SC continuously searching for ways to address adequacy of retirement savings

KUALA LUMPUR: The Securities Commission (SC) is continuously in search of novel ways to address the adequacy of retirement savings, where Malaysia is expected to become an aged nation by 2030, with 15 per cent of the population aged 60 and above.

In its Annual Report 2022 released today, the SC said one way involves approaching the problem through a behavioural lens and applying behavioural insights to encourage greater retirement planning among Malaysians.

"Malaysia has adopted a holistic and multi-faceted pension ecosystem that is equipped to mobilise savings and facilitate the rakyat’s retirement planning needs.

"This is anchored on a multi-pillar pension framework and includes mandated public pension plans as well as voluntary private pension schemes through Private Retirement Schemes (PRS) that are regulated by the SC,” it said.

According to the report, there has been growing acceptance of PRS as an alternative vehicle to supplement and complement the mandatory public pension system.

This, it said, is evidenced by an increase in the number of PRS contributors by 7.5 per cent per annum from 416,913 members in 2018 to 557,000 members in 2022.

Despite the private and public avenues available for Malaysians to save and invest for their retirement, the SC said there are still gaps in the levels of savings most have available for retirement.

"The SC recognises that moving the needle on retirement security with respect to private sector solutions requires partnership and collaboration between retirement stakeholders on multiple

fronts - including policy development, product innovation and investor education.

"The formal retirement system only covers about 60 per cent of the labour workforce - most of whom have insufficient retirement savings. This problem has been worsened by the recent early withdrawals of retirement savings to tide over cashflow needs through the pandemic,” it said.

The report said the remaining 40 per cent of the workforce are yet to be covered by mandatory savings - this could potentially grow as more workers enter self-employment and the gig economy.

Meanwhile, by incorporating behavioural insights into policymaking and product design, the SC said that Malaysians can be nudged into making better decisions to prepare for their retirement.

"A key principle to behavioural insights is that people are influenced by subconscious factors

(formally referred to as behavioural biases), when making decisions - this may result in decisions that

are not in their best interests. This is especially relevant in the context of retirement,” it said.

Globally, it said an increasing number of studies in behavioural economics show that financial

and savings behaviour relates to psychological factors.

For example, it said the Organisation for Economic Co-operation and Development (OECD) highlighted that while a certain percentage of people are dedicated savers who take responsibility for their retirement, a much larger percentage prefer to spend money than to save it, or would like to save more but lack the willpower or are overwhelmed by too many choices.

"While there are structural factors behind Malaysians’ retirement savings inadequacy, there are also behavioural barriers that need to be overcome to encourage better retirement planning among the broader population,” it said. - Bernama

Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

SC , Annual Report 2022 , retirement , adequacy , PRS


Next In Business News

Easing residential overhang
How to correct global imbalances?
Is the ringgit weakness permanent?
A bump on the road
Ringgit to recover on investor confidence
Workplace stress and anxiety
Yinson unit enters call option to acquire Netherland-based AFPS
Bursa Malaysia applauds PLCs embracing board gender diversity
Rex Industry to decommission Bukit Minyak factory
Tech shares see biggest-ever weekly inflow on AI boom-BofA

Others Also Read