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SAFEGUARDING PENSIONERS' RIGHTS

By A. Ragunathan

Retirees enjoying a tea session. The monthly pensionmust be sufficient to enablepensioners 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 workinglife, writes A. Ragunathan

LET me express in unequivocal terms that pensionrights are protected under Article

147 of the Federal Constitution and "PensionRights" includes superannuation rightsand provident rights.

Article 160 (2) of the Constitution defines remuneration as follows: "Remunerationincludes salary or wages, allowance, pension rights, free or subsidised transportand 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 pensionelement or its cost is set aside duringan employee's working lifespan so that when he retires, what he would haveaccumulated as "deferred pay" can be used to look after him in his old age. Theemployee 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 pensionon hisretirement for life, and on death to his dependants.

The monthly pension must be sufficient to enable him to retire in comfort andmaintain a reasonable standard of living to which he is accustomed immediatelybefore retirement, a principle that was adopted by the government. It is vital tomaintain the purchasing power of pension.

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However, under the Pensions Adjustment Act 1980, a novel principle was adoptedin the pensionsscheme. Consequently, the pensionof an officer who retired wouldbe adjusted whenever there was a revision of salary to current employees so that hispensionwould be of an amount that he would receive had he been deemed to haveretired under the revised salary.

Unfortunately, the determination of the "corresponding last drawn salary", under theold salary scale, to the next highest point of the revised salary scale has not providedthe desired objective.

The majority of pensioners, after paying their monthly instalments towards housingloan, education of their children and some without any source of income other thanthe pension, are living "destitute" as their real value of pension has beensubstantially reduced because of the rising cost of living. There is no effectivemechanism to check the prices of essential goods. What was considered a luxuryhas 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" incommuting pensionby those with ill-informed knowledge.

Former prime minister Tun Dr Mahathir Mohamad did not approve the "full period ofservice" but the government disbursed RM2.096 billion to the serving civil servantsby 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 notignore "the basic and fundamental principles for social justice to guaranteepensioners, 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 byDatuk Seri Anwar Ibrahim, then finance minister.

The terrible error to revise the pension and gratuity formula that was offered toCongress of Unions of Employees in the Public and Private Services (Cuepacs) iscontained in JPA (R) 81/16/4 klt 16(43) dated Jan 30, 1996, signed by the thendirector-general of public service Tan Sri Dr Mazalan Ahmad which states, among

others:

CHANGINGthe pensionformula to an unlimited service period (sub-clause D); and,

INCREASING the compensation payment rate from five to 7.5 per cent (sub-clauseE).

The amended formula referred to in sub-clause (d) states that the "full period ofservice" 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

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respectively, and indicated to them the error and told them in particular that his headwould roll and pleaded to them not to pursue the issue.

As a compromise, the monies were disbursed to serving employees, leaving thepensioners in the wilderness after giving them false hope.

The clean wage system integrated the element of cost of living and housingallowance. When the system was altered, the employees received 50 per cent of thetotal take-home pay.

To guarantee today's pensioners a fair share of what they gave during their workinglife is a fundamental concern of social justice and to ensure the purchasing power ofthe pensionis 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 ofimplementation of three instruments: social security (minimum standards) convention(No. 102), the invalidity, old-age and survivors' benefit convention (No. 128) andrecommendation (No. 131) in so far as they applied to old age benefits.

The effectiveness of lowering the pensionable age as a means of reducingunemployment was questioned by the survey since there was no guarantee that thevacancies created by early retirement be filled by unemployed persons and notsimply be rationalised out of existence.

Neither was also raising the pensionable age for demographic reasons spared as itwould 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 ensurethe financial health of the schemes.

Tomorrow: How salary structures and pensionlaws have changed

The writer is a former president of the Congress of Unions of Employees in thePublic and Civil Services

New Straits Times,18 December 2013

http://www.nst.com.my/opinion/columnist/safeguarding-pensioners-rights-

1.436260?localLinksEnabled=false#ixzz2nwCZTp6I

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PENSIONERS NEED FAIR REMUNERATION

By A. Ragunathan

CHANGING BENEFITS:Though pensionschemes have improved, retirees still havegrouses, 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 theamount of pensionmust not exceed two-thirds of the highest emolument drawn atany time in the course of his service.

This means that a pensionof half of the highest salary for 25 years service or two-thirds 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 sumgratuity 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 andthose restricted by law to one wife and are pensionableand whose salary is notless than RM240 are required to contribute to the Widows & Orphans PensionFund.

Contribution commences from the date of appointment and continues for 35 years oruntil the age of 65, whichever is earlier.

Pensions for widows and orphans are computed according to the annual rates ofcontribution and the ages of the contributors and his beneficiaries. As a result ofvehement protests from Cuepacs, the Widows and Orphans Fund was abolishedand the government introduced the Family Pension that covered every publicemployee.

Under the Pensions Act and Regulations 1980, four types of benefits are providedfor employees and their dependants:

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SERVICE pensionor retiring allowance;

DERIVATIVEpensionor derivative retiring allowance;

INJURYallowance; and,

DEPENDANTS'allowance.

Computation of pensions and gratuities

Pensions are calculated according to the formula: 1/600 x number of months servicex last drawn salary.

However, the maximum pensionis limited to half of the last drawn salary. There isalso provision in the Pensions Actto 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 followingadjustment of salaries.

Gratuities were calculated as follows: 1/20 x number of months reckonable service xlast drawn salary.

This is now amended to: 7.5 per cent x number of months reckonable service x lastdrawn salary.

The Retiring Allowance and Gratuity formula are similar to the permanent

employees.

Without going into detail, there have been enhancements in retirement benefits. Aderivative pension and a derivative gratuity, calculated in the same manner as aservice gratuity, is payable to the widow or widower and children and dependantparents of the deceased employee.

The amount of pensionwas reduced to 70 per cent and after 12.5 years from thedate of retirement or death while in service is now given 100 per cent to the widowand widower. A widow or widower on remarriage continues to draw the deceasedhusband's or wife's pension.

Notwithstanding the fact that public employees and pensionersget free treatmentand hospitalisation in government hospitals and clinics, and that employees andpensioners have housing loan facilities at four per cent per annum, there aregenuine grouses among the pensioners.

The denial of "full period of service" in computing pension to at least 70 per centwith a ceiling that pensioners' should not get similar amount as serving officers norabove two-thirds of their last drawn salary is "fair" as legislators have enhanced theirpension and gratuities, far superior to the Judges Remuneration Act. Therefore,giving 70 per cent for full period of service is justifiable.

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