SHAH ALAM: About 81% of active Employees Provident Fund members in the formal sector are earning a monthly salary of RM5,000 or less and this, the EPF says, is a reason for the inadequate retirement savings.
Of this number, CEO Datuk Seri Amir Hamzah Azizan says 44% earn less than RM2,000.
“This is too low,” he said, adding that EPF would support any initiative to push towards a minimum RM2,700 living wage.
“Helping our members build adequate funds is important,” he said. “One of Malaysia’s big issues is the low wage structure.”
Amir said the last increase in minimum wage from RM1,200 helped.
“However, there is a need to increase the base for savings and the issue of a low wage structure must be addressed.”
Amir pointed out that the minimum wage of RM1,500 is significantly low.
He said based on EPF’s Belanjawanku findings, an individual living in the Klang Valley, would need a minimum RM1,930 monthly expenditure for public transport.
“Those who own a car will need RM2,600,” he added. This, he pointed out, was higher than the minimum wage and only a little lower than the living wage of RM2,700.
“We need to push for the living wage to address the inadequacy. This is the biggest push that needs to happen in the country.”
Besides the low wage structure, other factors contributing to the savings inadequacy are the full withdrawal age not being in alignment with the retirement age.
A private sector employee can withdraw all his or her savings at 55 years old despite the minimum retirement age being 60.
The lack of minimum wage policy prior to 2014, inconsistent contributions and underemployment as well as poor financial literacy are some of the reasons for low savings, he said.
“The financial literacy rate of Malaysians is 36% whereas the rate was 29% for EPF members,” Amir noted.
He said the ageing nation status of Malaysia, the growing informal sector – which has led to gaps in coverage – the global market volatility and challenges of the external environment are the challenges currently faced by the EPF.