Universal social pension needed to ensure Malaysians have sufficient retirement funds

  • Business
  • Wednesday, 25 Oct 2017

KUALA LUMPUR: Policy makers should contemplate on creating a universal social pension due to rising concerns that Malaysians may not be saving enough for their retirement.

This is especially true in the case of low-income workers, who, in spite of having saved a portion of their income in the Employees Provident Fund (EPF) throughout their working years, still do not have enough to pull through their retirement years, not to mention the informal and self-employed workers, said University of Malaya’s Director of Social Security Research Centre (SSRC), Professor Datuk Norma Mansor.

She said that according to the ‘Savings Adequacy Among EPF Members’ survey conducted by the SSRC, 40% of those surveyed preferred lump-sum withdrawals, and only a small percentage would opt for a monthly withdrawal or an annuity.

The survey involved 2,635 contributors from 19 EPF branches nationwide.

It showed that most EPF withdrawals (before age 55) were used to buy houses, renovations, children’s education and other expenses.

Following the withdrawals, the majority of the respondents aged 55 and above would have an EPF account balance of less than RM50,000, a handful would have more than RM400,000 and a few would have nothing left.

“This is a cause for concern, since Malaysia does not have a universal pension that would provide older people with sufficient funds for their retirement,” she said.

On the other hand, the survey also revealed that 79% of the respondents with relatively small EPF account balance or had emptied their EPF account had placed their money in alternative saving schemes or chose to invest the funds for better returns.

“A majority of those respondents have their own landed or residential properties, and more than half have investments in principal guaranteed savings schemes, unit trusts or Tabung Haji.

“Thus, it comes as no surprise that those respondents with EPF balance of less than RM50,000 reported that they have total assets valued between RM100,000 and RM500,000, while a handful have assets valued at more than a million ringgit,” she said.

Further analysis showed that close to half of the respondents age 60 and above continued to work despite having some forms of savings or investments, indicating that they would work for as long as they could or if their health permitted.

“Most of them were forced to seek employment elsewhere as they feel their savings are insufficient to last them a lifetime.

“With the current economic uncertainty and escalating cost of living and healthcare, it could mean that many people would likely exhaust whatever financial resources they have in a relatively short time,” she said.

While EPF, which was established as a forced savings for workers, continue to manage the funds in the most prudent manner, Prof Norma pointed out that the current defined contribution could be improved further by introducing products that would evolve into a full or partial pension scheme, mandatory or otherwise.

“But then again the question arises as to whether the contributors themselves are willing to convert their EPF savings into future income stream similar to that of a pension.

“Based on our survey, it will require more attractive returns from their EPF savings in order for them to stay,” she said.

She said particular attention should be given to those who have less than RM50,000 EPF savings and total assets of less than RM100,000.

Based on the survey, 14% of respondents fall in this financially-vulnerable group of people, who in case of emergency or unexpected turn of events, would not have enough cushion to fall back on.-BERNAMA

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