Malaysiakini has an interesting article about the costs of pensions for MPs and states' assemblymen.
In the Malaysian Parliament, there are 222 MPs and according to M'kini, each MP costs about RM2.2m
However this is too simplistic a cost estimate and takes no account of the actual costs incurred after considering other factors.
If we take a 20-year cycle and taking into account different factors, the cost suggested is way below the real costs.
Malaysiakini suggests a total cost per annum of RM497million.
If you check out my table, you can see that the actual cost could be more than RM643million.
That is a 29% increase and shows the danger of too simplistic an analysis.
The following assumptions have been made.
Every GE, there is a turnover of 25% of MPs and the retiring MPs are entitled to the pension.
At the starting point, assume that 50% of the retired MPs are already enjoying the pension and at each GE, 25% of the 222 MPs will retire.
Therefore at every 4 years, those on pension will increase by 25%.
At term5, the number of retired MPs reaches 388 and the total pension costs is RM12.68 billion over the 20 years; equaling to an average of RM634mil per year just on pensions for MPs!
Another factor that needs evaluation is the second or re-marriage of MPs who have retired.
This assumes that the pensions transfers to the current wife of an MP.
This remarriage factor also needs to be considered for pension costs.
In the example, it is assumed that MPs who divorce and remarry are 75% of the MPs and the average number of wives is 2. The pension is calculated at 50% and they extend the pension payout by another 15 years on average.
So the total costs over the 20 years for this extended pension costs is RM185 million and the average cost per year is RM9.25 million.
It is suggested that more analysis can be done using existing data on MP pensioners to check out the reasonableness of the scenarios suggested.
Posts
