Retirees seek RCI on pension formula

A coalition of former government employees and armed forces veterans is requesting a royal commission of inquiry (RCI) to scrutinize the pension formula for 530,000 retirees who signed up prior to 2013. The group will deliver a memorandum to Parliament tomorrow advocating for the investigation. Their main concerns revolve around the public sector remuneration system (SSPA) 2024's pension calculation methodology, particularly how it aligns with the Pensions Adjustment Act 1980 and the Armed Forces Pensions Regulations 1982.

The inquiry would also probe the legal and policy foundations for the special pension appreciation component (PKKP) and the utilization of previous 2% pension adjustments. As an illustrative case, the group asserts that a RM2,000 pension could escalate to RM2,437.99 over 11 years due to 2% compounding, while a RM5,000 pension would grow to RM6,094.97, widening the gap between the two pensions by RM656.98, or 21.9%.

This disparity emerged from the persistent debate over pension adjustments since the 2% annual increase began in 2013. In 2023, the Federal Court ruled the 2013 amendments to the Pensions Adjustment Act unconstitutional, as they disadvantaged retirees. The government subsequently restored pensions for pre-2013 retirees to December 2012 levels, with the difference compensated through PKKP.

The government extended PKKP payments. The SSPA, effective since Dec 1, 2024, ties pension adjustments to revised salary structures. The first phase, implemented in December 2024, granted an 8% adjustment for high-earning groups, while a subsequent phase in January 2026 awaits. The group contends the SSPA pension adjustment is based on the 2024 equivalent final salary, employing a formula involving one-six-hundredth of the equivalent final salary multiplied by years of service, plus applicable PKKP.

Armed forces veterans separately challenged the government's decision not to extend a 2013 salary reform to pre-January 1 retirees in June 2025. The Court of Appeal dismissed the claim, finding no discrimination or constitutional violation. However, a High Court order mandating pension adjustments and a RM1.7 billion arrears payment to 531,976 retirees was overturned by the Court of Appeal in March.

Despite these rulings, the RCI proponents argue an exhaustive examination of the SSPA 2024 pension formula's history, data, documents, legal basis, and administrative processes is essential. They emphasize the inquiry's purpose is not to replace judicial proceedings but to offer a broader fact-finding mechanism involving government entities, current and former officials, experts, and stakeholders.

The ultimate goal, according to the group, is to secure a thorough explanation of the SSPA 2024 pension formula and determine a viable solution for affected retirees.