The Employees Provident Fund (EPF), a mandatory pension programme for all Malaysians, has raised worry over its members’ insufficient retirement savings.
Only 18% of EPF’s total members satisfy the basic savings benchmark necessary to secure a minimum monthly income of RM1,000 (US$214.61) throughout a 20-year retirement term beginning at the age of 55, according to Datuk Seri Amir Hamzah Azizan, CEO of EPF.
The EPF uses a benchmark of RM240,000 (US$ 51,480) to define Basic Savings by the retirement age of 55, which is equivalent to RM1,000 every month for 20 years. According to Amir, just 30% of EPF’s active formal members have fulfilled the basic savings requirement by age, while only 18% of overall members have attained the same standard.
“The inadequacy of retirement savings is concerning, as it highlights deep-rooted contributing factors,” he added. A low salary structure, misalignment between full withdrawal age and retirement age, inconsistent contributions, under-employment, and a low rate of financial literacy all contribute to the situation.”
Therefore, EPF is adopting long-term plans to improve its members’ retirement savings adequacy. With just 56% of Malaysia’s 16.7 million labour force receiving official social security coverage, the EPF has taken attempts to reach out to seven million persons in the informal sector and self-employed employees who may possibly become EPF members by deploying mobile units.
Furthermore, the EPF is investigating several options to improve Malaysia’s pension and retirement scene. Consideration should be given to a basic income drawdown option in order to offer members with an alternative source of retirement income.
“The establishment of Pillar 1 of the International Labour Organisation’s Multi-Layer Income Framework is another area that the EPF is actively studying through the introduction of a contributory national pension,” he went on to say.
