Have more retirement plans

THE statistics from the Employees Provident Fund (EPF) are alarming. A total of 68% of all its members aged 54 in December 2014 have less than RM50,000 in their EPF accounts.

The same statistics also revealed that another 12% have only between RM50,001 and RM100,000. That tallies up to a staggering 80% of members having not more than RM100,000 as their main retirement fund.

This is a disturbing fact especially as the average lifespan of Malaysians has increased to 75 years. Literally, a retiree with RM100,000 in his EPF account would only live on a miserable RM208 a month.

Corporate life is becoming far more challenging these days. In this evolving economy and demographics, employment is becoming more competitive, cost sensitive and business driven, resulting in more employees stretching their working hours to cope with the demands of the job.

In the Klang Valley, especially in Kuala Lumpur, it is a norm for an employee to be at the office for between 10 and 13 hours, plus another one or two hours travelling to and fro.

With the changing and challenging landscape of the economy and employment, retirement planning is critical for all.

Yet most employees show little interest in the subject. Perhaps the rampant increases in the cost of living is a factor.

People are more focused on monthly and short-term savings or financial goals. Another contributing factor is not having the opportunity to plan for retirement.

From a holistic perspective, employers or human resource managers play a crucial role in providing the platform for retirement planning.

Generally, employers perceive that retirement planning is the employees’ personal matters.

Many employees consider the EPF as the main, and for some the only, source of their retirement funds. This thinking must change. For a majority of contributors, the EPF alone is not sufficient to sustain life after retirement.

Other forms of retirement plans such as the Private Retirement Scheme (PRS), unit trust and other retirement investment plans approved by the Securities Commission are suitable long-term wealth accumulation schemes which should be shared with every employee.

Employers today can also help employees to plan for retirement by signing up for corporate retirement plans. The employer-based plans, which can relate directly to the PRS, should work well as an additional retirement scheme for employees at all levels.

Medical expenses after retirement are another area that requires planning.

Medical costs are rising by the year. In Malaysia, this rise is estimated to be 10% each year and is projected to continue to go up.

HSBC Insurance Limited, London disclosed that in 2012, treatment for kidney failure cost a minimum of RM150,000; if medical inflation continues to rise at the current rates, the same treatment could be as high as RM225,000 in five years’ time.

Without an adequate retirement plan and a decent health insurance policy, medical expenses will wipe out the savings in no time.

Employers must be able to play the role of a strategic partner to the employees. They should look at retirement planning as a subject of interest to both employers and employees as it is going to be a win-win situation.

Good retirement plans have also become potent retention tools, particularly to younger employees.

Employers need to understand how important their role is in advocating the benefits of retirement planning for employees and what they can do to encourage participation.

Town hall sessions, smaller group presentations or even exhibitions by wealth specialists are some of the ways to introduce retirement planning to employees.

Wealth specialists should be seen as strategic partners to employers. However, we can still see employers treating the wealth specialists as their foes.

After spending more than 12 hours in the office daily and working a lifetime, an employee should be treated with dignity and given suitable retirement benefits to address this serious issue.

Employers must play a significant role in reshaping the social landscape of the employment scenario in Malaysia.

The goal is to have a healthy, well prepared and robust retirement scheme.

The Government should encourage employers by giving them incentives, including tax breaks, to make them more willing to address the looming problem of a huge number of the population without adequate retirement funds.

SYED ZULBAKRI SYED JEMAL SHAH

Bandar Puncak Alam, Selangor