Private retirement schemes, higher wages the way to go

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expectancy and political economy of a different era. People now live longer, thanks to better nutrition and healthcare. Although the government has increased the retirement age to 60, it is still far from the global benchmark. Improved circumstances now allow for active ageing. Even if some retire early, the state must provide an option for those who are prepared to work beyond the official retirement age.

On that note, active ageing should be a new catchphrase. Malaysia needs to invest in wellness programmes to prepare for the large influx of retirees come 2030-2035. We need to invest in a sporting nation. A sporting nation will take the burden off rising healthcare and retirement costs. An active and healthy lifestyle should be the new national motto.

Wages also need to keep up with retirement concerns. Malaysia’s wage-capital share, at 35 per cent, is grossly below the global average. Companies need to do more to increase wages. Higher wages could act in the companies’ best interest. An increase of 10 per cent from the present ratio could produce a multiplier effect on the economy and prepare employees for retirement. Of course, increasing the ratio must come with better employee productivity.

This is also a good time to look at private retirement schemes (PRSs). In the long run, PRSs will be the best way to address the uncertainty that comes with the geek economy and changing nature of jobs. With more choosing to be self-employed, PRS could capture the retirement needs of the next generation. The last government budget had provisions to encourage more youth to take up private retirement plans. The announcement fitted well with the plan to develop capital markets, but more needs to be done in publicity and promoting financial literacy programmes.

Addressing retirement requires a holistic approach. Retirement concerns may not be so bleak if financial coverage, changing nature of jobs, demographic change and rising healthcare costs are planned for. The good news is that more are appreciating these issues given the increasing discussions on social security.