‘Reform of pension system needed to cope with ageing population’

KUALA LUMPUR: The government should seek ways to reform the current pension scheme in anticipation of the country’s ageing population and to mitigate its impact on economic growth.

According to the ‘ Economic Outlook 2019 Report’ released by the Ministry of Finance yesterday, the current pension scheme might not be sustainable in the long run as it would pose a larger financial burden to the government’s fiscal position.

“Currently, the civil service pension scheme is adopting the unfunded arrangement (pay as you go) where it is disbursed directly from the Federal government budget. Therefore, to ensure a sustainable fiscal position in the long run, the civil service pension scheme could be improved and modernised by introducing the defined contribution scheme for new recruitments in the civil services,” the report said.

As of 2017, the number of people aged 65 and above in Malaysia was approximately two million – or 6.3 per cent of the total population. By 2020, the number is projected to increase to 2.4 million, constituting about seven per cent of the population; hence becoming an ageing nation.

Outlining several measures to mitigate the negative impact of population ageing on the economic growth, the report suggested that increasing female labour force participation rate would partially reduce the downward pressure on labour following population ageing. Last year, the female and male labour force participation rates stood at 54.5 per cent and 80.1 per cent, respectively.

“Therefore, intensifying the implementation of various policies ranging from flexible working arrangements, provision of quality childcare facilities, skillstraining and entrepreneurship programmes for women will accelerate women’s participation in the labour force,” said the report.

It also suggested gradual retirement and re- employment opportunities for post-retirementaged workers as some possible options.

“The gradual retirement and reemployment opportunities will be beneficial to workers, employers and the nation through continuous Employees Provident Fund (EPF) contribution and tax revenue collection,” it said.

The report said as productivity is a game changer for economic growth, efforts to improve productivity should be further strengthened by technological innovation and increasing adoption of robotics.

Other ways forward suggested are creating an environment conducive to the elderly people and encouraging lifelong learning, including skills-upgrading, across every life cycle to keep people productive. — Bernama