Delayed regret?: The World Bank cautions that withdrawing retirement savings too early may lead to later problems, including retirees having to rely on support from the government.
PETALING JAYA: The proposal for the withdrawal age in the Employees Provident Fund (EPF) retirement account to be aligned with the minimum retirement age is meant to strengthen savings adequacy, says the World Bank.
It added that as highlighted by its previous analysis, gaining access to retirement savings prior to retirement could be problematic and lead to savings being prematurely exhausted.
“We note that in most countries, retirement savings are only accessed at retirement age. This is also important in the context of (non-contributory) social pension design, given that exhaustion of retirement savings can leave people needing support from the state,” the World Bank said in a statement yesterday.
It said the focus and findings of their recent paper entitled ‘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, it 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 as a means to contain the fiscal cost of such assistance,” it said.
On the minimum retirement age, while it is not a focus of the paper, its previous research has recommended that Malaysia gradually raise the minimum retirement age, in line with global trends and rising life expectancy (which in Malaysia now stands at over 75 years of age).
This recommendation is made in the context of increasingly rapid population ageing, which presents challenges for the financial security of older Malaysians.
“We do not prescribe a specific retirement age, as we note the need for societal discussion and consensus on this issue, 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 on these issues,” it said.
Previously, news reports quoted the World Bank suggesting an increase in the eligibility age for social pension from 55 to between 65 and 70, saying that the current age is too low.
It also said a gradual increase would ensure the sustainability of Malaysia’s social protection system, while allowing retirees to enjoy larger pension benefits.
