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NEW RETIREMENT AND PENSION POLICY


Speech by Y.A.B Dato’ Seri Abdullah bin Haji Ahmad Badawi
Prime Minister of Malaysia

at the Public Sector Workers' Day Gathering 2008
10 May 2008
at the Putrajaya International Convention Centre

 

1.
  1. “…the Government has decided to increase the age of compulsory retirement for civil
    servants from 56 to 58
    years old effective from 1 July 2008.”

  2. “Regarding derivative pension, one of the current conditions is its amount will be reduced to 70% after 12˝ years from the date of retirement or death of the officer while in service. Based on the detailed research, this condition has brought about to financial burden on the pension recipients with young children after the death of the officer or pensioner. To reduce this burden, the government has agreed to abolish this condition (effective from 1 January 2009) while derivative pension will be paid at the rate of 100% throughout the period of eligibility.

  3. “…the Government has agreed to compute pension based on formula that takes into account a period of to a maximum of 30 years of service effective from 1 January 2009. Prior to this, pension was computed a maximum of service up to 25 years. The new policy also includes payment of retirement and death in service before the date coming into effect. However, the amount of the pension recomputation will be paid from 1 January 2009 without no backdated effect.”; and

  4. “The mother or father of an officer who dies without leaving any other next-of-kin will be given a lump sum ex-gratia payment instead of derivative pensions effective 1 January 2009.

2.

Early in the year, the Government had agreed to eliminate the requirement of residency in Malaysia as a condition for granting pension adjustment and the payment of derivative pension after 12 ˝ years and pension adjustment beyond the death of retirement or death in service effective from January 2008.

   
 
 
EXPLANATION
 
I.

The extention of the age of compulsory retirement for civil servants from 56 to 58 years.

·    The extension is not automatic but is based on the option made by the individuals who are in the service before the effective date. For civil servants appointed on and after 1 July 2008 the new compulsory retirement age will be included as a conditions of service.

·    The option to serve to the age of 58 years will also be offered to those who chose to retire at the age of 55 years based on Service Circular No.3 year of 2001.

·    The option also will be offered to the officers who are under Employees Provident Fund Scheme.

·    An officer who is supposed to retire at the age of 56 years on 1 July 2008 (i.e. his birthdate being 1 July 1952) will be given the option to serve until 58 years (i.e. to retire on 1 July 2010). This is because on 1 July 2008 (i.e. the effective date of the new policy of compulsory retirement at 58 years), those who have not attained the age of 58 years on that date (including those who attain 56 years on that date) can continue their service if they chose to retire at the age of 58 years. However, those who attain the age of 56 on 30 June 2008 or before (i.e. his birthdate being 30 June 1952 or before) WILL NOT be given this option and will retire at the age of 56 years because he is not covered under this new policy which only come into effect on 1 July 2008.

·    Any officer who is supposed retire on reaching the age of 56 on or after 1 July 2008 and has received his pension card and Retirement Benefit Approval will have the payment benefit to him deferred until Pension Division, Public Service Department receive notice in writing of his option of compulsory retirement age.

·    The offer of employment on contract terms after retirement, of those who do not choose compulsory retirement age of 58 years, depends on the discretion of the respective appointing authorities.

 

II.

Computation of pension to be based to the maximum of 30 years of reckonable service.

  • The computation formula covers of pension for the service for those who retire or die in service
    before 1 July 2008 with new amount of pension being paid only from 1 January 2008..

  • This new policy (obviously) is not applicable to officers whose reckonable service is less than 300 months.

Example 1

An officer who has 365 months of reckonable service with last drawn salary of is RM2,000.00

Upon on 31.12.2008

Retire on 1.12.2009

300 months/600 x RM2,000.00

= RM1,000.00 per months

360 months /600 x RM2,000.00

= RM1,200.00 per months

(Notes) Officer who has 300 months or more of reckonable service will get an additional 20% compared with the computation of pension according to the previous policy.

Example 2

An officer whom years of reckonable service are 322 months, and his last drawn salary is RM2,000

Upon on 31.12.2008

Retire on 1.12.2009

300 months/600 x RM2,000.00

= RM966.66 per months

322 months/600 x RM,2000.00

= RM966.66 per months

 

III.

The derivative pension to be paid 100 per cent, effective from Jan 1, 2009

     Example 3

Officer A has 290 months of reckonable service with a corresponding of last drawn salary of RM 2,000 on 1 July 2007. Now, after 17 years of his death, what is the new amount of derivative pension entitled by the widow on 1 January 2009?

Derivative pension before reduced to 70%

Derivative pension after 12˝ years (reduced to 70%)

Derivative pension (without reduction) being

1 January 2009

290 months/600 x RM2,000.00

= RM966.66 per month

290 months/600 x RM2,000.00 x 70%

= RM676.66 per month

290 months/600 x RM2,000.00 x 100%

= RM966.66 per month

Example 4

(Notes) the effect of the new policy of computing pension according to 30 years of maximum reckonable service and payment of 100% derivative pension forever.

Officer B has with 375 months of reckonable service with a corresponding and his last drawn salary of RM 2,000 on 1 July 2007 is. Now, after 17 years of his death, what is the new amount of derivative pension entitled by the widow on 1 January 2009?

Derivative pension before reduced to 70%

Derivative pension after 12˝ years (reduced to 70%)

Derivative pension (without reduction) being

1 January 2009

300 months/600 x RM2,000.00

= RM1000.00 per month

300 months/600 x RM2,000.00 x 70%

= RM700.00 per month

360 months/600 x RM2,000.00 x 100%

= RM1200.00 per month

 

IV.

“The mother or father of an officer who dies without leaving any other next-of-kin will be given a lump sum ex-gratia payment instead of derivative pensions effective 1 January 2009.

  • A lump sum ex-gratia payment will be given either to the mother or father of an officer who dies in service without leaving any other next-of-kin.
  • The computation formula of ex-gratia payment is being discussed by Public Service Department and the Ministry of Finance.