Baffled over void pension Act

LETTERS: The Federal Court's judgment in June that the Pensions Adjustment (Amendment) Act 2013 is null and void has elicited various reactions, including from the Public Service Department (PSD).

The PSD is responsible for the remuneration and superannuation benefits in the civil service.

But its proposed implementation of the court's ruling, as posted in its portal, has caused confusion and apprehension among pensioners.

An explanation is necessary to put the issue into perspective.

The quantum of a pension takes into account employees' last drawn salary (excluding allowances) and his or her years of service, subject to a cap.

Under the Pensions Adjustment Act 1980, employees' pension has to be recomputed and readjusted whenever there is a revision of their former salary grade.

But following the enactment of the Pensions Adjustment (Amendment) Act 2013, the new policy of a two per cent annual increment came into effect on Jan 1, 2013, replacing the decades-old principle of pensions being readjusted to prevailing salaries.

Consequently, all pensioners, new and old, from that date onwards were to be governed by the new policy.

But retirees found, to their dismay, that colleagues who retired on or after Jan 1, 2013, have been getting higher pensions despite having identical service grades and the same years of service.

The PSD tacitly acknowledged, in its posting of the court's ruling, the existence of these distinct groups of pensioners, depending on whether they retired before or on and after 2013.

Such pension discrepancies would not have occurred but for some changes made in 2013 and thereafter to improve civil service salary schemes.

An improved pay means a better pension as employees' last drawn salary is also a crucial determinant in the pension formula.

Such changes would yet fall within the ambit of the pension adjustment principle if it had not been revoked.

It is precisely due to this pension inequity and the revocation of the readjustment principle that prompted 57 pensioners to challenge the legality of the Pensions Adjustment (Amendment) Act 2013, with the two per cent policy, as being contrary to Article 147 of the Constitution.

This article reads: "The law applicable to any pension shall be that in force on the relevant date or any later date not less favourable."

The court ruled in favour of the 57 pensioners, declaring the act as null and void, resurrecting the decades-old principle of readjusting pensions to prevailing salaries.

It is, therefore, puzzling to read that the PSD intends to implement the court's ruling, as explained in its portal, by adhering to the demarcation line of 2013, whereby civil servants who retired before 2013 would revert to December 2012 pension amounts, while those who retired from 2013 onwards would have their pension payments reverted to the original amount at the time of their retirement.

Surely the court's ruling has removed any demarcation between the pensioners.

Instead, it would have the coalescing effect of bridging the pension gap between them after pensioners who retired before 2013 have their pensions readjusted to an amount that is at least comparable to that of their peers who retired subsequently.

Otherwise, the legal battle won by the 57 pensioners in seeking pension parity would turn out to be nothing but a pyrrhic one.

Unfortunately, pensioners who retired on or after Jan 1, 2013, and are on higher pensions are the casualties in the legal crossfire by losing their two per cent annual increment as would all other pensioners.

But their setback is temporary as pensioners would now have their pensions readjusted with the next and subsequent revision of salaries.

This issue has affected pensioners in the armed forces and other government agencies.


Kuala Lumpur

The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times

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