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FMT: Time to fix the pension system

By November 15, 2022November 2nd, 2023No Comments

Those who have overdrawn on their pension funds leave themselves vulnerable in their senior years.

PETALING JAYA: The Malaysian pension and social protection system is broken and concrete steps are now necessary to ensure that retirees do not live out their golden years in poverty, according to the Malaysian Institute of Economic Research (MIER).

It noted that withdrawals from the Employees Provident Fund (EPF) to help contributors meet financial obligations as a result of job losses during the Covid-19 pandemic had depleted their nest egg.

Collectively, EPF contributors have taken out more than RM145 billion over four withdrawals allowed under various schemes since the pandemic began in March 2020.

As a result, MIER noted, millions of Malaysians are now left with little or no money in their retirement funds.

This has caused an imbalance in the pension system, it said in a summary of a report on its Sept 6 policy roundtable on the future of pensions and social protection in Malaysia.

“There is an urgency to recognise that the present provisions are inadequate,” the MIER said.

“A comprehensive assessment must be carried out, with long and short term impacts for a holistic model that includes a non-contributory pillar, a mandatory contributory pillar and private retirement schemes,” it added.

MIER said that apart from reform, how care assistance and support should be provided and financed remains another issue in retirement that is ignored.

“Where we age” needs to be addressed as well as “how we age”, as MIER puts it.

From the “where” and “how”, it should also cover those who are not in the labour force like those working in informal jobs, and non-Malaysians living here such as foreign workers and refugees.

The reform, MIER said, should be universal, and holistic in providing sufficient income to cover basic expenses, healthcare, insurance and cost of living.

It recommended that the next government forms an independent national pension review panel to address these challenges as well as introduce a “superfund” to provide sustainable financial solutions.

The country should be ambitious and to strive for better security for all Malaysians in retirement, MIER added.