KUALA LUMPUR (Sept 5): Deputy Finance Minister I Datuk Seri Ahmad Maslan said that the government is still studying the issue of a "rising" pension bill even though many quarters have urged urgent reform to the pension scheme for civil servants, given that the operating expenditure (opex) continues to rise at an unsustainable rate.

The burden to the opex notwithstanding, Ahmad Maslan said that the government remains committed to providing a pension for retirees.

“At the moment, the government is still studying this issue (rising pension bill), including the salaries of civil servants. The high amount [from pensions] is inevitable. Also, the number of pensioners is increasing every year,” he told media after officiating at a KWAP's Contributors Forum on Tuesday.

According to the minister, the government records an estimated 32,000 new retirees every year and spends RM31 billion on the pensions of more than 900,000 retirees, including statutory bodies and Armed Forces Fund (LTAT). 

As at end-December, a total of 768,947 retirees are pension recipients who come under Retirement Fund (Incorporated) (KWAP). 

In 2010, RM58.2 billion or 38.4% of the government's total opex of RM151.6 billion went towards the salaries and benefits of public sector workers.

That number grew to a whopping 52.3% or RM114.9 billion by 2021, and is expected to rise to RM115.2 billion in 2022 (40.5%) and RM119.8 billion in 2023 (44%), according to the Fiscal Outlook and Federal Government Revenue Estimates 2023. The federal government’s opex is funded entirely from government revenue.

Talks of reforming the pension system were raised after the Pakatan Harapan (PH) administration came into power in 2018, but the coalition government collapsed soon after in February 2020.

In September 2019, former prime minister Tun Dr Mahathir Mohamad said the government was looking at various mechanisms that it hoped would reduce the government’s burden, while not shortchanging civil servants and retirees.

Also at that time, former JPA director general Borhan Dolah had said that newly appointed civil servants may no longer be pensionable, possibly from 2020, but be given an improved contract scheme to reduce the financial burden on the government by up to RM5 billion a year.

KWAP, which is said to be on track to achieve its RM200 billion gross fund size by 2025, has achieved a total gross fund size of RM184.5 billion as at July 2023. 

According to Ahmad Maslan, about 40% of the funds are invested in fixed income, followed by public equity (40%), private equity (10%) and real estate (10%). 

Approximately 80% of the funds are invested in the country and 20% are international investments, said the minister. 

Since KWAP’s incorporation in March 2007 up to July this year, its cumulative contribution fund stood at about RM57.4 billion out of the total gross fund size of approximately RM184.5 billion. 

The contribution collection comprises RM15.3 billion from federal government contribution, RM25.8 billion from government shares and RM16.3 billion from employers contribution, which consist of statutory bodies, local authorities and secondment agencies. 

Currently, there are 482 contributing agencies in Malaysia, with 192 employers from statutory bodies, 151 from local authorities and 139 from secondment agencies, contributing for approximately 177,000 employees nationwide who are under the public sector pension scheme.