Malaysia maintains ‘C’ rating

KUALA LUMPUR: The Netherlands and Denmark offer “A” grade world-class retirement income systems with good benefits, while Malaysia retains its “C” rating, according to the Melbourne Mercer Global Pension Index.

Mercer Malaysia chief executive officer Hash Piperdy said despite the stable rating, measures needed to be taken to address the country’s ageing population.

More than five million Malaysians were expected to be above 60 years old by 2030, and nearly 10 million would be over 60 by 2050, he said.

“Malaysia’s sustainability score has decreased from 61.2 to 60.5, based on the index. There is still a gap which poses risks in the long-term sustainability in the system due to the ageing population. It is crucial as there are still many Malaysians without sufficient savings, besides the Employees Provident Fund.

“It is high time for industry and community groups to look into Private Retirement Schemes (PRS) and other ways to boost long-term savings more seriously,” said Piperdy in a statement.

Author of the study and senior partner at Mercer Australia Dr David Knox said to have a world-class pension system was to ensure the right balance between adequacy and sustainability.

“It is a challenge that policymakers are grappling with. For example, a system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is — what’s an appropriate trade-off?” he said.

Mercer International president David Anderson said it was a positive step to see governments addressing pension reform as life expectancies continue to rise.

“Developed economies have been aware of the demographic challenges facing their pension systems for some time.

“Where economies are less developed, it’s pleasing to see many governments recognising the same trends emerging in their own populations and taking steps to address this,” he said.