KUALA LUMPUR (Oct 30): The World Bank urged Malaysia to significantly expand its social pension coverage, warning that current schemes reach only a small share of the country’s rapidly ageing population.
Only about 4% of senior citizens currently benefit from the government’s Bantuan Warga Emas scheme, which is among the lowest globally, according to the World Bank’s “Should Malaysia Expand Its Social Pension? Global Evidence, Design Issues and Options” paper released on Wednesday.
Within the next decade, 14% of Malaysia’s population will be 65 or older, the paper noted. “Expanding social pension coverage could reduce inequality and support inclusive ageing,” the multilateral agency said.
Malaysia is already an ageing society, typically defined by the United Nations as a country where at least 7% of the population are aged 65 and above. By 2045, Malaysia will be considered an aged society.
However, a large swath of the 30 million-plus population have inadequate savings for retirement and less than half of the working-age population contribute to a formal pension scheme such as the Employees Provident Fund or public sector pensions.
The World Bank said expanding Malaysia’s social pension would cost-effectively reduce poverty both among older people and across the population, while strengthening social cohesion.
"International experience — including in China, India and Latin America — demonstrates that even modest social pensions reduce poverty, improve health and well-being, and these improvements have a positive spillover effect to extended family members," it said.
The Bantuan Warga Emas programme provides RM600 per month to eligible senior citizens, distributed directly into recipients’ bank accounts to help cover living expenses.
Eligibility is limited to Malaysians aged 60 and above with no fixed income or pension, whose household income falls below the poverty line, and who are not living in government welfare institutions or receiving assistance from other agencies.
“Many older Malaysians rely on family support, but falling family size and shifting social norms are weakening this support,” the World Bank said. “An increasing number are also living alone or in elderly-only households.”
Recommendations
The World Bank’s report recommended that expansion in social pension coverage should begin with 40% of the lowest income earners to ensure the greatest impact on poverty reduction.
The lender also suggested indexing benefits to inflation to preserve their real value over time, and that the income eligibility threshold be revised to align with current cost-of-living conditions.
In view of rising healthy life expectancy, the World Bank also proposed raising the minimum age for social pension eligibility to at least 65 years, with automatic adjustments in the future tied to demographic trends.
It further called for improvements to the targeting system and stronger interoperability between public sector databases to ensure effective delivery and minimise leakage.
“Fiscal sustainability is key, but expansion is possible with targeted design and revenue reforms,” the World Bank said.
Under Budget 2026, the Malaysian government allocated RM1.26 billion towards welfare for senior citizens, covering some 180,000 elderly Malaysians.
Besides that, the Retirement Fund Inc has committed RM300 million to pilot an assisted living housing project for low-income elderly in Kepala Batas, Penang, in collaboration with the state Islamic council, with similar projects being evaluated elsewhere.