Latest news with #AhmadZulqarnainOnn
Sinar Daily
3 days ago
- Business
- Sinar Daily
Malaysia faces retirement time bomb as longer lifespans, shrinking tax base threaten pension system
SHAH ALAM - Malaysia's retirement system is facing growing pressure as increasing life expectancy, declining savings and a shrinking taxpayer base raise doubts about the long-term viability of the nation's pension structure. Worries over Malaysians' preparedness for retirement have deepened, coming only three years after the government permitted large-scale withdrawals from the Employees Provident Fund (EPF) to help offset job losses during the Covid-19 pandemic. EPF Chief Executive Officer (CEO) Ahmad Zulqarnain Onn stressed the urgency for immediate action, saying it was crucial 'to ensure Malaysians are both financially and socially prepared for longer lifespans.' Projections now indicate that life expectancy could reach 81 years by 2050 — just 25 years away. With a rapidly aging population and a falling birth rate leading to a contracting tax base, fears are growing that future retirees may simply not have enough to live on. Malaysia's retirement savings landscape Malaysia's primary retirement mechanism is the EPF, a defined contribution (DC) scheme in which savings are built through employee and employer contributions, along with investment returns. Civil servants still enjoy a legacy defined benefit (DB) pension that guarantees monthly payouts based on final salary and tenure. While the DB model provides secure retirement income, it imposes significant long-term costs on public finances. Globally, DC schemes are seen as more sustainable because they shift investment and longevity risk away from governments, give individuals greater control over their funds and are easier to manage fiscally. The Covid-19 withdrawals hit hard Economic uncertainty in recent years has tested the resilience of Malaysia's DC model. During the pandemic, more than 8.1 million EPF contributors withdrew over RM145 billion from their accounts, often to cover immediate expenses such as rent, food and debt repayments. The result has been devastating to retirement readiness. Half of members aged 55 and below now have less than RM10,000 each, with the median balance at only RM10,898. Many accounts have been emptied entirely. The lifespan of the average Malaysian has risen, forcing the younger generation to bear the burden of sustaining them through old age for a longer period. Photo: Edited via Canva Living longer, but with less Life expectancy in Malaysia has risen sharply over the past three decades. Men now average 74.8 years and women 78.9 years, compared with 68.7 and 73.4 years respectively in 1990. This longevity comes at a cost. Someone retiring at 60 and needing RM1,500 a month for basic living expenses would require at least RM360,000 to last two decades. Yet, as of 2023, nearly 74 per cent of active EPF members had savings of under RM100,000. Enough for just five to six years, excluding healthcare and elderly care costs. A shrinking tax base compounds the problem Falling birth rates and low tax revenue are further eroding the sustainability of Malaysia's pension system. The country's tax-to-GDP ratio was just 12.6 per cent in 2023, far below the Asia-Pacific average of 19.3 per cent and the OECD average of 34 per cent. According to the Department of Statistics, the live birth rate dropped by 10.2 per cent to 100,732 in the second quarter of 2024 compared with the same period a year earlier. If this continues, there will be fewer taxpayers and EPF contributors in the future, even as more Malaysians retire. Countries that maintain generous DB pensions do so through high taxation and large reserves — conditions Malaysia does not currently have. Without reform, experts warned, the current system risks becoming unsustainable. Potential solutions on the table Experts suggested several measures to safeguard against retirees outliving their savings. These include promoting financial literacy, enhancing saving incentives, creating a modest social safety net and expanding aged-care facilities. One proposal is to introduce a hybrid pension system. Under this model, employees would keep contributing to EPF, but upon retirement, only part of their balance could be taken as a lump sum. The rest would be paid out monthly for life, similar to Singapore's CPF Life. This would reintroduce a guaranteed minimum lifetime income — a feature of the old DB pension — without overburdening public finances. In addition, tax incentives, matching contributions and voluntary top-up schemes could help rebuild depleted savings. The urgency for reform is growing. As Ahmad Zulqarnain emphasised, Malaysia must act now 'to ensure Malaysians are both financially and socially prepared for longer lifespans.' Without decisive action, today's workers could become tomorrow's financially vulnerable elderly — living longer, but going broke sooner.
