Judge Darryl Goon said the amendment violated Article 147 of the Federal Constitution as any new pension scheme cannot be less favourable than the old.
Under the old scheme, the pension of government retirees is revised based on the prevailing salary of incumbent civil servants in that grade.
However, from 2013, a new scheme was introduced based on a flat rate of 2% annual increment.
Goon, who sat with Vazeer Alam Mydin Meera and Abu Bakar Jais, said declaratory orders would take effect prospectively from today.
However, the impact of today’s ruling on retired government servants is unclear.
As of October last year, there were some 700,000 government retirees nationwide, with monthly pension payments estimated at about RM700 million.
Goon said the bench was not concerned with the entitlement to pension to retired government servants.
“It is whether the amendment to Sections 3 and 6 to the Pensions Adjustment (Amendment) Act 1980 contravenes Article 147 and whether the applicable law to pension has rendered a less favourable situation,” he said.
He said the amended sections which catered to the annual increment of 2% could result in a less favourable position to the appellants in this case.
The bench allowed the declaration that Sections 3 and 7 of the Pensions Adjustment (Amendment) Act 2013 were void in contravention of Article 147.
The judges also allowed another declaration that Sections 3 and 6 of the Pensions Adjustment Act 1980, as amended by Sections 3 and 7 of the Pensions Adjustment (Amendment) Act 2013 and in force since Jan 1, 2013, were void in contravention of Article 147.
“The appeal is allowed and the High Court order is set aside with no order to costs,” said Goon, who delivered the ruling via online.
Pensioner Aminah Ahmad and 56 others employed in the public services had filed the action in 2017, claiming that the new scheme was potentially less favourable than the old.
They named the government and director-general of public service as respondents.
However, the High Court dismissed their suit in 2019, resulting in the appeal.
Counsel Gopal Sri Ram and CK Lim appeared for the appellants while senior federal counsel Shamsul Bolhassan represented the respondents.