Politicians' pension reform needed to ensure fairness

KUALA LUMPUR: Issues revolving around the government's pension scheme are expected to rise again during the 2027 Budget debate.

This is especially so as the government is trying to reform the system, which is expected to reach RM46.36 billion in payments by 2030 — a level that many economists deemed too costly to bear.

According to Sunway University economic professor Dr Yeah Kim Leng, reforming the pension system is important as the current framework is no longer sustainable on its current trajectory.

This is because the pension liability will balloon to a level that will likely constitute a major portion of operational expenditure.

Pensions' payment allocated under the 2026 Budget — RM42.8 billion — constituted roughly 12.3 per cent of total federal government revenue.

One of the aspects that the government has been looking at is the reform of the system for politicians.

This is because unlike most civil servants, many politicians in the country could enjoy multiple pensions, due to the different positions they perform.

Malaysia's separate pension framework allows politicians who have served in different federal and state positions to receive multiple pensions, and this presents a conundrum over how reforms can be made without taking away entitlements that are already granted under existing laws.

In June, Prime Minister Datuk Seri Anwar Ibrahim said the government is fine-tuning a new mechanism for the civil service retirement scheme, based on the contributory permanent appointment basis.

While it is important for the government to reform the civil service pension scheme, pundits are saying that reform of politician's pension schemes is needed in the spirit of fairness.

National Unity Advisory Council member and political analyst Professor Datuk Dr Awang Azman Awang Pawi suggested a single-pension principle to be gradually implemented, so that a reform of politicians' pension scheme does not take away earned rights of elected representatives.

He explains the fairest principle would be one individual, one publicly funded defined-benefit pension; while subsequent political service should instead be covered through a contributory scheme.

"Such reform would not deny the contributions of politicians or take away the rights they have already earned.

"Rather, it would ensure that public office does not become a means of accumulating several lifetime pensions, all ultimately funded by taxpayers," added Awang.

He said Malaysia could adopt a combination of approaches taken by Australia and Singapore.

The Australian government pension scheme now entails government contributions equivalent to 15.4 per cent of elected representatives' parliamentary salary into their chosen retirement fund.

Existing members' entitlements were preserved, but new members no longer automatically receive a lifetime political pension.

Meanwhile the Singapore government abolished pensions for all political office-holders and members of parliament who began their service on or after May 21, 2011.

Rights accrued before that date were preserved.

Anwar had previously called for politicians who hold several portfolios in the government to be "morally responsible" by choosing only one pension scheme, even though they are legally entitled to receive multiple pensions.

Senior fellow at the Nusantara Academy for Strategic Research Dr Azmi Hassan said Anwar's call for politicians to choose one pension only should be enforced as a rule.

"I think it should be a rule and if it's only on pension, they can take the highest one," he said.

He added that it would be fair for politicians to become contributors to the Employees Provident Fund.

"To enforce this, some laws at the federal and state level need to be changed and that's where the problem lies.

"However, this can be done because of the anti-party hopping law, which was introduced in 2022 and the state governments also adopted it.

"Maybe the same can be done for the pension scheme," he added.

HOW TO GET MULTIPLE PENSIONS?

The matter surrounding multiple pensions for politicians arise because their services can fall under different pension laws.

At the federal level, the Members of Parliament (Remuneration) Act 1980 provides a scheme for elected representatives.

A member of parliament (MP) needs to serve at least 36 months to qualify for a pension.

Under the Act, an MP receives a basic salary of RM16,000 a month.

On top of that, they are qualified for various allowances, such as RM400 per day for attending Parliament, RM2,500 a month of entertainment allowance, fixed travel allowance of RM1,500 per month and a monthly fuel allowance of RM1,500, among others.

On average, an MP can receive an average of RM25,700 per month solely from their salary and eligible allowances.

Meanwhile at the state level, state governments have separate laws for remuneration and pensions for their assemblymen, executive councillors and menteri besar (MB) or chief ministers.

The ssemblymen's remuneration ranges from RM6,000 to RM15,000, with each state legislative assembly having its own jurisdiction to establish the salaries and allowances.

They also qualify for several allowances such as healthcare and travel.

Additionally, state executive councillors also receive supplementary allocations while the chief minister or MB will earn significantly higher base salaries.

SKY IS THE LIMIT

Dr Awang Azman of the National Unity Advisory Council clarified that holding several ministerial portfolios does not necessarily entitle for pension in each portfolio.

Multiple pensions usually arise when an individual qualifies under several different service schemes.

For example, a civil servant, MP or minister who is also a state assemblyman, executive councillor or MB.

"Therefore, the real issue is not simply that politicians hold multiple portfolios, but the absence of an overarching limit on the total amount of public pensions an individual can receive," he told Business Times.

He said Anwar's voluntary call for politicians to choose one pension scheme can result in inconsistency among policymakers.

One person may give up an additional pension, while another continues to receive it because it is legally permissible.

"However, reform should not retrospectively cancel pension rights that have already been earned. Anwar himself has explained that existing rights are protected by law, and that changes would be more appropriately applied to new positions or appointments," said Awang.

Additionally, if only one pension scheme were allowed for one person, Awang said the effects would reflect in the rise of public trust and lower their perceptions of political privilege.

It would also simplify pension administration and control the government's long-term liabilities.

"The financial savings may not be particularly large compared with overall government expenditure, but the impact on the integrity, fairness and credibility of the government would be far more significant."