Malaysia's golden opportunity: why 65 is the new 60 for retirement

Free Malaysia Today

3 days ago

From J Solomon
Azalina Othman Said's recent proposal to raise Malaysia's retirement age to 65 is not merely a recommendation; it is a vital and timely call to action – one that the National Union of Bank Employees (NUBE) wholeheartedly supports.
The suggestion by the law and institutional reform minister aligns perfectly with NUBE's own advocacy in our yet-to-be-negotiated 20th collective agreement, and we are ready to assist the minister in realising this crucial initiative.
Consider the global landscape: countries like Canada and the US already have 65 as the retirement age, while Australia has raised it to 67. Several nations in the EU are also signalling similar moves in response to demographic shifts and increased life expectancy, so why not Malaysia?
Hundreds of thousands may be retiring too early
In the private sector, general estimates suggest that about 200,000 workers retire every year. This is a broad estimate and not strictly tied to the age of 60, as private sector retirement clauses can vary – some may retire earlier or later.
In the public sector, some 1,804 civil servants under 60 opted for early retirement in the first nine months of 2024, according to the latest publicly available data from the Prime Minister's Department. As in the private sector, it's important to note that these are early departures, not retirements upon reaching the mandatory retirement age.
In the banking sector particularly, NUBE has seen a significant decline in membership over the past 25 years, dropping from an estimated 30,000 three decades ago to about 15,000 members currently. As older workers retire and technology advances, many traditional clerical and routine banking positions have been abolished or are increasingly handled by automation and artificial intelligence.
Why a more senior workforce is good for the banking industry
A more senior workforce can be highly beneficial for the banking industry. Senior employees often possess decades of experience and invaluable tacit knowledge. They've navigated various economic cycles, regulatory changes, and shifts in customer behaviour, offering insight that younger, less experienced employees may lack. This experience is crucial for complex problem-solving, risk management, and strategic decision-making.
Senior bankers can also serve as excellent mentors to younger colleagues. They tend to establish long-standing relationships with clients – relationships built on trust and a deep understanding of financial needs. These are invaluable for customer retention and business growth. Older clients, in particular, may feel more comfortable dealing with bankers of a similar age.
Moreover, senior workers typically exhibit higher job satisfaction and lower turnover rates than younger staff. This stability can reduce recruitment and training costs, while contributing to a more consistent and reliable workforce. Banks can invest in upskilling and reskilling programmes for older employees, fostering an age-inclusive workplace culture that values both experience and technological capability.
Early retirement option: more pros for the young generation
Raising the retirement age to 65 must still allow workers the flexibility to retire at 60 if they choose to do so. This ensures that individual circumstances, health conditions, and financial readiness are taken into account.
One major benefit of extending the retirement age is the reduced risk of seniors becoming a financial burden on their children. By remaining in the workforce longer, individuals can support their own living expenses, healthcare, and lifestyle, alleviating potential strain on the younger generation. This promotes intergenerational financial independence and can improve the overall quality of life for retirees.
Furthermore, empirical evidence from Malaysia's previous retirement age increase in 2012 suggests that allowing senior workers to remain employed for an additional five years has not significantly hindered the job prospects or earnings of younger workers.
More than a decade has passed since that adjustment, and there is no widespread evidence that it created a bottleneck in career progression or suppressed wages for new entrants into the workforce.
In fact, changing preferences among the younger generation support this argument. A growing number of younger Malaysians are drawn to the flexibility and autonomy offered by the gig economy, entrepreneurship, and commission-based or on-field jobs.
These alternatives contrast with the traditional desk-bound roles often held by older workers, suggesting a natural diversification of the labour market. As younger workers pursue these new employment models, the presence of older workers in conventional roles is less likely to compete with them, mitigating concerns over job scarcity for new graduates and early-career professionals.
The time to act is now
The advantages of raising the retirement age by another five years in both the private and public sectors far outweigh the drawbacks.
Malaysia's aging population means people are living longer and healthier lives. Yet our current retirement age of 60 may be pushing productive individuals out of the workforce prematurely, thereby wasting valuable human capital.
Some may express concern about work-life balance. But we must reframe our understanding: a longer working life does not necessarily mean more strenuous work. It can involve phased retirement, flexible roles, and a greater focus on leveraging experience. The emphasis should be on the quality of work life, not merely its duration.
A longer working life also addresses the issue of financial security. With the cost of living rising and many Malaysians having alarmingly low EPF balances, extending the retirement age to 65 offers a critical opportunity to build stronger retirement savings. It ensures a more dignified future and improves pension fund sustainability.
J Solomon is the general secretary of the National Union of Bank Employees and a FMT reader.
The views expressed are those of the writer and do not necessarily reflect those of FMT.