Civil Servants Retirement Scheme

Civil servants may have to contribute to their own retirement income in the future, the head of the agency which has taken over the government’s pension operation said recently. In an interview with TheSun, Retirement Fund Inc (KWAP) CEO Wan Kamaruzaman Wan Ahmad said it could be similar to how private sector employees contribute to the Employees Provident Fund (EPF).

“For all you know they (the government) may decide that this (current) scheme is unsustainable, we may move to the EPF (type) scheme,” Wan Kamaruzaman was quoted as saying. The current pension scheme for civil servants is called “defined benefit”, wherein only the government and other employers of civil servants, such as statutory bodies and local authorities, will contribute.
With this scheme, pensioners are assured half their last drawn salary for life after they retire at age 60. A spouse will receive the same in the event of a pensioner’s death.

Wan Kamaruzaman said the EPF-style contribution scheme, called “defined contribution” may also enable the government to gradually reduce its burden of the ever-growing pension liabilities. The current scheme sees the government placed with a liability amounting to some RM300 billion.

“Let’s say in future, five years down the road, new civil servants will be on defined contribution, so KWAP will be managing both a defined benefit and a defined contribution scheme, that is how I see it go. Because this is just too good to last,” Wan Kamaruzaman said, according to the local English daily.

It was previously reported that Prime Minister Najib Razak had also acknowledged that the current scheme is not sustainable for the long term, thereby suggesting that an alternative scheme may be in the works.

“With the current civil service strength numbering 1.6 million, moving to a ‘defined contribution’ model will take strong political will,” Kamaruzaman said.

KWAP runs the entire pension operations for the government and all other employers of civil servants, after having absorbed the entire public pension department that had previously been under the Public Services Department. All 250 employees of the department are now based at KWAP’s office in Cyberjaya.

Since November 2015, the company has also taken over from the government’s monthly operation of paying out pensions to the 700,000 retirees. This was made possible following an amendment made to the Retirement Fund Act 2007 early last year.


However, the funds for such disbursement still come from the government, while KWAP is paid an administration fee.