IDEAS home Printed from https://ideas.repec.org/a/tpr/asiaec/v18y2019i1p155-178.html
   My bibliography  Save this article

The Long-Term Financial Sustainability of the Civil Service Pension Scheme in Malaysia

Author

Listed:
  • Sheila Rose Darmaraj

    (School of Business INTI International College Penang 11900, Penang, Malaysia and School of Social Sciences Universiti Sains Malaysia 11800 Minden, Penang, Malaysia)

  • Suresh Narayanan

    (School of Social Sciences Universiti Sains Malaysia 11800 Minden, Penang, Malaysia)

Abstract

The civil service pension scheme (CSPS) in Malaysia is a defined benefit (DB), non-contributory system directly funded from the budget. An aging population, rising life expectancy, and ballooning pension payments underscore the need for reform. An annual pension deficit model was used to estimate the pension deficit over a period of 75 years under eight scenarios that compare the current scheme with changes in the pension deficit when three policy variables—retirement age, contribution rate, and replacement rate—are manipulated. We found the current scheme will not be financially sustainable. By increasing the retirement age, introducing employee contributions, and reducing the replacement rate, it is possible to delay the emergence of deficits and lengthen the period of sustainability of the scheme. However, a radical makeover is necessary to be fully sustainable and this might not be politically feasible.

