New civil servants won't lose out if EPF replaces pensions - minister

The government's proposal to introduce Employee Provident Fund (EPF) contributions for fresh civil service hires, instead of pension schemes, does not mean new civil servants will lose out, said Finance Minister II Amir Hamzah Azizan.

He said the details will likely be known by year's end as the Public Services Department is still studying the matter.

"I believe this is a good proposal by the government not only fiscally but it also gives options to the civil service.

"If they work with the government, they can get about the same returns in terms of interests; it will not be any less than what they are getting now (under a pension scheme).

"So, they will not lose out on anything. If they move elsewhere (to other employment), the contributions will follow them to their new workplace, so this gives them options," he told reporters at Bank Negara Malaysia in Kuala Lumpur, today.

At present, a civil servant must serve for 30 years to access the full pension of 60 percent of their last drawn salary.

Civil servants must work at least 10 years to access the minimum amount of pension.

READ MORE: How much pensions can MPs receive?

Ballooning pension bill

However, Amir admitted that more needs to be done to explain the proposal to replace the civil service pension scheme with EPF contributions.

Earlier there were allegations that the shift would hurt Malays, who make up the largest proportion of civil servants.

The government had said that the move was being explored to control the ballooning pension bill.

Pension payments for more than 900,000 retired civil servants are expected to cost more than RM32 billion this year and can surge to RM120 billion by 2040 if nothing is changed.

Earlier this year, Deputy Prime Minister Ahmad Zahid Hamidi said new civil servants would be hired on a contract basis until the cabinet approves a policy on permanent hires without pensions.

However, this move does not affect existing civil servants, while new hires will get EPF contributions.

Amir said the PSD is still finalising details on the plan and more information will be provided by the end of the year.

"We have to wait, it will be released after it has been detailed by the PSD and agreed by all parties," he said.

It was earlier reported that the PSD study would conclude in the second quarter of this year.

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