Ageing well requires money put aside for retirement

An EPF retirement advisory service officer answers questions from a retired couple in this filepic. Economic security is interlinked with health needs, especially as one ages.

Last week, politicians again questioned if individuals should be allowed to withdraw more money from the Employees’ Provident Fund (EPF) pension fund.

The easy argument for it is that anyone should be allowed to withdraw money belonging to them.

The more complicated answer considers the fact that we are dealing with an increasingly ageing population.

Adequate social safety nets are necessary to prepare for the future.

Our population is rapidly ageing; according to a report by the United Nations (UN), Malaysia is expected to become an ageing society by 2030, with more than 15% of the population aged 60 years and above.

One of the key challenges associated with ageing is the provision of healthcare services to the elderly.

The elderly are more susceptible to chronic diseases and disabilities, which require specialised medical care.

However, there is a shortage of trained healthcare professionals (e.g. in geriatric medicine), as well as a need for more appropriate medical facilities and equipment.

Ageing also leads to increasing demand for social and welfare services.

The elderly are often at risk of social isolation and may require support and care to maintain their quality of life.

They often require financial support, which can put a strain on the resources of loved ones.

Moreover, as the elderly population grows and the workforce shrinks, there will be an increasing demand for pension and social welfare services, which will place pressure on the government’s finances.

Inadequate safety nets

Without adequate support, the elderly may experience social isolation and loneliness.

These have negative effects on their mental and physical health.

Insufficient support can also lead to a lack of access to healthcare services, leading to untreated medical conditions.

A vicious cycle may appear, leading to an overall decline in the quality of health and increased healthcare costs, adding further financial burden on both the elderly and their families.

An important factor to also consider is the fact that social safety nets provide economic security for the elderly.

Without sufficient savings or retirement benefits, the elderly may struggle to meet their basic needs, such as housing and food.

This can lead to poverty and financial hardship, which once again leads to a vicious cycle that adversely affects health and social issues.

Pension funds

Pension funds allow individuals to save and invest a portion of their income during their productive working years.

These can be supplemented by contributions from employers.

Funds, like EPF, are invested by professional managers, who aim to grow the money over time and provide a dividend (in the case of EPF, a dividend is provided until the age of 100).

When the individual reaches retirement age, the accumulated funds are used to provide a regular stream of income, which helps to supplement their other sources of income, such as personal savings.

However, despite the importance of pension funds, they are often underutilised, and many individuals do not have sufficient savings to support themselves in their old age.

The EPF has warned Malaysians that they will need at least RM600,000 to retire comfortably in major cities.

However, research has shown that around 70% of retirees have less than RM50,000 in their EPF account.

Pension funds can face any number of issues: high fees, low returns, concerns about the safety and security of investments, and unethical fund managers.

Inappropriate policies can be disastrous too, e.g. Argentina’s government nationalised its private pension system more than a decade ago and used the funds to pay off government debt.

This led to reduced investor confidence, increased political risk, and challenges in securing long-term funding for the public pension system.

The mismanagement of the pension system contributed to broader economic challenges in the country, including high inflation, currency devaluation and a decline in foreign investment.

Planning for the future

The Malaysian government has introduced various policies and programmes to encourage individuals to save for their retirement.

For example, the government has introduced a voluntary savings scheme called the Private Retirement Scheme (PRS), which is designed to supplement the EPF savings of individuals.

The PRS provides individuals with access to various investment options, and offers tax incentives to encourage individuals to save for their retirement.

We can also look at how other countries have taken steps to cope for an ageing population, such as:

• Japan – free healthcare for the elderly, affordable housing options, and tax breaks for families caring for elderly relatives.
• Singapore – increasing the retirement age, providing financial incentives for families to care for elderly relatives at home, and investing in technologies to assist with eldercare.
• Australia providing access to affordable housing, offering pension schemes, and investing in aged care services.

  The government has also established a National Ageing Research Institute to study issues related to ageing and provide recommendations for policy development.

It is imperative that policymaking takes our ageing population into account.

After all, one of the key concepts of Malaysia Madani is protecting the disenfranchised – this includes our current and future elders.

By investing in healthcare and social welfare support, and ensuring that the right policies are implemented, the government will go a long way towards ensuring that our ageing population enjoys a high quality of life and continues to contribute to society.

Dr Helmy Haja Mydin is a consultant respiratory specialist and a Special Advisor to the Health Minister. For further information, email [e-mail]. The information provided is for educational and communication purposes only. The Star does not give any warranty on accuracy, completeness, functionality, usefulness or other assurances as to the content appearing in this column. The Star disclaims all responsibility for any losses, damage to property or personal injury suffered directly or indirectly from reliance on such information.