Suggested Citation

  • Sheila Rose Darmaraj & Suresh Narayanan, 2019. "The Long-Term Financial Sustainability of the Civil Service Pension Scheme in Malaysia," Asian Economic Papers, MIT Press, vol. 18(1), pages 155-178, Winter/Sp.
    • Handle: RePEc:tpr:asiaec:v:18:y:2019:i:1:p:155-178
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/asep_a_00670
    Download Restriction: Access to PDF is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Donghyun Park & Gemma B. Estrada, 2012. "Developing Asia’s Pension Systems and Old-Age Income Support," Governance Working Papers 23319, East Asian Bureau of Economic Research.
    2. Franz Rothenbacher, 2004. "The Welfare State of the Civil (or Public) Servants in Europe: A Comparison of the Pension Systems for Civil (or Public) Servants in France, Great Britain, and Germany," MZES Working Papers 74, MZES.
    3. Charles M Becker & Sergey Paltsev, 2001. "Macro-Experimental Economics in the Kyrgyz Republic: Social Security Sustainability and Pension Reform," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 43(3), pages 1-34, September.
    4. Park, Donghyun & Estrada, Gemma, 2012. "Developing Asia’s Pension Systems and Old-Age Income Support," ADBI Working Papers 358, Asian Development Bank Institute.
    5. Yi Zeng, 2011. "Effects of Demographic and Retirement‐Age Policies on Future Pension Deficits, with an Application to China," Population and Development Review, The Population Council, Inc., vol. 37(3), pages 553-569, September.
    6. Sane, Renuka & Shah, Ajay, 2011. "Civil Service and Military Pensions in India," Working Papers 11/91, National Institute of Public Finance and Policy.
    7. Srichander Ramaswamy, 2012. "The sustainability of pension schemes," BIS Working Papers 368, Bank for International Settlements.
    8. Palacios, Robert, 2006. "Civil-service pension schemes around the world," MPRA Paper 14796, University Library of Munich, Germany.
    9. Nicholas Barr & Peter Diamond, 2009. "Reforming pensions: Principles, analytical errors and policy directions," International Social Security Review, John Wiley & Sons, vol. 62(2), pages 5-29, April.
    10. Sakamoto, Junichi, 2011. "Civil Service Pension Arrangements in Japan," PIE/CIS Discussion Paper 500, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    11. James Banks & Carl Emmerson, 2000. "Public and private pension spending: principles, practice and the need for reform," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 1-63, March.
    12. Holzmann, Robert & Palacios, Robert & Zviniene, Asta, 2004. "Implicit pension debt: issues, measurement and scope in international perspective," Social Protection Discussion Papers and Notes 30153, The World Bank.
    13. Holzmann, Robert, 2014. "Old-age financial protection in Malaysia : challenges and options," Social Protection Discussion Papers and Notes 92725, The World Bank.
    14. Robert Holzmann & Richard Hinz, 2005. "Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform," World Bank Publications - Books, The World Bank Group, number 7336.
    15. Giuseppe Carone & Per Eckefeldt & Luigi Giamboni & Veli Laine & Stéphanie Pamies Sumner, 2016. "Pension Reforms in the EU since the Early 2000's: Achievements and Challenges Ahead," European Economy - Discussion Papers 042, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Robalino, 2005. "Pensions in the Middle East and North Africa: Time for Change," World Bank Publications - Books, The World Bank Group, number 7427.
    2. Klaus Kaier & Christoph Müller, 2015. "New figures on unfunded public pension entitlements across Europe: concept, results and applications," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(4), pages 865-895, November.
    3. Eich, Frank, 2009. "Public sector pensions: Rationale and international experiences," EconStor Preprints 54560, ZBW - Leibniz Information Centre for Economics.
    4. Can Verberi & Muhittin Kaplan, 2024. "An Evaluation of the Impact of the Pension System on Income Inequality: USA, UK, Netherlands, Italy and Türkiye," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 174(3), pages 905-931, September.
    5. Rafal Chomik & John Piggott, 2015. "Population Ageing and Social Security in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 10(2), pages 199-222, July.
    6. Alexander M. Danzer, 2013. "Benefit Generosity and the Income Effect on Labour Supply: Quasi‐Experimental Evidence," Economic Journal, Royal Economic Society, vol. 123, pages 1059-1084, September.
    7. repec:pid:wpaper:2010:1 is not listed on IDEAS
    8. Rashid Amjad & Musleh ud Din, 2010. "Economic and Social Impact of Global Financial Crisis: Implications for Macroeconomic and Development Policies in South Asia," PIDE Monograph Series 2010:1, Pakistan Institute of Development Economics.
    9. Ponds, E.H.M. & Severinson, C. & Yermo, J., 2012. "Implicit debt in public sector plans : An international comparison," Other publications TiSEM 8263bb65-8b50-4890-9252-0, Tilburg University, School of Economics and Management.
    10. Díaz-Saavedra, Julián, 2020. "The fiscal and welfare consequences of the price indexation of Spanish pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(2), pages 163-184, April.
    11. Qing Zhao & Haijie Mi, 2019. "Evaluation on the Sustainability of Urban Public Pension System in China," Sustainability, MDPI, vol. 11(5), pages 1-20, March.
    12. Bogomolova, Tatiana & Impavido, Gregorio & Pallares-Miralles, Montserrat, 2006. "An assessment of reform options for the public service pension fund in Uganda," Policy Research Working Paper Series 4091, The World Bank.
    13. Palacios, Robert & Robalino, David A., 2020. "Integrating Social Insurance and Social Assistance Programs for the Future World of Labor," IZA Discussion Papers 13258, Institute of Labor Economics (IZA).
    14. Robert Holzmann & Richard Hinz, 2005. "Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform," World Bank Publications - Books, The World Bank Group, number 7336.
    15. Ian Tower & Gregorio Impavido, 2009. "How the Financial Crisis Affects Pensions and Insurance and Why the Impacts Matter," IMF Working Papers 2009/151, International Monetary Fund.
    16. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    17. Johannes Hagen, 2018. "The effects of increasing the normal retirement age on health care utilization and mortality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(1), pages 193-234, January.
    18. Calvo, Esteban & Williamson, John B., 2006. "Old-Age Pension Reform and Modernization Pathways: Lessons for China from Latin America," MPRA Paper 4872, University Library of Munich, Germany, revised 2007.
    19. Geri, Milva, 2022. "Pension arrangements and economic thinking: unreal assumptions and false predictions in the case of Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    20. Martínez Preece Marissa R. & Venegas Martínez Francisco, 2014. "Análisis del riesgo de mercado de los fondos de pensión en México Un enfoque con modelos autorregresivos," Contaduría y Administración, Accounting and Management, vol. 59(3), pages 165-195, julio-sep.
    21. Mazzotta, Fernanda & Bettio, Francesca & Zigante, Valentina, 2018. "And Thou Shalt Honor: children’s caregiving, work and religion," GLO Discussion Paper Series 202, Global Labor Organization (GLO).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:18:y:2019:i:1:p:155-178. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The MIT Press (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.