This article first appeared in Forum, The Edge Malaysia Weekly on March 24, 2025 - March 30, 2025

Over the next two decades, four major structural trends will converge, creating what we (the authors) describe as a “perfect storm” for senior citizens in Malaysia. We believe that this perfect storm requires fundamental solutions, which we will describe in this article.

The first structural trend is Malaysia’s rapidly ageing population. By 2040, an estimated 6.4 million people — 17% of the population — will be aged 60 and above, according to the Department of Statistics. Second, these seniors will live longer, with life expectancy likely to surpass today’s average of 75.2 years.This means that seniors will require more funding to cover their living expenses for more years.

Third, older Malaysians living longer face even higher risks of catastrophic illnesses, particularly cancer. Data from the National Cancer Institute’s 2017-2021 report shows a 25% increase in cancer cases among men and a 19% rise among women compared to 2012-2016. The financial burden of catastrophic illnesses is overwhelming, especially for seniors who are underinsured or uninsured.

Finally, financial insecurity dramatically worsens the first three structural trends. Many Malaysians are woefully unprepared for retirement, with only 10% of Employees Provident Fund (EPF) members under 30 on track to meeting the RM240,000 basic savings threshold by age 55, as reported by Khazanah Research Institute.

This perfect storm of four trends — an ageing population, increased longevity, rising healthcare costs for catastrophic illnesses and inadequate savings — means that Malaysia’s seniors will struggle to afford even basic healthcare, let alone costly treatments for life-threatening illnesses. Two other trends that exacerbate this situation are the fact that more than 80% of Malaysians over 60 are either uninsured or underinsured, and there are fewer children caring for each elderly parent (fertility rates have dropped from 6.7 children per woman in 1957 to just 1.6 in 2021).

This leaves many seniors in uncharted territory. How can they fund their healthcare costs for catastrophic illnesses and also daily expenses when traditional retirement planning and social welfare systems no longer suffice? Innovative solutions are urgently needed for this specific group of seniors.

For many seniors, their most valuable asset is their home. However, unlike stocks, cash or bonds, a house is an illiquid asset, which cannot be sold easily, quickly or in small portions. Homes are especially illiquid because the owner is still living in it. As a result, many retirees find themselves “asset rich but cash poor”, owning valuable properties yet potentially struggling with day-to-day expenses and medical costs.

Neighbouring countries such as Singapore and Australia have pioneered home monetisation schemes at the national level to address this issue. “Home monetisation” describes several ways to monetise one’s home, such as downsizing, an outright sale, subletting your home, reverse mortgages or reverse annuity.

In Singapore, where 85% of the population lives in Housing Development Board (HDB) flats, the HDB launched the Lease Buyback Scheme (LBS) in 2009. The LBS enables homeowners aged 65 and over to sell a portion of their HDB flat lease back to the government, for any reason. The LBS preserves the homeowner’s right to live in his or her HDB flat up to the age of 95. The proceeds from this transaction go into the homeowner’s Central Provident Fund (CPF) Retirement Account, which then funds a CPF Life annuity plan that provides lifelong monthly payouts. Since 2009, LBS has benefited over 12,600 households, with 90% of participants receiving payments between S$100,000 (RM331,055) and S$300,000. Between 2020 and 2024, around 1,680 households joined LBS annually, equivalent to 6%-7% of all HDB resale transactions.

Australia offers the Home Equity Access Scheme (HEAS), operated by the federal government. The original incarnation is the Pension Loan Scheme (PLS), launched in 1985 and rebranded as HEAS in 2022. HEAS allows seniors above the pension age of 67 to get a “voluntary non-taxable loan” from the government to supplement their pension payments via fortnightly payments and/or lump sum advances. HEAS increases a person’s basic fortnightly pension payments by up to 50%. The interest rate is just 3.95%, a highly competitive rate compared with Australia’s 10-year government bond yield of around 4.41% (as at Feb 14) and the 6%-10% interest rates charged by private lenders. PLS only had 768 applicants in 2019, but HEAS applications increased 17 times to 13,400 in 2024, indicating a higher demand from Australians who are living longer.

The rising cost of living in both Singapore and Australia has contributed to the increasing demand for LBS and HEAS. Their success can also be attributed to their well-designed structures, seamless application processes and fair transaction values, which enable qualified seniors to obtain significant lump sum and/or monthly payouts easily from their homes, while still allowing them to stay in the homes until they pass away.

Malaysia needs its own innovative home monetisation scheme tailored to local needs and conditions. One early initiative is KALSIS, a reverse annuity model developed by one author (Teoh) with Kenanga Investors Bhd as its partner and investor.

