Retirees seek RCI on pension formula

A group of public sector retirees and armed forces veterans will submit a memorandum to Parliament tomorrow seeking a royal commission of inquiry (RCI) to investigate the pension calculation formula under the Public Service Remuneration System (SSPA) 2024.

The group wants the RCI to examine the calculation of pensions for those who retired before 2013, including the use of the 2012 equivalent final salary and the effects of the former 2% annual pension adjustment mechanism.

According to the group’s media kit, the issue affects about 530,000 public sector retirees and armed forces veterans.

The group wants the RCI to determine whether the SSPA 2024 pension calculation method is consistent with the Pensions Adjustment Act 1980 and the Armed Forces Pensions Regulations 1982.

It also wants the inquiry to examine the legal and policy basis for the special appreciation to pensioners (PKKP) component and the use of amounts arising from the previous 2% mechanism.

It cited an example in its presentation showing the effect of compounding at 2% over 11 years, saying a RM2,000 pension would rise to RM2,437.99 while a RM5,000 pension would rise to RM6,094.97.

It said this would widen the gap between the two pensions from RM3,000 to RM3,656.98 – an increase of RM656.98 or 21.9%.

The proposal comes amid a long-running dispute over pension adjustments following the introduction of the 2% annual increase in 2013.

In 2023, the Federal Court upheld a ruling that the 2013 amendments to the Pensions Adjustment Act were unconstitutional and invalid, finding that they placed retirees in a less favourable position.

The old system linked pension adjustments to salary revisions for serving civil servants, while the 2013 amendments introduced a flat 2% annual increase.

The government subsequently restored pension payments for retirees who retired before 2013 to their December 2012 amounts, while the difference between the original and current pension was paid as PKKP. The government later extended the PKKP payments.

The SSPA came into force on Dec 1, 2024, with pension adjustments linked to the revised salary structure. The first phase involved an 8% adjustment for implementing and management and professional groups whose final salary exceeded RM3,000, or RM240 for those below RM3,000, followed by a second phase in January 2026.

The government said the SSPA pension adjustment for retirees was based on the equivalent final salary for 2024, with the pension calculated using the formula of one-600th of the equivalent final salary multiplied by years of service, plus PKKP where applicable.

The issue was also litigated separately by armed forces veterans.

In June 2025, the Court of Appeal ruled against 50 armed forces veterans who challenged the government’s decision not to extend a 2013 salary restructuring to veterans who retired before Jan 1 that year. The court found there was no discrimination or constitutional breach.

In March, meanwhile, the Court of Appeal overturned a High Court order requiring the government to adjust pensions and pay an estimated RM1.7 billion in arrears to 531,976 retirees.

Despite the court rulings, the group seeking the RCI said a wider investigation was necessary to examine the history, data, documents, legal basis and administrative process behind the SSPA 2024 formula.

It said the RCI was not intended to replace or interfere with the judicial process, but would provide a broader fact-finding mechanism involving government ministries and agencies, current and former officials, experts and other stakeholders.

The group plans to seek support from MPs and have the issue raised in Parliament before seeking the government’s consideration for the RCI.

It said the ultimate aim was to obtain a comprehensive explanation of the SSPA 2024 pension formula and identify an appropriate and sustainable solution for affected retirees.

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