Solid pension, elderly support system needed as Malaysia becomes ageing nation
Elderly care support system also important, says expert
ASOLID pension mechanism and elderly care support system are crucial as Malaysia prepares to become an ageing nation by 2030, experts say.
For a start, they said, there was a need to review the Employees Provident Fund (EPF) members’ contribution rate and payout mechanism to address concerns about the lack of savings among retirees.
Malaysian Research Institute on Ageing (MyAgeing) senior research officer Chai Sen Tyng said although EPF had implemented syariah-compliant dividends and other initiatives, they still did not address the problem of inequality between lifetime high- and low-income earners.
He said the new rate of 24 per cent was too high and unnecessary under the new provisions.
The experience in other countries suggested that contribution rates beyond 20 per cent for retirement income risked becoming counter-productive.
“The contribution ceiling gives room to voluntary retirement savings and limits the role of government for people with income that is, say, two or three times the national average.
“The basic idea is that for people who make RM20,000 a month and someone who makes RM2,000 a month, the same dividend rate of five per cent might be fair but hardly equitable.
“In fact, EPF is making the gap between the rich and poor worse,” he said.
He cited the example of Singapore’s Central Provident Fund (CPF) as an alternative, which had a contribution ceiling of S$5,000.
The fund had fully transitioned into an annuity plan known as CPF Life, a scheme that provided a lifelong monthly payout starting from age 65.
Chai said the National Policy for Older Persons’ (2011) Plan of Action was due for a review.
He said MyAgeing had prepared a proposal to carry out a review of the plan of action under the Policy Division of the Women, Family and Community Development Ministry, with the support of the United Nations Population Fund Malaysia.
“We need to review the plan of action because some parts of the original plan have been carried out and the situation on the ground has changed, especially considering the impact of the Covid-19 pandemic.”
Another aspect to be considered was elderly care, which Chai said Malaysia was not doing poorly in based on the three major systems: social protection, healthcare, and labour market and the economy.
In terms of social protection, he said the government was trying to improve social assistance for older persons by increasing the value of cash transfers.
However, Malaysia had always been relying either on institutionalisation — like old folks’ homes — and financial assistance, with little else in between.
“Even on financial assistance, the public’s imagination has always been confined to either universal pension or universal basic income, ignoring other social protection reforms that might be targeted or equitable in today’s digital environment.
“Many Malaysians cite the Nordic model or long-term care insurance in Japan, but they lack an appreciation of the taxation and financing structure involved.”
Chai said Japan had a koseki, or household registration system, and in many countries, the “lastmile services” were provided by
the local government, while the ones in Malaysia played a rather limited role in comparison.
In addition, any policymaking, he said, should be done with prior consultative process with stakeholders that could improve public understanding of the risks and options available.
“The problem today is caused by a lack of discourse and evidence-based input, where public fears and concerns are not the same as the ones articulated by the experts.
“Solutions are aplenty, but the ultimate choice must be something that is sustainable.
“Because the masses have a poor understanding of how things work and how things can work, we can see how even our political leaders are hesitant to do the right thing in many instances because it may go against public opinion.”
This, he said, had led to a lethargic approach.
He cited the increase in aid for the elderly, called Bantuan Orang Tua (BOT), from RM350 to RM500, which had gained popularity among the masses.
However, he said the solution was not just about upping the quantum as this was an all-ornothing approach without a proper financing model.
This might end up with fewer people receiving aid because the government would not have enough funds to help more deserving people, he said.
Chai added data has shown that while the number of recipients of BOT increased, it has overtaken other target groups in terms of share of welfare.