Affording old age

Private sector pensions should be part of Malaysia’s rise to developed status

GROWING old is not the easiest thing to cope with, especially for private sector retirees with meagre savings and without hope of a job. Advances in medical science and generally improved public healthcare plus an awareness of hygiene has meant that retirement can last quite a while before death overtakes and the cares of this world are done with. For low and middle-income workers, the Employees Provident Fund (EPF) payout at 55 is unlikely to be sufficient for a lifespan that could go on for 20 years or longer. Often, longevity leads to impoverishment and dependence on sometimes errant children who already have enough on their plates. In short, the golden years do not necessarily translate into happy days, free of work stress and regimented schedules. And when health issues arise, which is not unexpected with age, matters can only get worse.

Therefore, a pension fund for private sector employees is certainly worth mulling over if Malaysians are indeed to enjoy the advantages of being citizens of a fully developed nation by 2020. For one of the main attributes of progress is the standard of care society provides for its senior citizens. Increasing the retirement age to keep the fit and able in productive work for longer is a necessary but only a partial solution. The need for a pension becomes more urgent as the population greys, and more of the elderly risk indigence. However, as has been the quandary in many advanced nations, an aging population is not without its problems.

The most obvious is the question of funding a pension scheme for the growing number of the healthy and not-so-healthy old who deserve to be cared for given their past contributions to national growth and development.

While the population ages, the proportion of those in work, and thus paying taxes, usually declines. What level of taxation is tolerable before this acts as a disincentive then becomes a major headache for governments. Can future generations be inured with the notion of responsibility towards their elders and thus increase their taxation tolerance levels? Or should the EPF be enlarged or diversified into other pension funds? Should higher savings on top of current arrangements be enforced on the private sector and individuals or be left to the government? Or some combination of the two? Private retirement accounts should also be reasonably secured against losses so that financial crisis will not put the future of too many pensioners on the line. Implementing sustainable social safety nets is one of civilised humanity's great challenges. Malaysia should start thinking about it now.

Affording old age

Private sector pensions should be part of Malaysia’s rise to developed status

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