Retirement: ‘Do I really have to come in tomorrow?’


As Malaysia moves toward becoming a super-aged nation, rising life expectancy has been cited as a justified cause to review the current retirement age in the country.

RETIRING today is more challenging than ever, with rising living costs, longer life expectancy, and insufficient savings making it harder for many to stop working after decades in the workforce.

And as Malaysia moves toward becoming a super-aged nation, the debate on extending the current retirement age from 60 in the country has been revived yet again.

Retirement Fund Inc (KWAP) chief executive officer Datuk Nik Amlizan Mohamed is the most recent to make this suggestion, pointing to Malaysians’ life expectancy today which is 75 years old, compared with 57 more than five decades ago.

As she puts it, an increase in working age limit can help older workers support themselves.

Then there are the various countries that have made the policy change in recent years to extend the working years for their people, with China being the latest to raise its retirement age – by up to five years – to avert what many fear could be an impending pension crisis.

After all, Malaysia is already on the path to becoming an ageing nation. A 2020 World Bank study projects that by 2044, 14% of Malaysia’s population will be over 65, rising to 20% by 2056.

At the same time, a lack of sufficient post-retirement savings remains a concerning issue. The Employees Provident Fund (EPF) reports that one in four Malay-sians depletes their retirement savings within five years.

Still, are advancing life expectancies and a gloomy outlook on post-retirement savings enough reasons for the retirement age to be raised from the current 60?

Well, experts and industry players argue that a blanket increase of the mandatory retirement age is not the answer.

Dissenting views

Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman says we must remember that raising the retirement age will hinder efforts to rejuvenate the labour market and economy.

“It is not appropriate to increase the retirement age as in 2023, the youth unemployment rate in Malaysia remained high at around 12.49%.

“Increasing the retirement age from 60 to 65 will cause the loss of about a million job opportunities for graduates and new entrants into the labour market.

“This is because workers who should retire when they reach the age of 60 will continue their service until they reach 65. About 200,000 private sector workers in Malaysia retire every year. The age of 60 for a worker is appropriate in most employment sectors.”

While Syed Hussain argues that raising the retirement age could stifle job opportunities for younger workers, others, like Centre for Market Education chief executive officer Carmelo Ferlito, take a different stance. Ferlito believes that retirement decisions should remain a personal choice, based on individual savings and preferences.

“I am against a compulsory retirement age. It should be a personal matter, decided based on the availability of personal savings,” says the Universitas Prasetiya Mulya faculty member.

Universiti Putra Malaysia’s Malaysian Research Institute on Ageing research officer Chai Sen Tyng says the government has yet to align the EPF withdrawal age, currently at 55, with the current retirement age, 60.

“An increase in retirement age will have to take place gradually but simultaneously for public and private sector workers.

“However, the rightsizing of the civil service has yet to take place, and the government has just introduced the new Public Service Remuneration System without any details on the pension adjustments, which is at a 2% annual increase.”

Balancing needs and reality

Syed Hussain says while re-employing retired staff members can be advantageous to both the company and the involved workers, the move can impose a hefty challenge for employers in terms of cost.

Dr Syed Hussain: Raising the retirement age will hinder efforts to rejuvenate the labour market and economy.— Photos: The StarDr Syed Hussain: Raising the retirement age will hinder efforts to rejuvenate the labour market and economy.— Photos: The Star

He points out that the types of vocation matters and it will directly impact expenditure.

“Although it may be beneficial to extend the retirement age in terms of maintaining an aged workforce with a good track record and for those who have insufficient retirement savings, it is a big challenge for employers.

“For certain sectors where work requires physical energy such as in construction, farming, agriculture, and manufacturing, the age factor will affect workers’ performance and productivity.

“Increasing the retirement age limit will undoubtedly increase employers’ medical costs as many insurance companies are not interested in providing coverage for older workers.”

Beyond the cost and labour market implications, there’s also the question of whether raising the retirement age will impact productivity or performance. According to Chai, this largely depends on the type of job. For high-skilled workers, increasing the retirement age is unlikely to hinder productivity, innovation, or knowledge transfer.

“High-skilled workers refer to employees with advanced education, expertise, or technical skills, and knowledge or experience in the formal sector, usually in senior managerial or supervisory roles.

“In this scenario, chronological age is a poor measure of productivity, and studies have shown that greater work experience is associated with higher earnings. How much of this is an effect of seniority or productivity is debatable.

“An older worker might experience deterioration in physical ability but unless the job is conditional upon strength, dexterity or physical endurance, there is very little reason to assume retiring at 60 or 65 will have a huge impact on performance outcomes.”

Instead, Chai says the bigger risk lies in the accelerating rates of change in technology adoption in the workplace, as insufficient retraining and upskilling might hamper a worker’s ability to adjust to new work or job requirements.

Time for a new plan?

If Malaysia is considering reviewing its retirement age policy, Chai suggests looking at the re-employment laws in Japan and Singapore. These laws are designed to ease older workers into retirement gradually.

“There are alternatives to simply increasing the mandatory retirement age. We could introduce a Re-employment Act, similar to those in Singapore and Japan, where older workers are offered re-employment after reaching retirement age.”

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Chai says this approach allows older workers to continue working as long as they are willing and able. Companies would be required to offer job contracts, but retirees are not obligated to accept them.

“If a worker has enough savings and prefers to retire early, they should have that option. Re-employment programmes protect workers from age discrimination while providing flexibility.”

Sunway University’s Jeffrey Cheah Institute on South-East Asia economic studies director Prof Dr Yeah Kim Leng says there is a need to be more strategic when it comes to implementing retirement age policies.

Prof Yeah, who is also a member of the Policy Advisory Committee to the Prime Minister, says there should be flexibility which allows the re-employment of retired workers who have exemplary track records.

“Currently, I think we need to be more strategic when it comes to implementing retirement age. Perhaps we can make it more flexible – for those with the necessary skills, knowledge, and experience, we can retain them.

“Some from the private sector are already bringing back their retired workers on a contract basis.”

Prof Dr Yeah: There should be flexibility which allows the re-employment of retired workers who have exemplary track records.Prof Dr Yeah: There should be flexibility which allows the re-employment of retired workers who have exemplary track records.

Prof Yeah stresses the concept of productive ageing among those who are still able to work and contribute.

“We should have a fair policy so that when they are re-employed, they can receive fair remuneration. Again, it should be strategic, because if it is forced, then you’ll have to retain unproductive employees.

“It will be costly to the company and it will not be able to expand and promote their younger staff members.

“On the other hand, the government can raise the retirement age, but gradually, in short phases, instead of a big jump from 60 to 65 for example. Maybe it can be done from 60 to 62. Then it will be less disruptive to the labour market.”

MEF says the current practice of hiring employees who reach the age of 60 on a fixed-term contract based on health, performance, and productivity is more appropriate.

“Such a practice is a win-win formula for both employers and employees.”

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