Govt mulls handing over pension payment operation to KWAP

The government is looking at the possibility of handing over of the management of pension payment operation to the Retirement Fund Incorporated (KWAP) as part of a plan to further reduce its debt to the gross domestic product (GDP).

Treasury secretary-general Tan Sri Mohd Irwan Siregar Abdullah said the discussions on this matter had reached the final stage.

"KWAP is the entity which is going to pay the pension in the long-run, so this is another thing (besides housing loan) which we're looking at in terms of the size of the civil service.

"We can transfer the whole of the pension department to KWAP but in terms of pension payment, it will still be the government's allocation until KWAP is able to take over when the time comes," he told reporters after the launch of the Public Sector Home Financing Board's (LPPSA) RM25 billion sukuk/bond programmes here, today.

He said the exercise would help the government in its debt management in the long run.

Earlier this year, the government had transferred the Housing Loan Division's (BPP) main function as the sole provider for the government for home financing to civil servants to the newly formed LPPSA in a move to reduce the public debt to GDP ratio.

Irwan Siregar said the government expected to reduce the public debt to GDP ratio by about 2.0 per cent to less than 54 per cent by transferring RM21.9 billion of its borrowings for civil servant loans to the LPPSA.

Irwan Siregar, who is also LPPSA chairman, said the government's current contingent liability amounting to RM170 billion and the transfer of RM21.9 billion from the BPP constituted a small percentage.

He said the RM21.9 billion was a fraction of BPP's total borrowings of more than RM50 billion, of which the remainder constituted mostly sukuk servicing.

He, however, said the debt taken over by the LPPSA was not too big as its assets were made up of loan collection from about 835,000 civil servants amounting to RM42 billion.