KUALA LUMPUR, June 27 — The Federal Court today reportedly declared legal amendments introduced in 2013 — which introduced a new pension scheme that adjusts pension payments every year by a two per cent increment — as less favourable to pensioners and as unconstitutional.

According to news outlet The Edge, the Federal Court ruled that the 2013 changes to the law on the pension adjustment scheme went against the Federal Constitution's Article 147, and declared these 2013 legal provisions as null and void.

Following the Federal Court's decision today, this would mean that the older version of the law — containing the old pension adjustment scheme — would be restored, as the new amendments in 2013 have been invalidated.

In its unanimous decision, the Federal Court's five-judge panel today dismissed the government's appeal against the Court of Appeal's decision in January 2022.

The Edge reported Chief Judge of Malaya Datuk Mohamad Zabidin Mohd Diah, who delivered the Federal Court's decision, as agreeing that the pensioners in this case only had to prove the new pension scheme was less favourable compared to the old scheme, and they not need to show they suffered loss under the new scheme.

The government had argued that the pensioner in this lawsuit had not proven she suffered actual loss from the 2013 amendments, and that the 2013 amendments – which introduced the new pension adjustment scheme – could not be said to be less favourable to her.

In a written judgment today, the Federal Court disagreed with the government, ruling instead that the pensioner did not need to have suffered "actual loss” before a less favourable situation could arise.

The Federal Court agreed with the Court of Appeal that the fact that a "risk” exists that a less favourable situation may arise and the "mere possibility that it can arise" is sufficient to show that a less favourable situation has already happened.

In the panel chaired by Court of Appeal president Tan Sri Abang Iskandar Abang Hashim, the other judges on the Federal Court panel were Chief Judge of Sabah and Sarawak Tan Sri Abdul Rahman Sebli, judges Datuk Seri Hasnah Mohammed Hashim and Datuk Rhodzhariah Bujang.

In this case, government retiree Aminah Ahmad filed a lawsuit April 28, 2017 in her personal capacity together with 56 other individuals who had also retired as public servants, naming the government of Malaysia and the public services director-general as respondents.

Aminah and the other pensioners were challenging the validity of amendments made in 2013 to the Pensions Adjustment Act 1980, which changed the pension adjustment scheme to a new system with an annual 2 per cent increment.

The amendments that Aminah and the 56 others were challenging were the Pensions Adjustment (Amendment) Act 2013's Section 3 and Section 7, which amended the Pensions Adjustment Act's Section 3 and Section 6.

Aminah had argued that the 2013 amendments resulted in the pension adjustment scheme becoming "less favourable” to the pensioners, and that this went against the Federal Constitution's Article 147 which protects pensioners from any subsequent "less favourable” pension laws.

Before the 2013 amendments introduced the new scheme of an annual 2 per cent increment, the old scheme resulted in the pension amount being adjusted or increased whenever there is a salary revision for serving government employees (of the same grade as the pensioner).

Under the new scheme, when salaries for current civil servants go up, it would not affect the pension sum to be paid to pensioners even if they are of the same grade.

Aminah lost in the High Court on January 9, 2020, but won her appeal at the Court of Appeal last year.

On January 13, 2022 the Court of Appeal declared that Sections 3 and 7 (the 2013 amendments) were null and void as they went against the Federal Constitution's Article 147, and also declared that the amended version of Section 3 and Section 6 of the Pensions Adjustment Act — which were amended through the 2013 amendments — are null and void as they went against Article 147.

The Court of Appeal ordered the declarations to take effect from January 13, 2022 onwards.

The Federal Court today answered two main legal questions; it agreed that the amended version of Section 3 and Section 6 contravenes Article 147 when a pensioner fails to prove that the adjusted pension received is actually financially less favourable when it is compared to the former law.

The amendment, through the 2013 amendments, enabled the introduction of the new scheme.

The second broad legal question answered by the Federal Court today was whether a pre-amendment law would automatically be revived on its own when the court strikes down the amendment, and whether the pre-amendment law's schedule – which was deleted by Parliament when the amendment came into effect – will also be revived automatically.

The Federal Court also agreed on the second issue.

"Be that as it may, it is our considered view that the COA is correct in restoring the status quo. This is because when a court strikes down a statute or an amendment to a statute, the pre-existing provision is automatically revived,” the top court said in today’s written judgment.

In short, the Federal Court today struck down the 2013 amendment (which introduced the new pension adjustment scheme of an annual 2 per cent increment) as unconstitutional and restored the previous version of the law (which contained the old pension adjustment scheme where existing public servants' salaries revision would also increase pensioners' pension amount).