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New Straits Times
10 hours ago
- Business
- New Straits Times
Safeguards critical in tapping EPF savings for private healthcare, says expert
KUALA LUMPUR: A bold plan to allow Malaysians to tap into their Employees Provident Fund (EPF) Account 2 to pay for health insurance may help ease access to private healthcare. However, an analyst cautions that without careful safeguards, it could leave retirees vulnerable later in life. The proposal, which aims to address rising healthcare costs and access concerns, is a potentially meaningful step, particularly for middle-income earners and the ageing population, who are often excluded from targeted public health aid. Universiti Putra Malaysia School of Business and Economics lecturer Associate Professor Dr Lee Chin said that while the initiative fills a gap in health protection, the long-term implications for retirement adequacy must not be overlooked. "From a social protection standpoint, enabling the use of EPF savings for health insurance could fill an important gap, especially for the ageing population and middle-income groups who fall outside public safety nets. However, contributors must be well-informed. "Account 2 was designed to support housing, education and emergencies — all of which are already pressing needs. Allowing health insurance payments from the same source adds another layer of pressure," she told the New Straits Times. Lee added that without proper caps or financial literacy support, contributors risk depleting their savings too quickly, leaving little for their retirement years. From a broader policy perspective, she said such flexibility should be paired with strong public education campaigns to help contributors make informed decisions, alongside safeguards to ensure withdrawals are responsibly managed. "At the same time, the move could have ripple effects on the health insurance sector. By enabling more people — particularly those previously uninsured — to afford private coverage, the insurance pool could grow, improving risk distribution and potentially lowering premium costs over time." However, she cautioned that a sudden spike in demand could also lead to higher premiums or moral hazard without sufficient regulatory oversight. "Insurers and regulators must be prepared to monitor cost escalation and prevent abuse," she said. As for fund sustainability, Lee said that while Account 1 remains ring-fenced for retirement, even partial erosion of Account 2 could undermine long-term financial resilience, particularly among lower to middle-income groups. She cited examples such as Singapore's MediSave and Chile's pension-linked health models, which allow similar withdrawals under strict regulatory frameworks, often supported by employer or government co-payments. "Malaysia can learn from these examples to design a scheme that is targeted, transparent and accountable." She added that the policy could serve as a much-needed bridge between financial and health protection, provided it is not treated as a short-term fix. "In short, this policy could bridge the gap between financial security and health protection —but only if it walks the line carefully. Health access should not come at the cost of growing old in hardship." On June 19, Health Minister Datuk Seri Dr Dzulkefly Ahmad said the government was considering allowing EPF members to use their Account 2 savings to pay for monthly health insurance premiums. He said that, if implemented, the initiative could enable 16 million EPF contributors to access private hospital treatment using their contributions. However, Dzulkefly later clarified that the proposed health insurance scheme — funded through EPF Account 2 — would be voluntary and not mandatory.
New Straits Times
22-05-2025
- Business
- New Straits Times
Raising retirement age could boost financial preparedness among older Malaysians
KUALA LUMPUR: Retiring at 60 may leave many Malaysians financially vulnerable as the longer lifespans and rising cost of living strain most people's savings, an economist warns. Universiti Putra Malaysia School of Business and Economics lecturer Associate Professor Dr Lee Chin said extending the retirement age to 65 could improve financial preparedness among older Malaysians, particularly civil servants. "Allowing civil servants to remain in the workforce longer enables them to earn a stable income, contribute to their retirement savings and delay the drawdown of their pension or Employee Provident Fund savings," she told the New Straits Times. She added that the current cost of living and increased life expectancy made early retirement increasingly unsustainable, especially for those who had not accumulated enough savings to last 20 to 30 years post-retirement. However, Lee said, any decision to raise the retirement age must be accompanied by efforts to retrain older workers and ensure workplace policies supported intergenerational balance. Her remarks followed renewed discussions on whether the government should revise the statutory retirement age, currently set at 60, in light of demographic and economic changes. On Tuesday, Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said suggested that the government should consider raising the retirement age to 65, citing the capability and experience of older workers. Malaysian Society of Geriatric Medicine president Professor Tan Maw Pin said retiring at 60 no longer reflected the realities of a population that was living longer but remained financially unprepared for extended lifespans. "With a rapidly ageing population and a shrinking workforce, we no longer have the luxury of retiring early. "Many who retire at 60 risk running out of funds midway through retirement, which could make their final years extremely difficult," she said. Tan said older adults without sufficient financial support might end up relying entirely on their adult children, placing additional pressure on younger families. Beyond financial concerns, she said continued employment also provided mental stimulation, purpose, and social engagement — all important elements of healthy ageing. "Work brings routine and keeps the mind engaged. Stopping work too early can lead to prolonged inactivity, which increases the risk of cognitive decline and conditions such as dementia," she said. Tan added that keeping the brain active helped strengthen neural connections and could prevent brain shrinkage. "Many people rely on their work colleagues for social interaction and once retired, the risk of social isolation becomes very real. "Social isolation is as significant a risk factor for poor health as cigarette smoking."
