KUALA LUMPUR (July 5): The Employees Provident Fund (EPF) is exploring more options to enhance the national pensions and retirement landscape, including a basic income drawdown.
“This includes a basic income drawdown option to strengthen our decumulation offerings to provide members with an additional source of retirement income,” said EPF chief executive officer Datuk Seri Amir Hamzah Azizan during his opening speech at the International Social Wellbeing Conference 2023 on Wednesday (July 5).
Amir said the EPF’s current disbursal of its member’s savings in a lump sum at 55-years old may not be a wise step from a social protection standpoint, as the savings will not last long.
“We have ways to encourage members to take out their savings periodically. This means they do not have to take it all at once, maybe each month, enough for their livelihood while the remaining savings can be compounded.”
“That is basic income draw down.”
He noted that the compounded savings could also continue to earn dividends.
“Schemes such as this will enable our members to received better returns in the future and they may live a better life.”
However, Amir noted that the basic income draw down needed further study and will be further discussed with the government.
“For now, we focus on encouraging members to use existing schemes.”
Amir noted that the pension fund is focused on extending its social protection coverage, as well as enhancing members’ retirement savings adequacy.
According to him, the EPF is also looking into Pillar 1 of the International Labour Organisation’s Multi-Layer Framework, through the introduction of a contributory national pension.
“Old-age dependency is also showing an increase from every 10 working age adults needed to support one older person in 2020, to three working age adults in 2050.”
He noted that the benchmark used to determine basic savings achievement by age is RM240,000, which served as the minimum target upon reaching the age of 55.
“This translates to RM1,000 per month, over a 20-year retirement period.”
“As of May 2023, only 30% of our active formal members meet basic savings by age, while only 18% of our total members meet the same threshold.”
“To compound matters is the blend of other multiple factors, such as a low wage structure, misalignment between full withdrawal age and retirement age, inconsistent contributions and under-employment, as well as a low rate of financial literacy.”
* This story has been amended as certain figures from an earlier version of the report have been retracted by the EPF.