More aid, higher savings needed to boost retirement incomes

PETALING JAYA: Malaysia needs to give more aid to the poorest among its elderly population, boost savings, and cut household debt to strengthen retirement incomes.

These are among the measures suggested by the Mercer CFA Institute’s 2023 Global Pension Index report, which benchmarked the retirement income system in 47 countries including Malaysia.

The report evaluated Malaysia’s retirement income system based on the Employees Provident Fund (EPF) scheme and placed the country in 32nd place.

Netherlands appeared top of the pension index, followed by Iceland and Denmark.

Three other South-East Asian countries were included in the index, led by Singapore that came in seventh followed by Indonesia (41), Thailand (44) and the Philippines (46).

The report said Malaysia should also consider introducing a requirement that allows part of the retirement benefit to be taken as an income stream.

In addition, the country needs to raise the pension age and labour force participation rate to older ages as life expectancy continues to rise.

The index measured each country’s retirement income system using more than 50 indicators, including benefits, savings, government support, pension coverage, government debt, public expenditure, regulation, governance and operating costs.

Malaysia, according to the report, recorded an index value of 56.0 in 2023, down from 63.1 the previous year.

The drop, the report explained, was primarily due to the significant reduction in the net replacement rates published by the OECD (Organisation for Economic Cooperation and Development) from the rates previously used.

“The net replacement rates use the OECD economic assumptions and allow for country-specific projections of mortality rates and the relevant retirement ages,” the report said.