KUALA LUMPUR: Civil servants may stand to unlock a bumper retirement windfall, with a back-of-the-envelope calculation by one Muhammad Izwan Chamburi pointing towards a savings pool of RM1.36 million through the new Employees Provident Fund (EPF) scheme.
The estimated RM1.36 million is not a stroke of luck but a result of meticulous calculations made over a civil servant's 35-year career.
Key assumptions and calculations underpin this financial breakthrough include EPF dividend rate of 5.0 per cent per year coupled with an annual salary increase of RM225 per year.
Muhammad Izwan Chamburi, in his shared estimation posted on Facebook, outlines that achieving the RM1.36 million savings pool involves refraining from withdrawals throughout the entire 35-year service period and opting for the EPF annuity scheme without a lump sum withdrawal.
"At the age of 60, a civil servant following these assumptions would accumulate a substantial savings pool of RM1.36 million.
"This significant sum enables the retiree to withdraw an annuity of RM10,000 per month for an impressive 15-year period.
"Remarkably, this financial achievement is realised even if the civil servant begins their career at the age of 25 with a modest monthly salary of RM2,700," said Muhammad Izwan.
The government on Wednesday announced a new civil service hiring policy, which will include a new pension scheme.
Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi said under the scheme, new hires in the civil service will contribute to retirement schemes like the EPF and Social Security Organisation (Perkeso).
Ahmad Zahid said the new civil service hiring policy will reduce the government's financial liability.
He said the government's liability for pension payments will reach RM120 billion in 2040 if the existing policy for the hiring for permanent positions in the civil service continued.
"As mentioned earlier, by 2040, the pension liabilities that the government would have to bear, in the absence of this new system, will amount to RM120 billion.
"This would impose a long-term burden on the government, particularly on the Retirement Fund Inc (KWAP), which may face challenges in making investments for dividends or the expected return on investment, especially if its investment portfolio is substantial," he added.