By A. Ragunathan

Retirees enjoying a tea session. The monthly pension must be sufficient to enable pensioners to retire in comfort and maintain a reasonable standard of living.

SOCIAL JUST: Retirees must get a fair share of what they gave during their working life, writes A. Ragunathan LET me express in unequivocal terms that pension rights are protected under Article 147 of the Federal Constitution and "Pension Rights" includes superannuation rights and provident rights. Article 160 (2) of the Constitution defines remuneration as follows: "Remuneration includes salary or wages, allowance, pension rights, free or subsidised transport and other privileges capable of being valued in money". Webster's New World Dictionary defines superannuation as derived from the word ''superannuate", which means, "discharged from service with a pension". The salary structure of public employees is based on the cardinal principle, "rate for the job". In determining the rate, the pension element or its cost is set aside during an employee's working lifespan so that when he retires, what he would have accumulated as "deferred pay" can be used to look after him in his old age. The employee is paid less as provision is made to look after him during retirement. The notional surplus is held back and paid out in the form of monthly pension on his retirement for life, and on death to his dependants. The monthly pension must be sufficient to enable him to retire in comfort and maintain a reasonable standard of living to which he is accustomed immediately before retirement, a principle that was adopted by the government. It is vital to maintain the purchasing power of pension.

However, under the Pensions Adjustment Act 1980, a novel principle was adopted in the pensions scheme. Consequently, the pension of an officer who retired would be adjusted whenever there was a revision of salary to current employees so that his pension would be of an amount that he would receive had he been deemed to have retired under the revised salary. Unfortunately, the determination of the "corresponding last drawn salary", under the old salary scale, to the next highest point of the revised salary scale has not provided the desired objective. The majority of pensioners, after paying their monthly instalments towards housing loan, education of their children and some without any source of income other than the pension, are living "destitute" as their real value of pension has been substantially reduced because of the rising cost of living. There is no effective mechanism to check the prices of essential goods. What was considered a luxury has become a necessity today. There is a need to have an effective mechanism to deal with the problem. It is pertinent to deal with the so-called alleged commitment of "full period service" in commuting pension by those with ill-informed knowledge. Former prime minister Tun Dr Mahathir Mohamad did not approve the "full period of service" but the government disbursed RM2.096 billion to the serving civil servants by modifying the salaries and housing allowances at the expense of the pensioners, who cried foul. Nevertheless, I wish to restate that the government had overlooked and should not ignore "the basic and fundamental principles for social justice to guarantee pensioners, a fair share, for what they gave during their working life". The alarm bells of huge cash to implement the "full period of service" was rung by Datuk Seri Anwar Ibrahim, then finance minister. The terrible error to revise the pension and gratuity formula that was offered to Congress of Unions of Employees in the Public and Private Services (Cuepacs) is contained in JPA (R) 81/16/4 klt 16(43) dated Jan 30, 1996, signed by the then director-general of public service Tan Sri Dr Mazalan Ahmad which states, among others: CHANGING the pension formula to an unlimited service period (sub-clause D); and, INCREASING the compensation payment rate from five to 7.5 per cent (sub-clause E). The amended formula referred to in sub-clause (d) states that the "full period of service" of employees will be taken into account in commuting the pension. In fact, the public service director-general had summoned the president and secretary-general of Cuepacs Datuk Mohd Mat Jid and Datuk Siva Subramaniam


respectively, and indicated to them the error and told them in particular that his head would roll and pleaded to them not to pursue the issue. As a compromise, the monies were disbursed to serving employees, leaving the pensioners in the wilderness after giving them false hope. The clean wage system integrated the element of cost of living and housing allowance. When the system was altered, the employees received 50 per cent of the total take-home pay. To guarantee today's pensioners a fair share of what they gave during their working life is a fundamental concern of social justice and to ensure the purchasing power of the pension is maintained. It is pertinent to note seriously what the International Labour Organisations (ILO) Report says. The survey, carried out by the ILO's Committee of Experts on the Application of Convention and Recommendations, covered all current state of implementation of three instruments: social security (minimum standards) convention (No. 102), the invalidity, old-age and survivors' benefit convention (No. 128) and recommendation (No. 131) in so far as they applied to old age benefits. The effectiveness of lowering the pensionable age as a means of reducing unemployment was questioned by the survey since there was no guarantee that the vacancies created by early retirement be filled by unemployed persons and not simply be rationalised out of existence. Neither was also raising the pensionable age for demographic reasons spared as it would have negative effects on the employment opportunities of young workers. Most countries have set up old-age benefit schemes, but there is a need to ensure the financial health of the schemes. Tomorrow: How salary structures and pension laws have changed The writer is a former president of the Congress of Unions of Employees in the Public and Civil Services New Straits Times,18 December 2013


