Insufficient For Retirement

A think tank has warned of the likelihood of future generations being burdened by the inability of currently working Malaysians to save money for retirement.

In an interview with FMT, Asian Strategy & Leadership Institute chief operating officer Ng Yeen Seen said those who could not save enough for their retirement would become dependent on government welfare. This would mean that the public would have to bear the increased costs for social welfare and healthcare, she added.

“Sooner or later, the growing elderly population will be dependent on a smaller working population,” she said. “When this situation occurs, taxes are bound to go up.”

She said figures on the saving habits of Malaysians were worrying.

“We have 14.5 million working Malaysians in the country, of whom 89% are earning less than RM5,000 a month. Of the total, only 6.7 million are active contributors to EPF (Employees Provident Fund).”

Of these 6.7 million, she said, only 22% would have saved enough at retirement to sustain themselves for 20 years.

According to EPF, RM196,800 is the minimum amount needed for retirement, based on a monthly expenditure of RM820 for 20 years.

“It is possible to live on that amount only if the retiree’s car and housing loans are fully paid off, nothing breaks down for the next 20 years, the retiree doesn’t fall sick, and there are children who can help out with the bills,” Ng said.

“Otherwise, it is unimaginable to survive on that amount.”

By 2030, she said, 14% of Malaysians would be aged 60 and above and close to 78% of working Malaysians would not have enough funds.

“EPF is just one form of savings and many don’t have enough,” she said. “According to the EPF, only one in three Malaysians has a savings account. Some 90% of rural households and 86% of urban households have zero savings.”

Ng said this likely meant that many people were living from pay cheque to pay cheque.

The main problem was the low salary structure in Malaysia, she added.

“We have the fifth highest mandatory contribution rates for retirement savings in the world, but somehow this does not translate into large retirement funds,” she said.

“What we need to do is have a culture of saving that is independent of EPF savings.

“Wage structures also need to be reviewed in line with the cost of living, but this must be compensated by increased productivity from employees.”