Many happy returns?

Revamp is necessary, but going contract may not be the answer

We advise a studied caution. Money is just one variable of the pension permutation.

PENSION everywhere is undergoing change. Malaysia may be the exception. A RM27 billion pension payout annually means revamp ideas are aplenty. From going pension-less to reshaping it into some hybrid form. Reaction to this is equally rich: from cacophonous rejection to silent welcome. We advise a studied caution. Money is just one variable of the pension permutation. Recall the job sales pitch? The private sector was sold on big salaries while the civil service hawked on huge benefits. Pension was one of them. Compensation must enter the permutation, if the civil service is to remain attractive. A government cannot help but deliver.

Economist Dr Aimi Abdul Rashid suggests one such permutation. A “cap and contract” scheme, if you will. Taking into consideration the prevailing cost of living index, Aimi suggests capping pensions of most positions at RM5,000, with the rest of the jobs going contract. What the healthy ratio is, it is for the Malaysian Administrative Modernisation and Management Planning Unit (Mampu) to work out. Placing every position on contract is not the answer, he says. Renegotiation is in order. Much of the renegotiation will happen for positions with a pension of RM5,000 and above.

Professor Dr Yeah Kim Leng of Sunway University Business School shares Aimi’s view, but the two academics differ on details. Yeah says the government can keep the pension system, but it must manage the cost by either capping the monthly pension to a living wage across all categories or introduce a lower cap for the upper income categories. There is also an alternative in Yeah’s scheme of things. For the civil servants who find such a pension scheme unattractive, he suggests what he calls a “defined contribution system” like the Employees Provident Fund (EPF). If EPF is adopted, the salary must be competitive. Otherwise, it will lose out to the private sector.

There is also a case for extending the retirement age for a limited number of high-performing civil servants, such as doctors, English teachers, nurses, meteorological specialists and identified others. It is not out of place to put highly skilled ambulance drivers, soldiers and police officers in the same list. The focus should be productivity, not age. Mampu would do well to generate such a list. While it is at it, Mampu can generate a Productivity Quarterly for oversight purpose. In such a productive environment, heads of departments will be an anomaly. They must be retired off at 60.

The civil servant-to-people ratio needs working, too. Many argue that our civil service is bloated because it hosts some 1.7 million officers. If this number is used, we get one civil servant serving 19 Malaysians, when in Singapore the ratio is 1:74. But the Congress of Unions of Employees in the Public and Civil Services (Cuepacs) is adamant that we are comparing apples and oranges. And Cuepacs is right. Elsewhere in the developed world, armed forces, police, education and health personnel are not part of the civil service. Unburdened of this, our civil service will only be 500,000, resulting in a more palatable ratio: 1:64. Notwithstanding this, the government may want to approach recruitment with studied caution. This way, the civil service can have many happy returns.