Population ageing is a worldwide phenomenon commonly faced by developed nations with high standards of living.
However, in the recent decade, this phenomenon is becoming more prevalent in many developing countries.
The United Nations defines an ageing population as a community composed of people aged 65 and over. A country becomes an ageing nation when the ageing population reaches 7% of its total population.
Japan is one of the countries that has long become a super-aged nation, with 28.7% of its total population being above the age of 65.
Other examples of super-aged nations include Italy with 23%, followed by Finland (21.9%), Portugal (21.8%) and Germany (21.4%).
Although population ageing is normally measured at the national level, the measurement by state has provided some useful insights in Malaysia.
In 2020, Perak, Kedah, Perlis and Sarawak were considered ageing states, with the percentage of people aged 65 and over being more than 7%.
If the current trend continues to persist, the number of ageing states will gradually increase in the coming years since eight other states – Selangor, Negeri Sembilan, Kuala Lumpur, Pulau Pinang, Kelantan, Melaka, Pahang and Johor – have recorded more than 6% of elderly people.
The changing age structure in the population of a country would present an range of major economic and social challenges to the government.
The rising old age dependency ratio (OADR) would impact negatively on future economic growth, savings, consumption, taxation and pensions.
As older people age further, the government is required to undertake certain social adjustments such as assistance for senior citizens, which may involve additional financial allocation.
Longer life expectancy is attributed to the effective role of the government in providing various facilities and basic needs for the people.
With a longer life expectancy, healthy older citizens continue to contribute to society through paid or unpaid jobs such as care work.
However, the ageing population are also at higher risk of falling into poverty and resorting to the various social protection programmes provided by the government.
Therefore, ensuring access to social safety nets such as provident funds, healthcare, long-term care and other social support is crucial in an ageing society to protect the lives and livelihood of the older population.
The government has the responsibility to ensure that the economy generates revenue sustainably, allocate resources efficiently and distribute income effectively.
As the working-age group is dwindling and the old-age group is expanding, the government is also expected to allocate more resources mainly towards pensions, health- and shelter-related programmes.
Thus, it is undeniable that an ageing population will have implications on the government’s spending, especially to support various social programmes and other related facilities.
Developed countries such as Norway and Japan have good funding arrangements in place, particularly through existing pension and provident funds to cope with the high projected OADR.
Emulating the good practices in these developed countries, Malaysia also provides funding for pensioners.
In 2021, the Federal Government spent a total of RM28bil for pension expenditure involving about 887,000 public pensioners, of which RM7.9bil or 28.3% represented payments for those aged 65 and over.
