leaving private sector employees to fend for themselves after retirement with EPF (Employees Provident Fund) savings, which may not be of much worth considering the ballooning cost of living.

Also, due to the high cost of the pension scheme, the government is not able to help lower income groups because of the lack of resources. The recent United Nations report on poverty has indicated the need for the government to relook its poverty eradication efforts and overcome poverty through more holistic methods, one of which could be the creation of a welfare state.

Increasing the retirement age again from 60 to 65 is not the right solution to address the financial situation of senior citizens who will also be suffering from various ailments at that age. Senior citizens should retire for good and the welfare state should take care of their needs.

The pension scheme has also led to a brain drain from critical government sectors such as medicine, as the government is unable to match salaries offered in private hospitals due to the high pension factor.

Needless to say, if the government does away with the pension, it has to come up with a scheme like the EPF, whereby contributions have to be paid by both the civil servants and the government, just as employees and employers in the private sector do.

Politicians, such as ministers, members of Parliament, the senate, state legislative assemblies and others, who draw high and multiple pensions might need to have a separate scheme for their retirement.

The government has to reduce the number of its employees drastically. In the present era of information technology and computerisation, outsourcing of tasks as well as contracting out government projects, there is no justification for this huge number of 1.6 million civil servants. A leaner workforce would be easier to deal with.

There must also be a more equitable method of recruiting government employees; for instance, the government could ensure that at least one person in a B40 (lower income group) family will be employed by the government or government-linked corporations to enable employment benefits to be spread out wider.

Abolishing the pension scheme will also enable private sector workers, especially professionals and those with suitable skills and expertise, to work for the government and vice versa, as is the case in the United States. Such cooperation, interaction and collaboration will be better for the country. Presently, under the pension scheme, age and other terms of employment prevent this sort of initiative.

There is also an impression that the salaries and pensions of the entire civil service are mainly contributed by taxation of the private sector, as the government sector is supposedly well known for its low productivity. This has created an imbalance in the economy and prevented private sector workers from getting more benefits. The government often claims that Malaysia’s progress is due to the interdependent relationship between the government and the corporate sector. But the country could progress even more if not for the red tape, abuse of power and corruption prevalent in the government sector.

The government needs to adopt a more egalitarian approach through a social security system that cares for all citizens post-retirement. The more preferential pension scheme and the less attractive EPF/Socso (Social Security Organisation) scheme have created a dualism and prevented the creation of a welfare state in Malaysia.

The merging of the EPF, Socso and KWAP (Retirement Fund Inc) can be the basis of a welfare state, and contributions by all workers must be mandatory to ensure all citizens can receive the benefits. Individuals who want to save more on their own or through their employers for their retirement are free to do so.

The government has to banish the thought of civil servants being a supportive vote bank, which is one of the reasons for the vast increase in the number of civil servants and the quantum of pensions being reviewed in almost every previous budget. The lowering of the voting age to 18 for the next election, when a few million youngsters will be part of the electorate, should erode this vote-bank dependence on civil servants.

Contributions by both private and government workers towards a common fund can not only be the basis of the welfare state but the resulting large fund can also be used for various development programmes to enhance economic progress.

The government pension scheme catering only to its workers is discriminatory and has to be abolished for the creation of a welfare state that will protect the well-being of all citizens.


Sg Buloh, Selangor
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