KUALA LUMPUR (Feb 24): The government said it is exploring options to efficiently manage future pension obligations, including introducing defined contribution schemes.

Given that Malaysia is now an ageing nation by the United Nations definition, pension obligations are expected to continue to increase, according to the Finance Ministry's revised 2023 Economic and Fiscal Outlook report.

“Retirement charges are projected to remain stable at RM31.1 billion, representing 10.7% of the total operating expenditure.

“Of this, pension payments make up RM23.9 billion or 76.9% while the balance is for gratuity payments and cash award in lieu of accumulated leave,” it said.

Defined contribution schemes are occupational pension schemes where the employees’ own contributions and the employers’ contributions are both invested and the proceeds are used to buy a pension and/or other benefits at retirement.

The Employees Provident Fund is a type of defined contribution scheme for pension.

In the revised Budget 2023, the government’s operating expenditure is projected at RM289.1 billion. Civil service emoluments are one of the biggest items in the budget, and it is projected to increase to RM90.8 billion in 2023 from RM87.08 billion in 2022.

The increase was due to a special annual salary increment of RM100, on top of annual increments as well as absorption of contract officers to permanent positions, particularly in the health and education sectors.

For more Revised Economic Report 2022/2023 stories, click here.