Reforms are needed to improve the sustainability and adequacy of Malaysians’ retirement savings, according to panellists at Asia Asset Management’s 12th Annual Malaysia Roundtable.
The panellists also agreed that improving financial literacy and innovation in product development are vital in improving the retirement landscape.
“No one should be left behind in the retirement phase. So, we do need to think of a needs-based basic income stream. We cannot avoid that, because there’s no way someone with 5,000 ringgit in their EPF [Employees Provident Fund] account can live in a dignified manner,” said Joseph Cherian, deputy chief executive officer and practice professor of finance at Asia School of Business. “We also need to include the gig economy and gig workers.”
Cherian was one of the panellists at the panel discussion entitled Enhancing Retirement Savings and Investments. Other panellists in the discussion were Ismitz Matthew De Alwis, executive director and chief executive officer at Kenanga Investors, and Nazaiful Affendi, senior director, portfolio strategy and research department at Kumpulan Wang Persaraan (KWAP).
The session was moderated by Sherry Sheriff, co-founder of Wahine Capital.
Estimates from the United Nations show that Malaysia will move from an aging to an aged nation in just 23 years, when 14% of the population will be more than 65 years old and reach super-aged status 14 years later when 21% will be older than 65.
Data from the EPF, a pension fund responsible for managing the retirement savings of Malaysia’s private sector employees and self-employed, showed that most members deplete their retirement savings within five years of their lump sum withdrawal. EPF members are allowed to withdraw all their retirement savings as soon as they hit 55 years old.
On top of that, the government is also looking at introducing a new pension scheme for the public sector. KWAP is currently responsible for managing the retirement savings of civil servants in Malaysia.
Nazaiful agreed that pension reforms are needed but added that reforms should be looked at in their entirety and should also address areas like social security and old age income security.
“All relevant stakeholders have to be involved actively,” he said.
Nazaiful said that it is also important that Malaysians continue to improve their financial literacy, and their awareness of retirement savings.
During the panel discussion, one participant noted that 40% of Malaysians do not have a retirement plan due to their lack of disposable income.
De Alwis said innovation on product development will also play a role, as developing the right products and solutions can help boost retirement income.
“When we speak to clients or prospective clients, they often say that they do not have the allocation or budget to invest. But, when we show them the right products, they will invest. I believe that with the right products, the challenges of retirement savings can be addressed,” he said.