We describe its principles here. KALSIS allows seniors aged 60 and above, who are diagnosed with cancer, to monetise the value of their homes to pay for their healthcare needs. In the first phase, eligible seniors must be living in fully-paid-off freehold and landed homes in the Klang Valley. KALSIS uses independent property valuers to value the home and shares the appraisal with the senior. Seniors who are approved under KALSIS will receive a lump sum payment of 10% of the property’s sale value and between 3.3% and 4.0% of the property’s sale value annually, until both participants (that is, husband and wife) pass away. Homeowners can stay in their homes until they pass away, at which point the home is sold.

Usually, reverse mortgages are highly dependent on interest rates, with higher rates leading to lower lump sum and monthly payouts to homeowners. In contrast, KALSIS is a reverse annuity model (that is, equity based rather than debt based), which is independent of interest rates. Therefore, reverse annuities will provide higher payouts compared with reverse mortgages which, all things being equal, make them more suited for seniors seeking to maximise decumulation of wealth.

Reverse annuity or home monetisation schemes can benefit specific subsets of seniors, not all seniors. In this article, the subset we refer to is “underinsured or uninsured seniors with catastrophic illness costs requiring short-term financing solutions and still wanting to age in place in their own homes”. This subset of seniors is likely to be in the M40 or middle 40% — with not enough disposable income to pay out of pocket from savings for healthcare like the T20 (top 20%), and not qualified for welfare assistance like the B40 (bottom 40%). There could be other subsets of seniors benefiting from reverse annuity solutions, outside the scope of this article.

For this subset of seniors, there are several direct benefits of reverse annuity or home monetisation solutions, like the models described above. One, the solutions allow these seniors to finance their cancer care, which in principle will help them to complete their cancer therapies and manage ancillary costs (like transport, nutrition and nursing care), while not outright selling their homes and having to move out. Two, these solutions are likely to support mental health by reducing anxiety and providing greater peace of mind provided by long-term financing solutions. And three, these solutions are able to fill in the gaps of existing welfare and healthcare systems, especially for middle class seniors who may fall through the gaps.

New features can be implemented in the reverse annuity schemes in the future. Firstly, these schemes can deliver preventive care solutions, especially secondary and tertiary prevention. (Primary prevention prevents disease from even happening, secondary prevention detects disease early, and tertiary prevention prevents complications from existing diseases). Secondly, these reverse annuity schemes can deliver digital health solutions, especially ageing in place, cognitive, fall risk and well-being solutions. And finally, these solutions must implement strong data collection systems to prove their benefit in economic, mental health and patient-reported outcome terms, with clinical improvement being a new capability in the distant future.

To be successful, reverse annuity schemes depend on several critical success factors. One, there must be a long-term existence of the underwriter/guarantor or investor of the homes, because the lifespan of each contract can be 15 to 25 years until both participants (husband and wife) pass away. Two, there must be ethical, transparent and non-predatory behaviour when dealing with applicants who have received life-changing news of cancer and are likely to be emotionally and financially vulnerable. Transparent counselling by neutral third parties, a cooling-off period and second opinion medical advice may be helpful. Three, the lifelong payments do not need to be generous but must be adequate to provide a dignified retirement.

Reverse annuity is one in a basket of tools for adequate retirement planning for Malaysian seniors, and is not a magic or solo solution. To maximise the benefits of reverse annuity solutions as one important tool, there could be three helpful public policies.

One, relevant government agencies (like Bank Negara Malaysia, EPF and the Ministries of Finance, and Women, Family and Community Development), private entities (like banks, fintech and insurtech companies) and non-governmental organisations must systematically improve public education on retirement planning and financing catastrophic illnesses. As a corollary, end-of-life planning, estate planning and advance directives are still very basic and under-discussed in Malaysia, and must be improved.

Two, an appropriate regulatory regime can be co-created among the government, senior community (for example, the National Council of Senior Citizens Organisations or Malaysian Coalition on Ageing), gerontologists, social welfare experts and the private sector. This regulatory regime should nurture a new set of solutions to help seniors appropriately and ethically monetise their assets to pay for their healthcare and retirement, perhaps starting with the specific subset of middle class seniors with catastrophic illness. There should be a strong focus on non-predatory behaviours and the highest standards of medical and financial ethics, with a predictable approval pathway or sandboxes.

And three, there can be appropriate discussions on tax deductions or exemptions for approved schemes to support seniors monetising their homes to pay for healthcare. For example, exemptions on stamp duty or real property gains tax would reduce transaction costs and result in larger payouts, enabling the government to materially help with seniors’ healthcare needs without the fiscal strain.

The perfect storm for ageing seniors requires a set of solutions, and reverse annuity schemes are an important part of this. Society in Malaysia can finance healthcare for catastrophic illnesses for seniors by using reverse annuities for a specific subset of seniors who may need it, while not ignoring other financing measures like a national health fund, a stronger social safety net, more allocations to public healthcare and stronger preventive care. Reverse annuities can be an important part of a set of solutions for Malaysia to overcome that perfect storm.

Jonathan Teoh is founder-CEO of KALSIS. Khor Swee Kheng is CEO of Angsana Health and specialises in health systems.

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