By A. Ragunathan

CHANGING BENEFITS: Though pension schemes have improved, retirees still have grouses, writes A. Ragunathan OVER the years, salary structures and pension laws have changed significantly. Prior to the Suffian Report in July 1967, the pension factor was 1/600 and the amount of pension must not exceed two-thirds of the highest emolument drawn at any time in the course of his service. This means that a pension of half of the highest salary for 25 years service or twothirds of the highest salary after 331/2 years' service. Hence, an officer, upon retiring, may opt to commute a quarter of his pension. Thus, a retiring officer who is eligible for a pension of RM600 a month may commute up to RM150. As the commutation factor is 12.5, he is paid a lump sum gratuity of: RM150 x 12 x 12.5 > RM22,500. Thereafter, he will draw only three-quarters of his pension (RM450) until his death, even if he should live more than 12.5 years after retirement. Widows and orphans pensions Prior to the implementation of the Suffian Report, officers who are monogamous and those restricted by law to one wife and are pensionable and whose salary is not less than RM240 are required to contribute to the Widows & Orphans Pension Fund. Contribution commences from the date of appointment and continues for 35 years or until the age of 65, whichever is earlier. Pensions for widows and orphans are computed according to the annual rates of contribution and the ages of the contributors and his beneficiaries. As a result of vehement protests from Cuepacs, the Widows and Orphans Fund was abolished and the government introduced the Family Pension that covered every public employee. Under the Pensions Act and Regulations 1980, four types of benefits are provided for employees and their dependants:


SERVICE pension or retiring allowance; DERIVATIVE pension or derivative retiring allowance; INJURY allowance; and, DEPENDANTS' allowance. Computation of pensions and gratuities Pensions are calculated according to the formula: 1/600 x number of months service x last drawn salary. However, the maximum pension is limited to half of the last drawn salary. There is also provision in the Pensions Act to ensure that where an employee has 25 years' service, the pension payable shall not be less than RM180 per month or such amount as determined from time to time by notification in the Gazette following adjustment of salaries. Gratuities were calculated as follows: 1/20 x number of months reckonable service x last drawn salary. This is now amended to: 7.5 per cent x number of months reckonable service x last drawn salary. The Retiring Allowance and Gratuity formula are similar to the permanent employees. Without going into detail, there have been enhancements in retirement benefits. A derivative pension and a derivative gratuity, calculated in the same manner as a service gratuity, is payable to the widow or widower and children and dependant parents of the deceased employee. The amount of pension was reduced to 70 per cent and after 12.5 years from the date of retirement or death while in service is now given 100 per cent to the widow and widower. A widow or widower on remarriage continues to draw the deceased husband's or wife's pension. Notwithstanding the fact that public employees and pensioners get free treatment and hospitalisation in government hospitals and clinics, and that employees and pensioners have housing loan facilities at four per cent per annum, there are genuine grouses among the pensioners. The denial of "full period of service" in computing pension to at least 70 per cent with a ceiling that pensioners' should not get similar amount as serving officers nor above two-thirds of their last drawn salary is "fair" as legislators have enhanced their pension and gratuities, far superior to the Judges Remuneration Act. Therefore, giving 70 per cent for full period of service is justifiable.


The government has increased the retirement "age limit" to 60 years. But there is no track record of succession plan. It keeps on appointing pensioned people on contract basis and making them indispensable at the expense of aspiring officers and the net result is that they become frustrated and just end up marking time. Very senior civil servants, besides their basic salaries get various allowances such as housing, cost of living and other perks during service. But, upon retirement, they are merely paid their pensions on their basic salaries. How can they maintain their standard of living, to which they are accustomed, immediately before retirement? This pulverises the objective of the pension laws. These officers have become "bourgeois" (middle-class) to quote former prime minister Tun Dr Mahathir Mohamad. Last, but not least, the Pensioners Association must change its mindset. The Pensioners Association should make effective representation. We are a large electoral force that can play a role in determining the outcome of the next general election. Cuepacs leaders, meanwhile, must remember that they will be pensioners tomorrow. Fight for pensioners' rights as their pioneers did. The writer is a former president of the Congress of Unions of Employees in the Public and Civil Services New Straits Times,18 December 2013


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