Concerns over inadequate retirement savings in Malaysia
The Employees Provident Fund (EPF), a compulsory pension scheme for all Malaysians, has expressed concerns regarding the inadequate retirement savings of its members.
According to Datuk Seri Amir Hamzah Azizan, CEO of EPF, only 18% of EPF’s total members meet the basic savings benchmark required to ensure a minimum monthly income of RM1,000 (US$214.61) over a 20-year retirement period, starting at the age of 55.
To determine the achievement of Basic Savings by the retirement age of 55, the EPF utilises a benchmark of RM240,000 (US$ 51,480), equivalent to RM1,000 per month for 20 years. Amir revealed that only 30% of EPF’s active formal members have met the basic savings benchmark by age, while only 18% of its total members meet the same threshold.
He said, “The inadequacy of retirement savings is worrying, as it highlights deep-rooted contributing factors. To compound matters is the blend of other multiple factors such as a low wage structure, misalignment between full withdrawal age and retirement age, inconsistent contributions, and under-employment, as well as a low rate of financial literacy.”
The EPF is implementing long-term strategies aimed at enhancing the retirement savings adequacy of its members. With only 56% of Malaysia’s 16.7 million labour force enjoying formal social protection coverage, the EPF has taken steps by deploying mobile units to reach out to seven million people in the informal sector and self-employed employees who could potentially become EPF members.
Additionally, the EPF is exploring various approaches to strengthen Malaysia’s pension and retirement landscape. This includes considering a basic income drawdown option to provide members with an additional source of retirement income.
“The establishment of Pillar 1 of the International Labour Organisation’s Multi-Layer Income Framework is another area that the EPF is actively studying through the introduction of a contributory national pension,” he added, reported New Straits Times.