LETTERS: In Malaysia, the average life expectancy in 2023 is 76.65 years, an increase from 76.51 in 2022.
Although the pension system in Malaysia is well organised, there may be future challenges given the country's rising life expectancy and the fact that the majority of the population fall under the senior citizen category.
The first challenge for Malaysia's pension system is that, given the rising trend in life expectancy, it must, at the very least, provide its retirees with an additional 16 years of savings after they leave the service.
A pensioner needs to have at least RM576,000 for 16 years, given the RM3,000 monthly living expenses for senior citizens in Malaysia.
They, however, require RM600,000 due to health and other fragilities.
Therefore, it may be prudent to change the pension system so that retirees can reap the benefits over an extended period of time.
The second challenge pertains to the continuously rising cost of living.
According to Belanjawanku 2022-2023, a senior citizen's anticipated monthly budget is RM2,520 for a single person and RM3,210 for a pair. Therefore, to meet the senior citizen's current monthly expenses, the last received pay should be at least RM5,500 based on the current Malaysian maximum pension computation of 60 per cent.
However, a worker who only draws RM1,500 as minimum pay will not be able to reach RM5,500 as maximum pension.
Raising the next generation's level of education and basic pay is one way to ensure that Malaysia benefits from the pension system.
The mean pay for young people with tertiary education is RM4,643, the highest of any degree of education, according to RinggitPlus Malaysia (2019).
Meanwhile, young people with primary and secondary education earn an average wage of RM1,929 and RM2,372, respectively. Hence, higher educational attainment, a higher basic salary and the highest eligible pension amount are vital.
The final challenge is the portfolio management of the pension fund.
The rising trend in interest rates in the United States, coupled with lower interest rates in Malaysia and most other nations, will make managing the pension fund's portfolio more difficult.
It will be increasingly difficult to predict which domestic or foreign investments have the potential to yield larger profits.
The Retirement Fund Inc Malaysia (KWAP) needs to be more robust and analytically proficient.
The government should initiate a comprehensive review of the pension system, considering adjustments that align with the increasing life expectancy and the financial needs of our senior citizens.
Simultaneously, businesses and educational institutions should work in tandem to elevate the earning potential of the younger workforce through enhanced education and improved basic pay.
Furthermore, the portfolio management of the pension fund requires a strategic overhaul, and institutions like KWAP must enhance their analytical capabilities to navigate the evolving global economic landscape.
The time for action is now, and by working together, we can ensure a secure and prosperous retirement for generations to come.
DR ADILAH A. WAHAB
Senior lecturer, Faculty of Business and Economics, Universiti Malaya
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times