PETALING JAYA: The World Bank has recommeded that the withdrawal age from the Employees Provident Fund (EPF) retirement account should ideally be aligned with the minimum retirement age to strengthen the adequacy of retirement savings.
The World Bank stated that its previous analysis highlighted how access to retirement savings before retirement can lead to premature depletion of those funds.
"We note that in most countries globally, retirement savings are only accessed at retirement age. This is also important in the context of non-contributory social pension design, as exhausting retirement savings can leave people needing state support," the World Bank said in a statement on Sunday (Nov 2).
It added that the focus of its recent paper, 'Should Malaysia expand its social pension? Global evidence, design issues and options', is on non-contributory social pensions, specifically the Bantuan Warga Emas (BWE) programme.
The paper did not make recommendations about the minimum retirement age, the World Bank added.
"Our discussion and recommendation in the paper on eligibility age refers to the Bantuan Warga Emas programme.
"We note that currently only about 4% of older Malaysians receive this assistance, and suggest that the government may wish to consider broadening its coverage to more B40 households.
"In that context, we mention that many other countries use 65 as a benchmark age for eligibility to contain the fiscal cost of such assistance," it said.
Although the minimum retirement age was not a focus of the paper, previous research from the World Bank has recommended that Malaysia gradually raise the minimum retirement age, in line with global trends and rising life expectancy, which now stands at over 75 years.
This recommendation is made in response to Malaysia’s rapidly ageing population, which poses challenges for the financial security of older citizens.
"We do not prescribe a specific retirement age, as we note the need for societal discussion and consensus, and we argue for incremental adjustments rather than one large increase.
"We appreciate the public’s continued interest in this topic, and would note the importance of distinguishing between contributory retirement savings schemes (such as EPF) and non-contributory social assistance programmes like BWE in ongoing discussions," it said.
Previously, a news report stated that the World Bank had suggested increasing the EPF withdrawal age from 55 to between 65 and 70, arguing that the current age is too low.
The report added that a gradual increase would help ensure the sustainability of Malaysia’s social protection system while allowing retirees to enjoy larger pension benefits.
It also stated that the current social pension eligibility age of 60 is below most countries’ standards and no longer aligns with Malaysia’s improved healthy life expectancy.
An analysis by the World Bank of Malaysians’ household income and spending, based on government data from 2022, showed that the risk of poverty increases with age.
Hence, the World Bank said raising the eligibility age could also help better target support to elderly citizens who truly need it.