Borneo Post
5 days ago
- Business
- Borneo Post
How Malaysians are growing old and going broke
With a population rapidly ageing, and a fall in birth rates leading to a contracting tax base, the fear that future retirees may not have enough to get by is rising. – AI IMAGE PETALING JAYA (Aug 7): Concerns with readiness for retirement are intensifying, just three years after the government first allowed people to dip into their nest egg to get through job losses during the Covid-19 pandemic. Employees Provident Fund (EPF) CEO Ahmad Zulqarnain Onn couldn't have stressed the point more succinctly in his call for prompt measures to be taken to ensure Malaysians are both financially and socially prepared for longer lifespans. Every projection now indicates that life expectancy could reach 81 years by 2050, just a quarter of a century away. With a population rapidly ageing, and a fall in birth rates leading to a contracting tax base, the fear that future retirees may not have enough to get by is rising. FMT takes a look at the escalating challenges of retirement affordability in Malaysia and how potential reforms today can secure workers' financial future tomorrow. Overview of Malaysia's retirement savings system Malaysia's primary retirement mechanism is EPF, a defined contribution (DC) scheme where individual and employer contributions, alongside investment returns, constitute an employee's retirement savings. A legacy defined benefit (DB) pension that ensures monthly payments based on final salary and tenure remains in effect for civil servants. The DB model, though secure for beneficiaries, imposes substantial long-term costs on public finances. Conversely, the DC approach is increasingly regarded as more sustainable globally, as it transfers investment and longevity risk away from the government, offers individuals enhanced control and portability, and presents fewer fiscal management challenges. Impact of Covid‑19 withdrawals Economic volatility of recent years has put the predictability of the DC model to the test. More than 8.1 million EPF contributors withdrew over RM145 billion from their savings during the pandemic, often to offset job losses or settle debts. Many have almost or entirely emptied out their reserves, with half of those aged 55 and below having been left with less than RM10,000 each. The median balance now stands at only RM10,898. Rising life expectancy The concerns are compounded by the fact that Malaysians now live longer. Men now average 74.8 years and women 78.9 years, up from 68.7 years for men and 73.4 years for women in 1990. If one retires at 60, and assuming he or she needs RM1,500 a month to sustain a decent life, he will need at least RM360,000 in the bank to last him up to two decades. However, as of 2023, nearly 74 per cent of active EPF members had accumulated less than RM100,000 each, which is insufficient for even five to six years – without considering escalating healthcare and elderly care costs. Demographic and fiscal challenges As birth rates fall, the tax base is shrinking, making it unsustainable to continue with a DB pension system. Malaysia's tax-to-GDP ratio was just 12.6% in 2023, far below the Asia-Pacific average of 19.3 per cent and the OECD average of 34 per cent. At the same time, the country's life birth rate fell by 10.2 per cent to 100,732 in Q2 2024 compared with the previous corresponding period, according to data from the department of statistics. If this trend continues, there will be fewer taxpayers and EPF contributors going forward, slowing fund growth just as more people join the ranks of retirees. In contrast, countries with generous DB pensions can sustain their retirees because they collect higher taxes and have built a large reserve. On the other hand, Malaysia has limited tax revenue and a smaller reserve, making it impossible to sustain a fully tax-funded pay-as-you-go pension scheme without major reform. Potential solutions To safeguard against the risk of exhausting retirement reserves, Malaysia must promote greater financial literacy, enhance saving incentives, develop a modest social safety net, and establish integrated aged-care facilities to support its ageing population. Introducing a hybrid pension scheme could restore some benefits of the former DB system while retaining sustainability. Within this framework, employees would continue contributing to their EPF accounts. However, upon retirement, only a portion could be withdrawn as a lump sum, with the remainder distributed as monthly payments throughout their lifetime. Such an arrangement partially reinstates the protective features of the legacy civil-service pension – a guaranteed lifelong minimum income – while avoiding the fiscal strain of a fully tax-funded model. Singapore's CPF Life serves as a relevant example, blending personal savings with lifelong payouts to prevent retirees from outliving their resources. This proposed hybrid reform holds promise for ensuring retirees maintain a basic standard of living, even if individual savings are depleted. Moreover, initiatives aimed at bolstering financial education and facilitating easier EPF top-ups – whether through matching contributions, tax incentives, or voluntary programmes – could meaningfully replenish and grow retirement savings. Urgency is mounting for comprehensive reform. By integrating individual responsibility with inter-generational support, Malaysia can help ensure that today's workers do not become tomorrow's financially vulnerable retirees. *This article was first published by epf reform retirees savings social protection
Borneo Post
5 days ago
- Business
- Borneo Post
How Malaysians are growing old and going broke as increasing lifespans, shrinking tax base threaten current pension scheme
With a population rapidly ageing, and a fall in birth rates leading to a contracting tax base, the fear that future retirees may not have enough to get by is rising. – AI IMAGE PETALING JAYA (Aug 7): Concerns with readiness for retirement are intensifying, just three years after the government first allowed people to dip into their nest egg to get through job losses during the Covid-19 pandemic. Employees Provident Fund (EPF) CEO Ahmad Zulqarnain Onn couldn't have stressed the point more succinctly in his call for prompt measures to be taken to ensure Malaysians are both financially and socially prepared for longer lifespans. Every projection now indicates that life expectancy could reach 81 years by 2050, just a quarter of a century away. With a population rapidly ageing, and a fall in birth rates leading to a contracting tax base, the fear that future retirees may not have enough to get by is rising. FMT takes a look at the escalating challenges of retirement affordability in Malaysia and how potential reforms today can secure workers' financial future tomorrow. Overview of Malaysia's retirement savings system Malaysia's primary retirement mechanism is EPF, a defined contribution (DC) scheme where individual and employer contributions, alongside investment returns, constitute an employee's retirement savings. A legacy defined benefit (DB) pension that ensures monthly payments based on final salary and tenure remains in effect for civil servants. The DB model, though secure for beneficiaries, imposes substantial long-term costs on public finances. Conversely, the DC approach is increasingly regarded as more sustainable globally, as it transfers investment and longevity risk away from the government, offers individuals enhanced control and portability, and presents fewer fiscal management challenges. Impact of Covid‑19 withdrawals Economic volatility of recent years has put the predictability of the DC model to the test. More than 8.1 million EPF contributors withdrew over RM145 billion from their savings during the pandemic, often to offset job losses or settle debts. Many have almost or entirely emptied out their reserves, with half of those aged 55 and below having been left with less than RM10,000 each. The median balance now stands at only RM10,898. Rising life expectancy The concerns are compounded by the fact that Malaysians now live longer. Men now average 74.8 years and women 78.9 years, up from 68.7 years for men and 73.4 years for women in 1990. If one retires at 60, and assuming he or she needs RM1,500 a month to sustain a decent life, he will need at least RM360,000 in the bank to last him up to two decades. However, as of 2023, nearly 74 per cent of active EPF members had accumulated less than RM100,000 each, which is insufficient for even five to six years – without considering escalating healthcare and elderly care costs. Demographic and fiscal challenges As birth rates fall, the tax base is shrinking, making it unsustainable to continue with a DB pension system. Malaysia's tax-to-GDP ratio was just 12.6% in 2023, far below the Asia-Pacific average of 19.3 per cent and the OECD average of 34 per cent. At the same time, the country's life birth rate fell by 10.2 per cent to 100,732 in Q2 2024 compared with the previous corresponding period, according to data from the department of statistics. If this trend continues, there will be fewer taxpayers and EPF contributors going forward, slowing fund growth just as more people join the ranks of retirees. In contrast, countries with generous DB pensions can sustain their retirees because they collect higher taxes and have