Heed World Bank’s call to raise retirement age to 65
Published on: Sunday, January 10, 2021
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Credit: continental.com (For Illustration Purpose Only)
If we add Covid-19 to the equation, mandatory retirement at 60 is not exactly a comforting option. Hence, it is crucial that the government consider raising the retirement age to 65, as called for by the World Bank recently.
Despite data overwhelmingly speaking for itself for worsening living standards faced by the average Malaysian worker, has the government seriously reflected on the emotional trauma the average wage earner is facing in these dark days that the Malaysian economy is experiencing?
One perspective that underlines this sad plight is the recent move by the government via the EPF (Employees Provident Fund) to introduce the i-Sinar withdrawal scheme. It doesn’t take a genius to realise the consequences of this scheme in the long run: depletion of hard-earned savings meant for post-retirement life.
Along with i-Sinar, the EPF has also reduced the mandatory employee EPF contribution from 11pc to 9pc effective from January till December this year. Most average workers will opt for the reduced amount to cover monthly expenses.
But unlike most developed countries, Malaysians do not have a safety net to fall back on – the only choice we have is the EPF. But ask yourself this: With employees in most companies having to take pay cuts, in some cases by 30pc to 50pc, how much use will the extra 2pc take home money be. It would amount to perhaps about RM100 ringgit for someone earning RM5,000. What can you do with RM100 these days?
So how will this affect the average Malaysian worker’s retirement nest egg? However, raising the retirement age to 65 will at least help to make up for the loss of income and savings due to salary cuts after Covid-19.
Moreover, the pandemic has devastated the economy and disrupted education, leading to worries about the long-term effects on the country’s youth in terms of graduation and gainful employment.
Increasing the retirement to 65 will also immediately reduce the number of civil servants approaching pensionable age, thereby providing the government huge savings (very necessary to offset the bloated spending called for by the pandemic) – something Thailand has discovered lately.
Malaysia is also an ageing country. Statistics have shown that by 2030,15pc of the population will be above 60. And I feel that we cannot entirely depend on a young workforce either, as more and more young people seem to be emigrating or planning to. Of course, we could import even more foreign labour.
The call by the World Bank should be heeded, especially since its study has found that employment prospects for younger workers are not impacted by increasing the retirement age. The irony is that the same study also found that Malaysia’s annual economic growth will increase by 0.3pc points by increasing the retirement age to 65.
Indonesia – with a younger population – and Singapore can be proactive, what’s holding us back?
ADC
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