‘Look beyond EPF for retirement’

PETALING JAYA: While the Employees Provident Fund (EPF) provides the best savings and retirement scheme for private sector workers, economists are advising them to invest in other schemes as well to tide them over.

Economics expert Prof Dr Barjoyai Bardai of Universiti Tun Abdul Razak said people should start investing in endowment schemes, and unit and property trusts to ensure solid growth of their wealth.


Barjoyai advised people to look at profitable investment schemes like the Amanah Saham Bumiputera (ASB) or Amanah Saham Wawasan 2020 or even Real Estate Investment Trust as good options.

On the EPF scheme, he said that if a young person earned about RM4,000 a month and continued working for 40 years, he or she could retire with about RM1mil in the account.

“Then, you will have an average monthly income of RM5,000 upon retirement.

“Right now, the EPF is looking at only a minimum of RM250,000 for people to have when they retire. That won’t be enough.

“The household income for those below the poverty line stands at RM2,200. If their principal amount with the EPF is RM250,000, and the dividend rate is 5% (or 12,500 a year), you are looking at RM1,041 a month.

“If someone has only RM1,000 now, they may have RM50,000 when they retire in 20 years. How will someone survive with that amount?” he asked.

It has been reported that there are about 3.6 million EPF contributors who have less than RM1,000 in savings while some 6.1 million contributors have less than RM10,000.

Malaysian University of Science and Technology’s Institute of post-graduate studies dean Dr Geoffrey Williams proposed a four-tier social pension scheme namely Universal Basic Pension, Income Replacement Pension, Desired Income Pension and Non-Pension Income Alternatives.

He said money could be sourced from the National Trust Fund (KWAN), unclaimed assets from the estates of those who died without dependents, income from windfall taxes, and responsible privatisation among other sources.

Williams said funding for each tier would be different, and involve direct government contributions by combining existing aid programmes, contributions from those who could afford it and income from public investment funds.

“If you combine all the pension funds in Malaysia, they have more than the total GDP in assets but not enough in individual accounts to pay member pensions. This is a difficult reality to admit but one that must be addressed.

“Unfortunately, there is very little people can do by themselves without major structural reforms not just in pensions but in the whole social protection system and the labour market.

“The pension problem is one of the biggest structural problems Malaysia faces. Unless it is tackled immediately, it could derail economic development post-Covid-19,” he said.

He added that EPF itself said it would take about four years to rebuild lost savings, but even after four years most people would be underfunded.

To provide a RM2,000 pension to a two-person household above 60 years old would cost around RM3.2bil for the B10 income group, RM12.9bil for B40, and RM16.2bil for B50, he said.

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