Fixed deposits need rate hike

  • Letters
  • Wednesday, 20 May 2020

THE current turbulent climate necessitates Prime Minister Tan Sri Muhyiddin Yassin to urgently demand an increase in fixed deposit interest rate for elderly savers with deposits of RM500,000 and below. Without this, our elderly middle class will shrink into poverty as insurance premiums skyrocket.

Escalating inflation has rendered RM500,000 savings small today! A budget of RM2,500 monthly or RM30,000 annually is merely adequate for an elderly person to cover costs of food, house, utility, maintenance, healthcare, communication, transport and some domestic help. They need about 6% return on a principle of RM500,000 to yield RM30,000 annually.

Retiring at 60 means we can expect to live another 20 years or more. Many elders live on the annual bank interest alone, yet our country’s depositor interest rate for senior small savers has been allowed to descend from a weak 3% to 2%, and is projected to spiral down to negative next year. Meanwhile, inflation has swelled to over 2% this year.

The burden of low deposit interest rate falls most heavily on Malaysia’s middle-class elderly who have neither the opportunity nor sophistication to make funds grow without incurring high risks. Their savings of RM500,000 or less are considered too meagre to be accepted into the higher yielding bank deposit accounts. Currently, our banking system pays higher earnings to large savers to retain their patronage, like regressive tax that enriches the already wealthy in our society.

We need greater humanistic capitalism that promotes fair saving interest rates for citizens aged 60 and above. No elder wishes to be a drain on the resources of their children when unemployment is high amid more job cuts due to global recession and the Covid-19 pandemic. The truth is many elderly citizens are still financially supporting their jobless adult children.

Low interest rates also affect insurance companies that rely on greater interest return on their premiums to support coverage liabilities. Insurance companies compensate for this diminishing margin by charging our vulnerable elders much higher premiums for coverage at a time when they need healthcare the most.

Bank Negara Malaysia holds responsibility for the safety and soundness of the quality of life of our society and needs to re-evaluate the rising risk of lowering savings interest rates for far too long. Slashing the overnight policy rate twice this year to 2.5% has made it the lowest since 2010. Bank Negara’s Monetary Policy Committee can motion to issue savings certificates indexed against inflation for senior savers. It is definitely possible for senior citizens to invest in Treasury Bills where our government guarantees the principle with a fixed higher return, so there is no risk unless our government goes down.

In an orderly fashion that will not cause painful disruptions to existing maturing loans in the savings and loans industry, controlled conditions for higher-yield savings (HYS) can be put in place:

1) HYS is solely reserved for senior citizens aged 60 and above;

2) HYS is for long-term certificates of minimum one-year tenure; and

3) HYS is eligible for maximum savings of RM500,000.

It’s time our Prime Minister pushes for higher yield interest for Malaysia’s elderly small savers as part of our nation’s social safety net.



(Society that advocates for the well-being and productivity of seniors aged 50 and above)

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Finance; Fixed deposit


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