Malaysia retains stable C rating for retirement income systems index

October 23, 2018 editor

kw: retirement scheme, Employees Provident Fund, EPF, Malaysia, Mercer Global Pension Index, pension, Private Retirement Schemes

by NST Business

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.

While Malaysia’s C reflects a stable rating, Mercer Malaysia chief executive officer Hash Piperdy said action needed to be taken to address the country’s ageing nation.

Over five million Malaysians are expected to be over 60 years old by 2030, and nearly 10 million will be over 60 by 2050, he noted.

“Malaysia’s sustainability score has decreased from 61.2 to 60.5, based on the index. There still exists a gap which poses risks in terms of the long-term sustainability in the system due to the ageing population, and the need to address it is crucial as there are still many Malaysians without sufficient pension savings on top of 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,” he said in a statement.

Author of the study and Senior Partner at Mercer Australia Dr David Knox said the natural starting place to having a world class pension system is ensuring 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 tackle 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 now to address this.

“Such actions make future pension systems more sustainable over the longer term,” he said.

The Index uses three sub-indices – adequacy, sustainability and integrity – to measure each retirement income system against more than 40 indicators. Each index value represents a score between zero and 100.

The Netherlands and Denmark have scores of 80.3 and 80.2 respectively.

Source: NST