The Life Insurance Association of Malaysia (LIAM) said that it has proposed to the government to consider establishing private pension schemes to assist ageing Malaysians achieve financial independence after their retirement.
Its president, K.H. Chia, in a statement yesterday said that the proposal was presented to the Finance Ministry at the 2004 Budget Dialogue Session with the private sector early this week.
Explaining the rationale for private pension schemes, Chia said that most retiring Malaysians might not have sufficient retirement income if they rely totally on their Employees Provident Fund (EPF).
Quoting an EPF survey, he said about 70% of retirees would have exhausted their entire EPF savings within three years of withdrawing the lump sum.
“If a retiree has no regular income after his retirement, how would he be expected to live a reasonable lifestyle up to age 75,” he said.
He said the most effective way to encourage people to save voluntarily towards their retirement would be to provide tax incentives to the individuals.
Towards this, Chia said LIAM had proposed tax deduction against personal income be provided up to a maximum of 14% of salary a year for employees.
For the self employed, LIAM has proposed a tax deduction up to 28% a year.
Chia said that if the tax incentives proposed are granted, the EPF contributor or self employed would be able to purchase a pension plan which would be equivalent to 50% or half of his final salary or income.
This 50% will be paid as a monthly income upon retirement until the person’s death. - Bernama