built a large reserve. On the other hand, Malaysia has limited tax revenue and a smaller reserve, making it impossible to sustain a fully tax-funded pay-as-you-go pension scheme without major reform. Potential solutions To safeguard against the risk of exhausting retirement reserves, Malaysia must promote greater financial literacy, enhance saving incentives, develop a modest social safety net, and establish integrated aged-care facilities to support its ageing population. Introducing a hybrid pension scheme could restore some benefits of the former DB system while retaining sustainability. Within this framework, employees would continue contributing to their EPF accounts. However, upon retirement, only a portion could be withdrawn as a lump sum, with the remainder distributed as monthly payments throughout their lifetime. Such an arrangement partially reinstates the protective features of the legacy civil-service pension – a guaranteed lifelong minimum income – while avoiding the fiscal strain of a fully tax-funded model. Singapore's CPF Life serves as a relevant example, blending personal savings with lifelong payouts to prevent retirees from outliving their resources. This proposed hybrid reform holds promise for ensuring retirees maintain a basic standard of living, even if individual savings are depleted. Moreover, initiatives aimed at bolstering financial education and facilitating easier EPF top-ups – whether through matching contributions, tax incentives, or voluntary programmes – could meaningfully replenish and grow retirement savings. Urgency is mounting for comprehensive reform. By integrating individual responsibility with inter-generational support, Malaysia can help ensure that today's workers do not become tomorrow's financially vulnerable retirees. *This article was first published by epf reform retirees savings social protection
Free Malaysia Today
5 days ago
- Business
- Free Malaysia Today
How Malaysians are growing old and going broke
The lifespan of the average Malaysian has risen, forcing younger generations to bear the burden of sustaining them through old age for a longer period. (File pic) PETALING JAYA : Concerns with readiness for retirement are intensifying, just three years after the government first allowed people to dip into their nest egg to get through job losses during the Covid-19 pandemic. Employees Provident Fund (EPF) CEO Ahmad Zulqarnain Onn couldn't have stressed the point more succinctly in his call for prompt measures to be taken to ensure Malaysians are both financially and socially prepared for longer lifespans. Every projection now indicates that life expectancy could reach 81 years by 2050, just a quarter of a century away. With a population rapidly ageing, and a fall in birth rates leading to a contracting tax base, the fear that future retirees may not have enough to get by is rising. FMT takes a look at the escalating challenges of retirement affordability in Malaysia and how potential reforms today can secure workers' financial futures tomorrow. Overview of Malaysia's retirement savings system Malaysia's primary retirement mechanism is EPF, a defined contribution (DC) scheme where individual and employer contributions, alongside investment returns, constitute an employee's retirement savings. A legacy defined benefit (DB) pension that ensures monthly payments based on final salary and tenure remains in effect for civil servants hired prior to October 2001. Civil servants entering service after this date now participate in the same EPF system as private-sector employees, making their retirement income wholly dependent on accumulated contributions and investment performance. The DB model, though secure for beneficiaries, imposes substantial long-term costs on public finances. Conversely, the DC approach is increasingly regarded as more sustainable globally, as it transfers investment and longevity risk away from the government, offers individuals enhanced control and portability, and presents fewer fiscal management challenges. Impact of Covid‑19 withdrawals Economic volatility of recent years has put the predictability of the DC model to the test. More than 8.1 million EPF contributors withdrew over RM145 billion from their savings during the pandemic, often to offset job losses or settle debts. Many have almost or entirely emptied out their reserves, with half of those aged 55 and below having been left with less than RM10,000 each. The median balance now stands at only RM10,898. Rising life expectancy The concerns are compounded by the fact that Malaysians now live longer. Men now average 74.8 years and women 78.9 years, up from 68.7 years for men and 73.4 years for women in 1990. If