Improving retirement savings adequacy

Amir said a more inclusive social protection system was needed in Malaysia, as the coverage was currently narrow and inadequate.

PETALING JAYA: The Employees Provident Fund (EPF) is focused on the extension of its coverage and enhancing members’ retirement savings adequacy.

The provident fund’s chief executive officer Datuk Seri Amir Hamzah Azizan said as of May 2023, only 30% of the EPF’s active formal members met the basic savings benchmark of RM240,000 by the minimum age of 55, while only 18% of its total members met the same threshold.

This amount will enable a member to have RM1,000 per month over a 20-year retirement period.

“Indeed, the inadequacy of retirement savings is profoundly worrying, as it highlights deep-rooted contributing factors,” Amir said during the International Social Wellbeing Conference (ISWC) in Kuala Lumpur yesterday.

He said a more inclusive social protection system was needed in Malaysia, as the coverage was currently narrow and inadequate, with only 9.1% of intended beneficiaries being covered versus an average of 55.1% for Asia and 12.8% for the world.

Amir said old-age dependency was showing an increase from every 10 working-age adults needed to support one older person in 2020, to three working-age adults in 2050.

“With Malaysia’s population aged 65 and above growing faster than other age groups, the time for change is now,” he said.

In order to meet these challenges head-on, Amir said the EPF is putting in substantial measures with a clear focus on securing Malaysians’ retirement well-being.

With only 56% of Malaysia’s 16.7 million labour force having some form of formal social protection coverage, the EPF has deployed mobile units to reach out to seven million people in the informal sector and self-employed who can potentially become EPF members.

It is also looking to explore other approaches to enhance the national pensions and retirement landscape, including a basic income drawdown option to strengthen its decumulation offerings 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 also another area that we are actively studying through the introduction of a contributory national pension,” Amir added.

With a firm focus on addressing critical gaps in social security coverage and advocating for the fundamental rights to social protection, this year’s theme of ISWC was “Changing the Game: Building the World We Want”.