one retires at 60, and assuming he or she needs RM1,500 a month to sustain a decent life, he will need at least RM360,000 in the bank to last him up to two decades. However, as of 2023, nearly 74% of active EPF members had accumulated less than RM100,000 each, which is insufficient for even five to six years – without considering escalating healthcare and elderly care costs. Demographic and fiscal challenges As birth rates fall, the tax base is shrinking, making it unsustainable to continue with a DB pension system. Malaysia's tax-to-GDP ratio was just 12.6% in 2023, far below the Asia-Pacific average of 19.3% and the OECD average of 34%. At the same time, the country's life birth rate fell by 10.2% to 100,732 in Q2 2024 compared with the previous corresponding period, according to data from the department of statistics. If this trend continues, there will be fewer taxpayers and EPF contributors going forward, slowing fund growth just as more people join the ranks of retirees. In contrast, countries with generous DB pensions can sustain their retirees because they collect higher taxes and have built a large reserve. On the other hand, Malaysia has limited tax revenue and a smaller reserve, making it impossible to sustain a fully tax-funded pay-as-you-go pension scheme without major reform. Potential solutions To safeguard against the risk of exhausting retirement reserves, Malaysia must promote greater financial literacy, enhance saving incentives, develop a modest social safety net, and establish integrated aged-care facilities to support its ageing population. Introducing a hybrid pension scheme could restore some benefits of the former DB system while retaining sustainability. Within this framework, employees would continue contributing to their EPF accounts. However, upon retirement, only a portion could be withdrawn as a lump sum, with the remainder distributed as monthly payments throughout their lifetime. Such an arrangement partially reinstates the protective features of the legacy civil-service pension – a guaranteed lifelong minimum income – while avoiding the fiscal strain of a fully tax-funded model. Singapore's CPF Life serves as a relevant example, blending personal savings with lifelong payouts to prevent retirees from outliving their resources. This proposed hybrid reform holds promise for ensuring retirees maintain a basic standard of living, even if individual savings are depleted. Moreover, initiatives aimed at bolstering financial education and facilitating easier EPF top-ups – whether through matching contributions, tax incentives, or voluntary programmes – could meaningfully replenish and grow retirement savings. Urgency is mounting for comprehensive reform. By integrating individual responsibility with inter-generational support, Malaysia can help ensure that today's workers do not become tomorrow's financially vulnerable retirees.
The Sun
18-06-2025
- Business
- The Sun
Lump sum withdrawals may undermine long-term retirement security
KUALA LUMPUR: The practice of lump sum retirement withdrawals may jeopardise long-term financial security and increase the risk of retirees outliving their savings, said Employees Provident Fund (EPF) chief executive officer Ahmad Zulqarnain Onn. He said that only a small proportion of EPF members currently meet the basic savings threshold, while over 58 per cent of working-age Malaysians are not contributing to any formal retirement scheme. 'If Malaysia is serious about preparing for a 100-year life, we must fundamentally rethink how we work, save, engage and care, across all stages of life,' he said. Ahmad Zulqarnain added that the EPF is exploring enhanced accumulation strategies, including structured monthly withdrawal options, to help members manage longevity risks and ensure the sustainability of their retirement savings. 'We are intensifying efforts to promote retirement literacy, particularly among youth, informal workers and vulnerable groups, to build a culture of long-term saving and informed financial decision-making,' he said during his closing remarks at the International Social Wellbeing Conference 2025, themed 'Living to a Hundred: Are We Prepared?' held here today. As Malaysians live and work longer, he said the country must eventually align the full EPF withdrawal age with the national minimum retirement age to ensure a more coherent and secure transition into later life. 'The EPF remains committed to turning this challenge into an opportunity by delivering retirement solutions that are inclusive, sustainable and future-ready,' he said. 'Our shared responsibility is to build systems that enable Malaysians to age with dignity and social connection,' he added.
